Lesotho was faced with a series of challenges in the realm of politics and security during 2014. However, despite the rifts which appeared in the three-party coalition Government, the past 20 years of constitutional democracy stood the country in good stead to overcome the obstacles which arose. Following successful mediation by the Southern African Development Community (SADC) and the signing of an agreement by all political parties, the ship of state has been steered into calmer waters, anchored on an early election scheduled for February 2015.
On the economic front, the country has weathered a number of storms since the international financial crisis of 2008, which saw a fall in global demand for Lesotho’s exports, particularly diamonds and textiles. However, the economy rebounded in 2010 and 2011, and by 2012 was posting a real GDP growth rate of 6 percent. While growth decelerated slightly in 2013 (5.7 percent) and 2014 (a projected 4.3 percent), the latest IMF Economic Outlook of October 2014 forecasts healthy economic expansion in the medium term, rising to 5.5 percent by 2019.
At the same time, receipts from the Southern African Customs Union (SACU), which make up a substantial portion of Lesotho’s revenue earnings, are on the increase. It will nonetheless take some time to rebuild reserves to levels adequate to guard against external shocks in the future. Government’s development plans therefore attempt to strike a balance between service delivery and development commitments, and the need to protect reserves for macroeconomic stability and fiscal viability.
The National Strategic Development Plan (NSDP), which covers the 2012/13-2016/17 period, provides the policies and programmes necessary to realise the overarching goal of sustainable development. Government’s strategic plan is tethered to the realisation that further economic growth is reliant upon a robust and competitive private sector, supported by enhanced skills and technological know-how. The NSDP thus seeks to improve the investment climate in Lesotho and to remove the most binding constraints to growth and job creation at the macro and micro levels. While foreign direct investment continues to be pivotal to future growth scenarios, so too does the empowerment of local entrepreneurs and the creation of economic value chains.
Much has already been done to improve the investment climate, and Lesotho’s business environment is currently ranked 14 places above the sub-Saharan African average, according to the World Bank’s 2015 ‘Ease of Doing Business’ report. Going forward, there is clear commitment to implementing additional reforms, with the focus on simplifying procedures for starting and doing business; improving access to finance through strengthening the performance of established facilities such as the Credit Guarantee Scheme; developing financial markets; and exploring further options for land reform to support commercial agriculture and investment in industrial infrastructure.
Attracting higher levels of investment is crucial to Lesotho’s future growth, and it is thus important that the opportunities which presently exist for private sector investment are marketed and promoted to potential investors. The Lesotho Review provides a comprehensive overview of Lesotho’s business environment and major economic sectors, as well as current policies, development programmes and investment incentives, making it the ideal medium for showcasing Lesotho as a viable investment destination to the business community and investors worldwide.