Le­sotho’s eco­nomic out­look bleak

Lesotho Times - - Business -

Le­sotho faces pos­si­ble eco­nomic paral­y­sis in 2016 due to a com­bi­na­tion of political and en­vi­ron­men­tal chal­lenges sad­dling the coun­try as well as other global fac­tors be­yond this King­dom’s con­trol, an­a­lysts have warned.

As a re­sult food prices are likely to sky­rocket, cre­at­ing havoc for an al­ready be­lea­guered pop­u­la­tion reel­ing from the worst ever drought in decades.

the south African Rand, against which Le­sotho’s Loti is fixed, has been in a free-fall due to a com­bi­na­tion of fac­tors in­clud­ing a slow­down in the economies of south Africa’s main trad­ing part­ners, China and europe, and the peren­nial pol­icy in­con­sis­ten­cies of Pres­i­dent Ja­cob Zuma’s govern­ment.

The Rand ex­pe­ri­enced a sharp knock when Mr Zuma re­placed re­spected fi­nance min­is­ter Nh­lanla Nene with lit­tle-known ANC back­bencher David Van Rooyen last month.

Even though Mr Zuma rec­ti­fied his grave er­ror by re­vers­ing Mr Van Rooyen’s ap­point­ment within four days of the in­fa­mous de­ci­sion and re-anoint­ing for­mer fi­nance Min­is­ter Pravin Gord­han to the crit­i­cal port­fo­lio, enor­mous dam­age had al­ready been done with more than M175 bil­lion be­ing wiped off the value of the Jo­han­nes­burg Stock Ex- change (Jse).

Just about two weeks into the New Year, the JSE is down a fur­ther six per­cent and the Rand this week hit its low­est level in his­tory, reach­ing nearly 18 to the green­back be­fore claw­ing back to set­tle at around 16.50.

Le­sotho, which is a vir­tual satel­lite econo- my of south Africa, has nei­ther the clout nor fi­nan­cial where­withal to con­tain the im­pact of neg­a­tive in­ter­na­tional sen­ti­ment against its gi­ant neigh­bour.

But an­a­lysts warn that the sit­u­a­tion can be­come far worse for Le­sotho if the coali­tion govern­ment’s pol­icy choices and political de- ci­sions alien­ate the coun­try’s long­stand­ing donors.

Prime Min­is­ter Pakalitha Mo­sisili has al­ready de­clared a na­tional emer­gency over the cur­rent crip­pling drought but has also warned for­eign de­vel­op­ment part­ners to re­frain from dic­tat­ing to his govern­ment over gov­er­nance is­sues.

the price of white maize hit an all­time high of M4 900 a tonne this week, by far sur­pass­ing the pre­vi­ous high point of M3 800. the price of maize has cu­mu­la­tively risen by about 140 per­cent in the last 12 months. this is seen es­ca­lat­ing the price of maize-meal by more than 50 per­cent. When the price in­creases even­tu­ally reach the shop shelves af­ter sev­eral months, the con­sumer will be hard hit.

“Wa­ter scarcity will af­fect the ru­ral econ­omy neg­a­tively re­sult­ing in in­creased hunger be­cause most agro-eco­nomic ac­tiv­i­ties there are rain-fed,” said econ­o­mist Kanono tha­bane of the Le­sotho Coun­cil of Non-gov­ern­men­tal or­gan­i­sa­tions (LCN).

“there is there­fore a need to im­prove the cov­er­age of so­cial pro­tec­tion to the most vul­ner­a­ble house­holds in or­der to mit­i­gate de­ple­tion of pro­duc­tive as­sets be­cause of the drought.”

Pri­vate Sec­tor Com­pet­i­tive­ness and Eco­nomic Di­ver­si­fi­ca­tion Pro­ject Man­ager, Chaba Mokuku, said Ba­sotho con­sumers were al­ready un­der enor­mous pres­sure due to in­creas­ing food prices.

Sum­mer crops such as maize, beans and sorghum would largely fail due to the cur­rent drought.

“Prices of some food­stuffs have been in­creas­ing since last April, and prices of veg­etable such as toma­toes and cab­bages had more than dou­bled by De­cem­ber 2015. Fur­ther­more, food prices are ex­pected to con­tinue soar­ing over the next com­ing months,” said Mr Mokuku.

Yet the big­gest con­cern, ac­cord­ing to Mr Mokuku, was the ma­jor­ity Ba­sotho re­sid­ing in ru­ral ar­eas as sub­sis­tence farm­ers who de­pended solely on rain-fed agri­cul­ture for their liveli­hoods.

“Presently, wa­ter short­ages are so se­vere that the main river sys­tems and dams through­out the coun­try are run­ning dry. Even com­mer­cial farm­ers with well-es­tab­lished ir­ri­ga­tion in­fra­struc­ture are af­fected,” he said.

Mr Mokuku said farm­ers were also bat­tling with ris­ing in­put costs due to the weak­en­ing Loti. Th­ese costs were in turn passed on to the con­sumer whose an­nual in­come in­cre­ment does not nec­es­sary match food price in­creases.

Mr Mokuku called for in­vest­ment in adap­ta­tion and mit­i­ga­tion strate­gies to avoid and re­duce the im­pact of fu­ture droughts.”

Such adap­ta­tion and mit­i­ga­tion mea­sures could in­clude in­vest­ment in biotech­nol­ogy re­search and plant­ing of drought re­sis­tant va­ri­eties of crops like ge­net­i­cally mod­i­fied va­ri­ety of maize called “Wena” .

He said im­proved wa­ter-con­ser­va­tion, stor­age and har­vest­ing as well as ap­pro­pri­ate ir­ri­ga­tion tech­nolo­gies were among other adap­ta­tion and mit­i­ga­tion mea­sures.

The sit­u­a­tion is also omi­nous for work­ers in the tex­tile sec­tor.

Prom­i­nent trade union­ist, Bahlakoana Le­bakae, said if the govern­ment failed to mend its strained re­la­tions with Amer­ica and Le­sotho’s tex­tile ex­ports into the United States un­der the Amer­i­can Growth and Op­por­tu­nity Act (AGOA) were af­fected, then mas­sive job losses in this crit­i­cal sec­tor would en­sue.

The Amer­i­can govern­ment has al­ready de- ferred the re­newal of the Mil­len­nium Chal­lenge Compact (MCC) pro­ject un­der which mil­lions of dol­lars in aid as­sis­tance would be given to Le­sotho over the coali­tion govern­ment’s han­dling of hu­man rights is­sues. The Amer­i­cans are par­tic­u­larly miffed by at­tempts to scup­per the re­port of a South­ern African De­vel­op­ment Com­mu­nity (SADC) in­quiry into the bru­tal killing of for­mer Le­sotho De­fence Force (LDF) com­man­der Maa­parankoe Ma­hao.

The tex­tile sec­tor is Le­sotho’s se­cond larg- est em­ployer af­ter the govern­ment with 35 000 jobs de­pen­dent on that sec­tor.

Mr Le­bakae said it was in the coali­tion govern­ment’s own in­ter­ests to ad­dress the se­ri­ous con­cerns of the very donors it had ap­pealed to for as­sis­tance re­gard­ing the gov­er­nance is­sues they had raised.

He said if the donors ended up with­hold­ing aid due to gov­er­nance con­cerns, the coali­tion govern­ment would face a se­vere cri­sis and most prob­a­bly crum­ble. And even if the aid was given, Mr Le­bakae said mech­a­nisms must be put in place to en­sure it was not stolen for the ben­e­fit of in­flu­en­tial politi­cians and their friends at the ex­pense of the masses.

Le­sotho also re­quired to at­tract loads of in­vest­ment to ame­lio­rate eco­nomic hard­ships for the poor and en­sure sus­tain­able job-cre­ation.

But sig­nif­i­cant in­vest­ment in­flows would not ma­te­ri­alise un­less SADC’S me­di­a­tion ef­forts in the coun­try suc­ceeded, ac­cord­ing to the Pri­vate Sec­tor Foun­da­tion of Le­sotho (PSFL) Chief Ex­ec­u­tive Of­fi­cer, Thabo Qh­esi.

Mr Qh­esi com­mended the govern­ment for putting in place the Drought Mit­i­ga­tion and Pre­pared­ness Plan but warned that its suc­cess would de­pend on the avail­abil­ity of re­sources.

The con­struc­tion and min­ing sec­tors nev­er­the­less of­fered a glim­mer of hope for the econ­omy with the con­struc­tion of Poli­hali Dam in Mokhot­long, a pos­si­ble source of sub­stan­tial job-cre­ation when it fi­nally be­gins as well as the com­mence­ment of op­er­a­tions of key mines in the North­ern parts of Le­sotho.

Min­ing Min­is­ter, Le­bo­hang Thotanyana, re­cently an­nounced that the govern­ment would en­sure Lem­phane, Mothae and Liqhobong mines in Mokhot­long and Butha-buthe, as well as Kolo di­a­mond mine in Mafeteng, be­come fully op­er­a­tional in the near fu­ture.

The min­is­ter told the Le­sotho Times this week that the govern­ment’s in­ten­tion was to make sure the mines op­er­ated in full swing by 2020 and if pos­si­ble even much ear­lier.

Cen­tral Bank gov­er­nor Retšelisit­soe Mat­lanyane, speak­ing in Novem­ber dur­ing a sem­i­nar on Le­sotho’s eco­nomic out­look for 2016, also warned that drought con­di­tions and ex­treme weather con­di­tions would neg­a­tively af­fect the al­ready weak agri­cul­tural sec­tor. “This is likely to erode some of the gains that the coun­try has made in ad­dress­ing poverty and vul­ner­a­bil­ity,” she said.

The de­pre­ci­a­tion of the Loti, cou­pled with drought con­di­tions in South­ern Africa, would foster in­fla­tion­ary pres­sures in the econ­omy and im­pact on pos­i­tive eco­nomic growth, she warned.

PSCED Pro­ject Man­ager Chaba Mokuku.

Pri­vate Sec­tor Foun­da­tion of Le­sotho CEO Thabo Qh­esi.

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