Lesotho follows Botswana model, not Zimbabwe’s
LESOTHO’s mooted 51%-49% localisation policy should only affect the mining sector and will take the softer line of investmentfriendly Botswana rather than the controversial indigenisation and control structures seen in Zimbabwe, says Tom Thabane, Lesotho’s new prime minister.
London-listed Gem Diamonds, which owns 70% of the Letseng mine in Lesotho, is one of the companies likely to be affected by the change. Another is London-listed Namakwa Diamonds, which owns the majority of the Kao mine. The current structure is a 34%-66% partnership share in favour of foreign mining companies.
Mr Thabane’s All Basotho Convention leads a coalition government in the National Assembly, the first in the country’s history and a novel development in Southern African politics.
Elections on May 26 were hotly contested and tensions remain high in the country as the opposition rallies its supporters and criticises the coalition’s initial policy proposals and failure to call the first sitting of parliament.
Mr Thabane said he wanted to mend the poor relationship with SA and encourage better ties and more business integration.
“There has been a lot of success in Botswana. We will find out why that formula is so successful. The localisation issues mentioned are in the mining sector — other sectors are not affected.
“But it is still a debate. At the moment we do not think we will follow the status quo.”
He noted that Botswana has a very successful partnership with foreign investors. “We also have lots of diamonds, but are not doing so well,” he said. Botswana’s economy has enjoyed one of the world’s highest growth rates since 1966.
Mr Thabane said the new government would also “look at” company tax of 35% — Botswana has managed to entice plenty of foreign investment at a rate as low as 15%. While Botswana has protection measures in place for many sectors, reserving them for local businesses only, these generally relate to smaller businesses such as butcheries, filling stations and liquor stores and supermarkets (though not chains), while different government departments are imposing more stringent and varying licensing requirements for foreign businesses.
In large part, Botswana operates on unwritten rules that citizens must participate or foreign businesses must benefit citizens before licences are given.
“We want foreign companies to train local people. It is in investors’ interests,” said Mr Thabane.
He dismissed a report in the Lesotho press last week that the election results were being challenged. He said the headline was incorrect and not based on fact.
The leader of the opposition, Pakalitha Mosisili, told Business Day on Wednesday the new government was legal, although he felt he would easily win the next election. The 48 constituency seats he won indicates the people wanted his new party, the Democratic Congress Party, in power.
But he did not say he would contest the result.
Mr Mosisili warned that government plans to raise salaries for factory workers could result in retrenchments and scare away foreign investors.
Mr Thabane, however, said the proposal to raise salaries had come from left-wing parties within the alliance. “It is a minority position by the Lesotho Workers Party, which is also a trade union,” he said. His stance is that workers must get paid adequately, but the entire economic situation needs to be considered. “You can’t just say you will pay more.”
He said the fact that two new malls worth R200m and R500m were being built was a clear sign investors did not feel threatened.
US retailers such as Levi and Gap source garments from Lesotho, as the country benefits from the US African Growth and Opportunity Act.
The act provides for duty- and quota-free entry for qualifying goods into the US, though the countries eligible to benefit need to be approved by the US president every year. The aim is to promote free markets in sub-Saharan Africa. It also aims to i mprove labour rights.
Mr Thabane expects the benefits to continue, but the new government is still to negotiate the exact terms with the US.
Mr Thabane intends forging a new, healthier relationship with the African National Congress (ANC), admitting it has been tenuous as Lesotho traditionally adopted Pan-Africanist leanings, which were not in tune with the ANC. But he said he personally had a good relationship with President Jacob Zuma, having helped to shelter him as a refugee during apartheid. However, with mining sector migrant labour a major cog in Lesotho’s economic wheel, high border costs imposed on the South African side have led to enmity.
“We are quite determined to repair that relationship and also for people who seek jobs in SA. We literally run the (South African) mining sector through our labour here — we cannot let them ignore that or ignore the fact that as refugees they came here. Our job is to repair that damage, and it is reparable with a little will.”
The Lesotho stance on localisation comes as cracks appear in Zimbabwe’s unity government over controversial indigenisation plans that include the banking and various other sectors. Zimbabwean Prime Minister Morgan Tsvangirai earlier this month dismissed demands from the empowerment minister, Saviour Kasukwere, that foreign companies need to give up control via the empowerment laws within the next year, saying there had been no cabinet decision to that effect.
By comparison, foreign investment and management are welcomed in Botswana, and as a result, the financial and services sectors have increased at a fast rate to replace mining as the leading industry.