German company threatens to bring Lesotho to its knees
Kingdom in bid to repel firm’s €50m claim
The Lesotho government is running the risk of being unable to pay its public servants and funding the Covid-19 expenditure should a German company seize €50-million (R857-million) of its assets.
Prime Minister Moeketsi Majoro told the Joburg High Court this week that an order in favour of renewable energy firm Frazer Solar Gmbh (FSG) would bring the mountain kingdom to its knees.
FSG signed a supply agreement with Lesotho in 2018 to provide up to 40 000 solar water heating systems, 350 000 solar lanterns, 1.5-million LED lights and some solar photovoltaic capacity, nationwide.
Despite the supply agreement being signed off, the project did not proceed. FSG then claimed that Lesotho had materially breached the provisions of the agreement and it had suffered “significant” damages as a result.
FSG’S lawyers have begun a worldwide enforcement action against assets held by the government of Lesotho. The enforcement followed an arbitration ruling in South Africa against the Kingdom of Lesotho, which awarded damages to FSG.
Independent arbitrator Vincent Maleka directed Lesotho to pay FSG damages of €50-million in addition to a pre-award interest of €754 273 and post-award interest of 1.7% a year.
Majoro, in an affidavit trying to persuade the court to urgently set aside the arbitration award, said the contract between the two parties was entered into fraudulently. “The supply agreement was signed by an unauthorised member of cabinet on the frolic of his own, acting without the power to incur legal obligations on behalf of the kingdom,” said the prime minster.
He further argued that the €50-million award would bring the kingdom’s economy to its knees as it constituted 2.2% of the country’s gross domestic product.
“If the kingdom were to pay the entire claim, the kingdom would be unable to pay salaries of government employees, which include employees performing services to the public such as teachers, police and health workers, and dilute the kingdom’s ability to procure needed health facilities to combat the global pandemic.”
Majoro has since launched a commission of inquiry to establish whether the country is obliged to pay FSG. Majoro was sworn in as the new premier last May following the resignation of Tom Thabane. He was previously finance minister in the Thabane cabinet from 2017 to 2020.
Should Lesotho fail in its urgent bid to set the award aside, FSG will be free to seize Lesotho’s assets around the world.
The World Bank said Lesotho’s economy is expected to be boosted by construction-related projects.
If the country were to pay the claim, it will be unable to pay salaries