PERSPECTIVE OF BUSINESSIN LESOTHO

Trade & Investment Promotion Seminar and Expo organised by Mangaung Chamber of

Commerce and Industry at Bains Game Lodge

29th - 31th OCTOBER 2013

Thabo Qhesi – CEO

Private Sector Foundation of Lesotho

E-mail: thabo.qhesi@gmail.com

Tel: +266 62001975

* Background of Lesotho

* Current investment

* Investment climate

* Investment opportunities

* Starting a business

* Conclusion

STRUCTURE OF PRESENTATION

* LESOTHO IS SMALL COUNTRY, WITH LDC STATUS, SITUATED IN SOUTHERN AFRICAN

REGION AND IS HAVING A POPULATION OF 1,8 MILLION.

* TEN DISTRICTS (Lowlands, foothills, and highlands)

* MEMBERSHIP: - SACU

- SADC

- AU

- UN

- WTO

BACKGROUND OF LESOTHO

Sacu 5 member states map

BACKGROUND OF LESOTHO (cont)

Angola

Zambia

Botswana

Tanzania

RSA

Namibia

Zimbabwe

Swaziland

Kenya

Lesotho

DRC

SACU

ABOUT PSFL

* Apex body of Private Sector Business Associations

* Launched in October 2009

* Promote and sustained dialogue with Government

through the Business Council

* Business Council chaired by the Prime Minister

BACKGROUND OF LESOTHO (CONT)

* MEMBERSHIP STRUCTURE

- Corporate Category

- Affiliate Category

- Associate Category

* COUNCIL MEMBERS

- 21 MEMBERS (7 Members of each category)

BACKGROUND OF LESOTHO (CONT)

MEMBERSHIP SERVICES- Networking - Capacity development - Access to information - Secretarial services to associations- Consultancy development - Constitution registration- Company registration- Consortium and joint venture agreements - Training- Business counselling

BACKGROUND OF LESOTHO (CONT)

* ClOTHING, TEXTILE, FOOTWEAR SECTOR

* ASSEMBLY OF CONSUMER ELECTRICAL AND ELECTRONIC APPLIANCE

* FOOD PROCESSING

* PLASCTIC PRODUCTS

* RESOURCES – BASED PROJECTS: - Ceramic ware- Brick – making- Sandtone- Mining of minerals

CURRENT INVESTMENT

Company Taxation

* The government of Lesotho has introduced:

- 0% tax on income tax generated from exporting manufactured goods outside of SACU;

- A permanent maximum manufacturing tax rate of 10% on profits.

- No withholding tax on dividends distributed by manufacturing companies to local or foreign shareholders.

- Free repatriation of profits derived from manufacturing companies

INVESTMENT CLIMATE

Banking Infrastructure

* Lesotho is a member of the South African Common Monetary Area (CMA) and the Loti (plural Maloti) is pegged to the Rand.

* It is therefore a convertible currency

* Lesotho has a sophisticated banking infrastructure with four (4) full service banking networks operated by:

- Standard Lesotho Bank - Nedbank - First National Bank- Lesotho post bank

INVESTMENT CLIMATE (CONT)

Investment Protection

* Lesotho is also a signatory to the Convention on the Settlement of Investment Disputes between states and nationals of other states and is a member of the Multilateral Investment Guarantee Agency (MIGA).

* MIGA promotes the flow of foreign direct investments to developing countries by providing investment guarantees to investors to mitigate against specified non-commercial risks associated with a project, such as: - political risks;- transfer restrictions; - expropriation;- breach of contract; and - war and civil disturbances in the host

INVESTMENT CLIMATE (CONT)

Market support

* Government procurement: - 10 per cent price preference on Lesotho goods; - 7.5 per cent preference for contracts performed at least 50

per cent in Lesotho or sub-contracted at least 50 per cent to Basotho business; and

- All contracts over LSL500,000 which entail sub-contracting must sub-contract at least 25 per cent of the work to Basotho businesses.

*Exclusivity: - Under the Industrial Licensing Act, a manufacturer may be

granted an exclusive industrial licence

INVESTMENT CLIMATE (CONT)

POTENTIAL MARKET

* SACU – 54 million consumers

* EU – 456 million consumers

* USA– 295 million consumers

* SADC – 170 million consumers

* Japan, Turkey, Canada, Australia and New Zealand operate GSP schemes under which tariff reductions are granted to specified lists of agricultural and industrial products for Least Developed Countries.

INVESTMENT CLIMATE (CONT)

Sector opportunities* Agriculture:

- Poultry and piggery abattoirs - Hatchery - Mushroom farming - horticulture - Wool and mohair processing plants

- Fish farming * Infrastructure development: - commercial property - industrial property - residential property

* Retailing: wholesale

INVESTMENT OPPORTUNITIES

Sector opportunities* Transport: - Bus - Trucking * Mining: - Diamonds - Gold - Quarrying/ crasher plant

* Tourism: - Entertainment - Hospitality

* Service industry: - Insurance - Education - Legal * ICT and Telecommunication

INVESTMENT OPPORTUNITIES (CONT)

Sector opportunities* manufacturing:

- food processing (mushroom soup & sauces) - packaging and labeling - tv and radio production - spare parts - solid waste processing

- stone cutting * water sector: - water bottling - water treatment - water sport

* financial services: banking

INVESTMENT OPPORTUNITIES (CONT)

Barriers

* Cross border trade

* Export permits

* Brain drain

* Unclear coordination to effect decisions

CHALLENGES

One Stop Facilitation Centre

* Established in 2009

* Agencies: - Registrar General

- Ministry of Trade and Industry

- Ministry of Labour and Employment

- Ministry of Home Affairs

- Lesotho Revenue Authority

STARTING A BUSINESS

One Stop Facilitation Centre- Export Permits

STARTING A BUSINESS (CONT)

Export Permits Import Permits

Rebates Work permits

Residence Permits Company Registration

Tax Registration Investment information

Advocacy for regulatory reform

Business statistics

Tariff investigation and Trade remedies

Utilities payment

STARTING A BUSINESS (CONT)World Economic Report

Country Lesotho Swaziland

Botswana Namibia South Africa

2013/14 123 124 74 90 53

2012/13 137 135 79 92 52

2011/12 135 134 80 93 50

LNDC* It is the principal point of contact for prospective foreign investors and can provide serviced land and low-cost factory shells.

LTDC* It promotes tourism investment by foreign and national investors.

BEDCO

* It promotes investment by smaller nationally-owned businesses

STARTING A BUSINESS (CONT)

CONTACTS OF KEY ROLE PLAYERS

- OBFC: www.obfc.org.ls

- LNDC: www.lndc.org.ls

- LTDC: www.ltdc.org.ls

- BEDCO: www.bedco.org.ls*

STARTING A BUSINESS (CONT)

BUSINESS COMMUNITY OF LESOTHO AND FREE STATE PROVINCE SHOULD REALLY JOIN HANDS IN TERMS OF DOING TRADE. THE END RESULTS:

- INCREASED EMPLOYMENT ;- REDUCED PORVERY AND CRIME; AND- CURBING BRAIN DRAIN.

CONCLUSION

Thank you