Economy on the up

New African, Apr 2004 by Jere, Janet

LESOTHO

Despite severe negative weather conditions that have led to food shortages, Lesotho's economy performed well in the 2002/03 fiscal year. Janet Jere reports.

According to a recent International Monetary Fund (IMF) review, quoted by the UN's Integrated Regional Information Network (IRIN), Lesotho's economy grew by almost 4% last year. Much of the improvement was attributed to strong textile exports to the United States under the African Growth and Opportunity Act (AGOA).

Lesotho, which has been a member of IMF since 1968, received preferential access to US markets under AGOA in 2000, including an exemption from AGOA rules of origin until 2004, attracting investment from Asian-owned textile factories keen to export to the United States.

The rules of origin state that fabric used by the textile factory must originate from the US or a qualifying African country. At the moment the bulk is from Asian-states.

Since it joined the programme, Lesotho has experienced a considerable boom in the garment sector, with increased employment opportunities.

The IMF, however, cautions that if the exemption from the AGOA rules of origin was not extended beyond 2004, Lesotho's current economic growth would not be sustainable. The country could also face daunting medium-term problems because of the fall in agricultural production in recent years. Due to poor weather conditions exacerbated by gradual soil degradation, Lesotho, the small but culturally-rich landlocked country of stunning natural beauty, is facing yet another year of severe food shortages, needing at least 57,000 metric tonnes of food to feed between 600,000 and 700,000 people until the end of the 2004-05 harvest time. Prime Minister Pakalitha Mosisili was forced to declare a national food emergency in mid-March.

According to the World Food Programme (WFP), the average maize and sorghum yields in Lesotho in the mid-1970s were about 1,400 kg per hectare, but today they average 450-550 kg/ha. The WFP warned that unless the country took steps to reverse soil erosion, agricultural production could cease altogether.

Lesotho's main natural resource is water, often referred to as "white gold" which it exports to South Africa. Between 1995 and 1997, with intense construction activities involving the multi-million Lesotho Highlands Water Project, Lesotho registered an impressive economic performance - the real GDP growth rate made the country one of the top 10 performers in Africa at the time.

The country seems to have found its feet again. Its economy is based on subsistence farming, animal husbandry, and small-scale industries that include clothing, footwear and textiles.

According to the government, the country is "fully committed to a free enterprise economy". In the last few years, the government has mounted an aggressive campaign to attract foreign investments coupled with an extensive programme of guiding local entrepreneurs in establishing their own businesses.