AS reported elsewhere in this edition, Lesotho has slumped on the Global Competitiveness Index (GCI) — from 107 to 113 out of 140 countries. The GCI is the world’s most comprehensive assessment of national competitiveness and highlights the strengths and weaknesses of each of the economies featured.
According to the CGI, the Mountain Kingdom had an overall score of 3.7 out of seven which is marginally lower than the 3.74 of 2014.
Among the major barriers to doing business in Lesotho over the past three years are access to finance, which remains far and away the main problem, followed by corruption and policy instability.
In other areas, such as infrastructure development, technological readiness, labour markets, financial markets and the training of the labour force, Lesotho also does not fare well.
If ever they were in doubt, the seven-party coalition government has its work cut out to reverse these statistics. This is because competitiveness also entails higher productivity – which is a key driver of economic growth and resilience.
The economy desperately needs to be more competitive considering the volatility and uncertainty of Southern African Customs Union (SACU) revenues. According to an International Monetary Fund Article IV mission that was in the country in August, SACU revenues, have begun to slip and are expected to fall sharply in the next fiscal year, 2016/17 to just over 15 percent of gross domestic product, compared with almost 30 percent in 2014/15.
The mission emphasised the need for Lesotho to diversify its economy and increase competitiveness to spur growth. In light of the looming challenges, government cannot afford to sit on its laurels.
In its report, the World Economic Forum (WEF) states that the economic crisis of 2008 and the relative performance of economies since its onset have shed light on how structural weaknesses can exacerbate the effects of, and hinder recovery from shocks.
During the crisis, the WEF notes, the more competitive economies systematically outperformed the least competitive in terms of economic growth. They either withstood the crisis better or recovered more quickly.
For example, Switzerland, ranked first in the CGI, has since 2007 experienced only a mild recession in 2009 and its unemployment rate has remained around three percent throughout the crisis. Meanwhile, Greece, which is ranked 81st, has seen its economy shrink by 25 percent and the jobless rate remains above 20 percent.
At the heart of an economy’s competitiveness is its capacity to leverage talent. The high unemployment rate in Lesotho, for instance, weighs heavily on the economy and society, resulting in a significant segment of the population disenfranchised and raising the risk of unrest.
The first port of call in addressing these issues is tackling the challenges in the education delivery system. Lesotho cannot afford to continue churning out half-baked educational graduates who are ill-equipped to compete with other nations on the job market.
There is need also for more concerted efforts to ensure no child is left behind in acquiring basic education especially considering that Lesotho sits at 117 and 112 on secondary education and tertiary education enrolment respectively.
Government will also need to address the glaring infrastructure deficit as highlighted in the CGI. Lesotho needs to be an attractive destination for foreign direct investment and that will only happen if basic infrastructure is in place.
Ultimately, becoming more competitive is not an option but a necessity for Lesotho.