MASERU — The chief executive officer of African Alliance Lesotho, Retšepile Ellias, on Thursday said Lesotho had not felt the full impact of the global financial crisis because of the sound policies of the government of South Africa.
Ellias was speaking at the official launch of African Alliance Lesotho that was attended by leading bankers and businessmen in Lesotho. Former South African Reserve Bank governor, Tito Mboweni, also graced the occasion.
African Alliance Lesotho is part of African Alliance — a pan-African investment banking group which operates in 19 countries.
The company is currently managing two unit trust funds, the Loti fund, a money market fund and the Lefisa Fund. It started operating in Lesotho in February.
Ellias said Lesotho had to a large extent been spared from the effects of the global financial crisis because of the “very cautionary measures and the sound policies” of the South African government.
He said the aftershocks of the 2008 economic crisis were only being felt in Lesotho now when the South African economy is technically out of the recession.
Ellias said the global financial crisis had brought a new perspective in business contrary to the popular belief in some circles that some financial institutions were too big to fail.
“Contrary to the popular belief that there were institutions which were too big to fail, we have seen some of the biggest institutions collapse, probably because some institutions were too big to save.
“However, the minister of finance recently warned that we are heading towards a rough time in the near future due to falling Sacu revenues and the falling commodity prices in the mining sector,” Ellias said.
He said Lesotho was the only country within the Sacu region without a stock exchange.
He said there was therefore a greater need to create an environment that is favourable to investors.
Ellias said African Alliance Lesotho was seeking to grow and have a robust, active and funding site that will ensure a win-win situation for investors and investment firms.
The group chief economist at African Alliance Lesotho, Maciek Syzmanski, said Lesotho’s economy was expected to grow by 3.1 percent, down from an initial projection of five percent.
“The fall in export demand and the decline in demand for diamonds have changed the economic growth focus for real GDP growth to 3.1 percent,” Syzmanski said.
He said the textiles sector had been badly affected as Lesotho’s exports to the United States had declined due to the global recession.
“The fall in demand in the textile markets means a sudden loss of jobs.
“The declining Sacu revenues also pose a great threat since they make up such a huge contribution to government revenue,” Syzmanski said.
“Individuals and business have been struggling to find finance, as banks are now cautious of giving out loans.”
He said Lesotho had been fortunate to maintain its fiscal discipline.
Syzmanski said it was important for local businesses to remain competitive in the face of rising competition from countries such as China.
Mboweni, who was the guest of honour at the function, said the new threat was now coming from the debts in Dubai where many banks have been heavily exposed.
“When South African contractors told us they had abandoned their projects in Dubai, we should have listened then,” Mboweni said.
Mboweni called for co-operation towards the creation of sources of capital which will contribute to economic growth.
“We have a couple of banks in Maseru and insurance companies which if properly organised can be locked into the existing operating infrastructure like the Johannesburg Stock Exchange.
“And they can grow from there,” Mboweni said.
Mboweni said the roots of the financial crisis could be traced to the rogue actions of bankers who “forgot the business of banking and opted for quick money-making models”.
“Central banks allowed the banks to make some unregulated cash balances. And unfortunately the response is more regulation by central banks to ensure that this does not ever happen,” Mboweni said.
Des Mahony, the African Alliance group deputy chief executive officer, said the experience his company had garnered over the past 14 years was enough to build a strong financial sector in Lesotho.
“We have been in places where we were told that we could not succeed, but we have made huge business in such places.
“We believe in Lesotho, like in other African countries we are operating, we will introduce the best products for investors here which will give them a platform for achieving good returns from their investments,” he said.