THE Thomas Thabane administration is deep in debt and owes service providers a whooping M1 billion, the Ministry of Finance has said.
The Deputy Accountant General in the Ministry of Finance, Hlompho Matsoso, disclosed the parlous state of the government finances when she recently appeared before the Public Accounts Committee (PAC).
The disclosure comes against the background of the government’s persistent failures to timeously pay service providers. It has also pleaded poverty when confronted by restive civil servants, particularly teachers and magistrates demanding salary increments.
The government’s debt crisis is borne out of the failure to raise enough money due to declining South African Customs Unit (SACU) revenues. Even though the Lesotho Revenue Authority (LRA) met its collection targets for the first time in two years, this was not enough to cover the deficit caused by the declining SACU revenues. Consequently, the government has been struggling to pay various services providers who-according to Ms Matsoso — are owed a massive M1 billion.
The parlous situation has not been helped by the government’s failure to convince international development partners to lend financial assistance to help balance the national budget. Despite Finance minister, Moeketsi Majoro’s spirited attempts, the International Monetary Fund (IMF) has so far stuck to its guns and refused to provide a financial bailout which will help to reduce the budget deficit and boost foreign currency reserves.
Sources close to the talks recently told this publication that the two parties had still not reached a deal because the government did not agree with some of the conditions that the IMF wanted met before availing funds.
Among other things, the IMF wants the government to reduce the high public wage bill, undertake public financial management reform as well as implement the multi-sector reforms that were recommended by the Southern African Development Community (SADC).
The IMF has also advised the government to award performance-based salary increments. The IMF prescriptions are inimical to the civil servants and other workers’ demands for wholesale wage increments.
The ongoing budget deficit has resulted in the government failing to pay various service providers. In addition, it has forced the broke government to turn to a South African company called Property 2000 for a M2, 4 billion loan to finance the construction of sports facilities including a stadium for the Africa Union Sport Council (AUSC) Region 5 Youth Games to be hosted by Lesotho next year.
The government’s move has however, been criticised by Ms Matsoso and other senior finance and sports ministry officials.
“We cannot afford that (M2, 4 billion) loan,” Ms Matsoso said in response to PAC chairperson, Selibe Mochoboroane, who had asked her whether the government could afford the M2, 4 billion required for the construction of facilities for the AUSC youth games.
The government hopes the infrastructure will be part of the legacy projects that will be used to promote the growth of sport in the country long after the regional showpiece.
But its plans for new infrastructural developments could seriously erode the nation’s creditworthiness.
“We cannot afford that loan,” Ms Matsoso said, adding that Lesotho was already deep in debt and acquiring a huge loan of M2, 4 billion would only worsen the situation.
“Government gets most of its cash from the South African Customs Unit (SACU) revenues and that is only M6 billion. All of that money goes to salaries and it is only enough to last for a quarter of the financial year. Thereafter, tax and non-tax collections, which are not sustainable, are used to pay salaries to cover for the remaining three quarters of the financial year.
“Couple that with the M1 billion that government still owes to the service providers and so that means we cannot afford to pay the loan (M2, 4 billion),” Ms Matsoso said.
She was supported by the ministry’s Director of Public Debt, Khotso Moleleki, who said by incurring the M2, 4 billion debt, the government would only increase the debt from 42 to 43 percent of the gross domestic product (GDP).
Mr Moleleki said increasing the debt “will impact negatively on our ability to raise funds to pay our debts”.
On his part, the Head of Public Procurement Advisory Department (PPAD), Likotsi Leseli, said the M2, 4 billion for the sports facility project was not budgeted for and it was one of numerous cases where the cabinet forced decisions on them without considering proper procurement procedures.
“The M2, 4 million was not budgeted for and procurement procedures were not followed to hire contractors for the jobs.
“We have a problem of hierarchical influence which overrides legal procedure. Ministers make decisions in cabinet and we are forced to implement them whether or not standard procedures were followed,” Mr Leseli said.
Never-the-less the government will go ahead with the construction of the sports facilities after sourcing the M2, 4 billion from Property 2000.
Part of the money will be used in the construction of a 40 000-seater football stadium and a 3000-seater indoor arena. The money will also be used to construct the games village which will accommodate 3000 people.
In addition, officials from the finance and sports ministries presented an adverse report on the project saying the country would be mired in intractable debt if the project was allowed to continue.
“The costing of the projects entirely depends on the developers’ estimates; therefore, the government remains vulnerable to over-costing of these projects without justification. There is a possibility of cost escalation due to unforeseen costs. The cash flow projections are not based on facts simply because the financial proposals are not financial models which cannot determine the viability of the project into 30 to 35 years proposed years (of repaying the loan).
“The bankability of the projects cannot be determined hence no accredited financiers seem to be interested in these projects. Property 2000 was allegedly converted from close corporation into a company only last year. The fiscal implications including its solvency cannot be determined under the new regime it has opted for. In addition, it is not known whether indeed it is a trustworthy financier.
“The commercial viability is not known and will never be known without the feasibility; the government will just be signing a blank cheque and tying future generations to undesirable debt,” the two ministries said in their legal opinion.
The officials from the two ministries also said the project was already eight months behind schedule and if it was forced to continue, the country risked getting sub-standard facilities.
“The entities are all eight months behind commencement of the works in terms of the timelines provided in their response to the expression of interest (EOI). It is not known to the Ministry of Finance how such a risk will be mitigated otherwise Lesotho risks sub-standard unsafe facilities.”
However, Gender and Youth, Sport and Recreation Minister, Mahali Phamotse, who was summoned to appear before parliament after officials from the Sports and Finance ministries had presented their adverse opinion to PAC, insisted that there was no going back on the project.
Dr Phamotse told parliament that the games would continue as several preliminary processes have already been done.
“The agreement to host the games comes with clear conditions…the local organising committee (LOC) is right on track working on seeing that we achieve that.
“We also have the theme of the games (Unite, rise and build), we have the logo, the theme song and a mascot for the games.
“The construction is in two categories. The first one is the construction of stadiums and grounds while the second is the building of the games’ village. The Prime Minister (Thomas Thabane) has already turned the sod for the 40 000-seater stadium, two Olympic standard swimming pools and a multi-purpose indoor facility in August 2019 at Lepereng while the Deputy Prime Minister (Monyane Moleleki) also turned the sod for a 3000-capacity games’ village in Roma this month.
“To start the construction, the government, through Ministry of Finance, has signed an agreement with investors who will do the work,” Dr Phamotse said.