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‘Govt should promote private sector’

Lijeng Ranooe

THE government should promote the private sector and economic diversification to increase output while creating employment, a research paper published by Open Access journal publisher, Scientific Research Publishing (SCIRP) has said.

The paper titled The Sources of Unemployment in Lesotho, said Lesotho has endured persistently high unemployment rates ranging between 23 and 28 percent over the past 10 years.

The research that was published last week was written by Central Bank of Lesotho’s senior economist, Moeti Damane and Senior Analyst, Lira Peter Sekantsi.

The paper also said the period under review has been characterised by a high prevalence of poverty coupled with high income inequality in the face of non-inclusive growth.

“Lesotho’s government should promote private sector development, diversify the economy’s markets and invest in human and physical capital development with a view to increase employment,” reads part of the paper.

“This will also help to relieve pressure on the public sector and enhance labour market competitiveness and flexibility, reduce labour costs and encourage the creation of more employment opportunities.

“Labour market deficiencies, undiversified markets and small private sector, among others, are to blame for this high unemployment in the economy.

“With a few job opportunities at home and higher wages in the neighbouring South Africa, a sizeable proportion of Lesotho’s labour force used to seek employment in South Africa.”

The paper however says South Africa’s policy shift towards the use of local labour highly impacted on the demand for labour from Lesotho which only worsened the already “obstinately” high unemployment. This, the paper says, increased income inequality and poverty.

“The national head count poverty rate was 57.1 percent in the fiscal year 2010/11 according to the 2010/11 household survey. This figure was virtually unchanged from the 2002/03 household survey.”

The study says the public sector has remained strained to provide employment which has resulted in the increase in the size of the public sector and recurrent public expenditure.

It further highlights that the level of inequality increased from 0.51 to 0.53 between 2002/03 and 2010/11. The paper said the main factors inhibiting returns to labour and jobs in Lesotho are lack of skills, high burden of disease especially HIV and AIDS and tuberculosis; poor investment climate and lack of key infrastructure.

“Public spending in the 2014/15 financial year rose to about 63.1 percent of gross domestic product (GDP) from 44.4 percent of GDP registered in the 2004/05 financial year.

“The labour market of Lesotho is characterised by a low employment-to working age population ratio. The government is the main employer in the formal sector of the domestic economy while the largest informal employer is the manufacturing sector,” the paper said.

The research said that the country had 1 461 763 people that were eligible for employment but just 42.3 percent of that population was economically active. The rest, the paper said, were either unemployed or not available for work.

It says the highest number of employed people were in the 25 years to 29 years age group while the highest number of unemployed people are in the 20 years to 24 years old group. It further indicates that the proportion of unemployed males exceeds that of unemployed females.

“The nature of the labour market remained broadly unchanged in 2012. The majority of the economically active population was employed with a salary in all the age groups except the age group 60 – 64 where most of the population was engaged in subsistence farming.

“Of those employed with a salary, 56.1 percent were females while 44.6 percent were males; 982 656 people formed the economically active population with 74 percent of this employed whereas 26 percent was unemployed,” the study says.

It further indicated that the unemployment rate in the second quarter of 2014/15 was an estimated 32.8 percent which translated into an economic dependency ratio of 1.41 during that time.

“In the past decade, Lesotho’s growth rate averaged about 3.8 percent with growth primarily driven by substantially expanding public activities especially government spending. Despite this, unemployment, poverty and income inequality and other social ills remained stubbornly pervasive in the face of non-inclusive growth in the economy,” the study said.

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