Tefo Tefo
MASERU — Finance Minister Timothy Thahane says the government is putting in place support systems to help manufacturing firms retain their productive capacity and look for alternative markets in response to the global financial turmoil.
Thahane made the remarks as he briefed the National Assembly on Thursday on the impact of the global financial and economic crisis on Lesotho’s economy and the country’s future budget prospects.
“Faced with this bleak situation the government’s immediate goal is to preserve jobs by putting in place support systems that will enable our manufacturing firms to retain their productive capacity and to look for alternative markets,” Thahane said.
To deal with the crisis Thahane said the government had given M50 million to the Lesotho National Development Corporation (LNDC) to be injected into companies that are headquartered in Lesotho with the government taking equity in those firms.
“A facility has also been created based in the Central Bank of Lesotho to provide export credit to local textile manufacturers to ameliorate the financial problems faced by the manufacturers from the global financial collapse,” he said.
Thahane said the global financial crisis meant there would be “a huge financing gap in our budget for the foreseeable future”.
“It means potentially increasing loss of jobs for most of our people. It means potential threats to our social protection programmes for the most vulnerable groups,” he said.
Thahane said the situation for Lesotho was dire, adding that dark clouds were hanging “perilously over our future as a nation”.
The minister said demand for Lesotho’s textiles and clothing exports had virtually closed with Asian banks that used to provide finance to local firms having stopped doing so.
He said local firms were experiencing a severe cash liquidity crisis as banks had stopped giving credit.
Thahane said the economic crisis had resulted in thousands of workers in South African mines and the manufacturing sector being laid off.
“Several mines could not export their products. Some found their ore building into mountains at sea ports and around the pits . . . As over 47 000 Basotho still work in the mines many were laid off,” he said.
“Their remittances which used to support many rural families dried up. Rural poverty increased.”
Thahane said the international market price for diamonds also collapsed, causing Lesotho’s biggest gem diamond mine to reduce its staff.
“The price of diamonds internationally collapsed falling from about $2 000 (about M15 080) to less than $900 (about M6 786.18) per carat,” he said.
“Two diamond mines closed and our biggest gem exporter, Letséng (Diamond) Mine, cut operations and reduced staff.
“Revenues which government received from diamonds were drastically cut with resultant negative impact on government budget.”
Thahane said revenue from the Southern African Customs Union (Sacu), which constitutes 60 percent of Lesotho’s budget, was set to decline drastically over the next three years.
He said Lesotho’s revenue share was set to decline from M4.918 billion to M2.623 billion in 2010/2011 and decline further to M1.733 billion in 2011/2012.
This will represent a decrease of 65 percent over two years, Thahane said.
“In the light of the declining revenues, it is extremely important that there are hard budget decisions to limit expenditure to levels that the country is able to finance,” he said.
“It is also critical that a conscious public expenditure review programme is institutionalised to ensure that annual budget allocations are directed to strategic areas and improve operational efficiency and effectiveness in the use of public funds.”
He said to continue financing development programmes in the coming years there was a need to “deepen our efforts to mobilise more domestic resources, particularly non-tax revenues”.
“But we will also need to take advantage of the external financing through donor budget support,” he said.
Responding to the speech, the MP for Likhetlane constituency, Libe Moremoholo, said the government should consider slashing per-diems issued to public officers.
“The situation tells us that the government should consider reducing per-diems for public officers,” he said.
“And how soon will the government consider reducing costs of the hired Avis vehicles?”
However, Thahane said the government would consider reducing costs.
“The government will consider reducing costs where necessary,” he responded.
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