Business

Lack of funding threatens job creation 

  Bereng Mpaki

THE Minister of Development Planning Tlohelang Aumane says the lack of funding could pose challenges to the government’s job creation efforts.

Mr Aumane said this during the recently held Investment Forum. The forum was part of the Job and Investment Summit held by the government on 21 and 22 August 2019. The summit was held to review the progress of the Economic Laboratories held in March to April this year.

The summit was part of the government’s efforts to stimulate job creation in the private sector. The government engaged PEMANDU Associates, a Malaysian firm in February this year to implement the Big Fast Results methodology, a radical strategy to help the country achieve economic transformation. The strategy is in line with the country’s National Strategic Development Plan (NSDP II).

The process has identified 77 high impact projects with a total investment of M19, 9 billion that have the potential to create 30 000 jobs. However, there are many other projects that are yet to secure funding.

The 77 projects are from four priority sectors namely agriculture, manufacturing, technology and innovation, and tourism and creative industries.

Speaking at the forum, Mr Aumane said some projects needed funding for them to succeed.

“Some of the projects still need to be facilitated and they are facing some financial constraints,” Mr Aumane said.

“Access to finance came up as one of the main factors that need to be addressed to fast track private investment towards job creation in the country. Some of these projects are low hanging fruits whose benefits can be realised within a short period therefore they present significant investment opportunities that can be attractive to financiers.”

For his part, Finance Minister, Moeketsi Majoro said financial constraints were a major impediment to business in Lesotho.

“The inaccessibility of credit and capital is a major impediment to the development of Lesotho’s private sector and SMEs in particular, because it prevents them from acquiring new technology that would make them more production and more competitive.

“Limited sources of long term finance in Lesotho’s financial sector is dominated by commercial banks, with a limited number of microfinance/money lenders and no development banks.

“As a result, SMEs frequently use more readily available short-term financing instruments for medium to long term investments. In addition to reducing their profitability and constraining their ability to pay, this situation diverts investment decisions away from capital intensive ventures,” Dr Majoro said.

Dr Majoro said there was insufficient depth of the financial sector with the business needs of enterprises generally varied.

“For these needs to be adequately addressed by the financial sector, the latter must be equally diverse. This calls for a wide variety of long medium and short term products, and a healthy composition of both debt and equity instruments, as well as those instruments specifically tailored for the unique needs of certain sectors.”

He added that the local financial sector was narrow with only a few standard products which limit the options for private sector development.

“There is an argent need for collaborative efforts by all stakeholders to find a lasting solution to the credit needs of the sector for those identified projects from the Economic Laboratories which are waiting for the adequate financing particularly the start-ups and small and medium enterprises. This is the segment of the economy where businesses are too small to have access to bank credit and at the same time too large to be satisfied with microcredit,” Dr Majoro said.

 

 

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