Lesotho’s economic prospects very bleak: Majoro
- economy to contract by 10 percent in current fiscal year,
- 6000 factory jobs on the line due to Covid-19.
NEWLY appointed Prime Minister Moeketsi Majoro has painted a bleak picture of the country’s economic prospects, saying the economy will contract by a massive 10 percent in the current financial year due to the effects of the Coronavirus (Covid-19) pandemic on the global economy.
Dr Majoro, who succeeded All Basotho Convention (ABC) leader Thomas Thabane on 20 May 2020, said this in a televised address to the nation on Thursday.
He said as a result of the Covid-19 induced global slowdown in economic activity, 6000 jobs were on the line in the country’s crucial textiles sector.
The former Finance minister’s dire forecast paints a far worse picture of the effects of Covid-19 on Lesotho’s economy than earlier assumed by the government.
Last month the Finance ministry said the economy, which was already shrinking at an average rate of 0,3 percent over the past three years, will contract by 1,2 percent in the 2020/21 fiscal year due to the impact of COVID-19. But Dr Majoro said the contraction will be much larger.
The contraction will mirror that of South Africa, predicted to contract by as much as 17 or even 20 percent.
The Finance ministry had also said important revenues obtained from Lesotho’s membership of the Southern African Customs Union (SACU) would dry up with the country expected to lose as much as M1,2 billion as a result of the Covid-19-induced slowdown in regional and global activity.
The budget deficit is now projected at 11,8 percent of GDP up from the 4,7 percent earlier predicted by Dr Majoro in February when he unveiled the 2020/21 budget while still Finance minister.
More worryingly, Lesotho is expecting its worst hunger crisis in recent years with about 900 000 people, almost half the population, projected to be in need of urgent food interventions during the current fiscal year which started on April 1, 2020.
Lesotho is heavily reliant on the export of textile products particularly to the United States for employment generation.
But imports of raw materials have been significantly delayed and therefore exports of the final products cannot take place.
Dr Majoro said the government had anticipated an “easy turn-around” this fiscal year but “things have changed” due to the outbreak of the virus.
He said one of the biggest challenges facing Lesotho was the slowdown of economic activity in the United States of America, neighbouring South Africa and other traditional markets for locally produced textiles.
More than half of textile goods are exported to the US in terms of the African Growth and Opportunity Act (AGOA) which allows duty-free imports of products from eligible countries. Most of the remaining textile products are exported to South Africa but due to Covid-19, the demand has been significantly lower in both countries.
“As things stand, one of the biggest retail companies in South Africa, Edcon, which orders more than 30 million denim jean products from our local factories annually, has already made it clear that there is a likelihood that it might close, and should this happen, 6 000 factory workers are likely to lose their jobs,” Dr Majoro said.
He said the recovery forecast of the US market seems bleak given the daily rise in new Covid-19 infections and deaths. This is compounded by the fact that 40 million Americans had already lost their jobs. That would impact negatively on America’s demand for Lesotho’s apparel products.
By yesterday, the US had recorded about 1,8 million Covid-19 infections and close to 105 000 deaths.
South Africa, which has the highest number of infections on the continent, had recorded about 29 300 infections and close to 620 deaths by yesterday.
Dr Majoro said his cabinet was exploring ways of ensuring food security and mitigating the effects of Covid-19 on the economy. He said he would update the nation once they had finalised their plans.
“The fight against Coronavirus should not only be a burden of the national command centre but it should be a concerted effort involving all stakeholders including medical staff, chiefs and even the business sector,” Dr Majoro said.
He said apart from fighting Covid-19, his government would also prioritise job creation and the implementation of the much-delayed constitutional, security sector, judicial, media and governance reforms recommended by SADC in 2016.