MASERU — Lesotho’s economy grew by 4.3 percent last year from the 3.7 percent GDP growth recorded in 2011, the central bank said on Friday. Acting Central Bank of Lesotho governor, Dr Masilo Makhetha, attributed the growth to dynamic activity in the construction and mining sectors. Delivering the state of economy address, Makhetha said second quarter reports indicate that the manufacturing sector remains the largest employer despite declines in textile and clothing exports to 67.8 percent from 75.1 percent in the first quarter.
A slight 1.4 percent increase in diamond production, an increase in electricity consumption for both households and business and a drop in water consumption were also reported during the quarter, he said. Although inflation currently remained moderate, the constant rise in domestic prices of petrol, diesel and paraffin could result in an upward swing in inflation given the current weakness of the Rand/Loti and uncertainty in oil prices. The bank said public debt showed an upsurge with external debt at 48.4 percent of GDP. Further depreciation of the Rand/Loti threatens to affect debt negatively.
Money supply has expanded owing to the surge in credit extension to the private sector with household loans making up 60.2 per cent of domestic credit while business enterprises are at 39.8 per cent. The cost of borrowing remained low at 9.75 percent. However the rate remains higher than the South African rate of 8.5 percent. Makhetha said the government had registered a fiscal surplus of 1.9 percent of GDP while foreign reserves had risen significantly largely due to Sacu receipts.
The current account deficit had narrowed following reduced import spending in the second quarter. However he expressed concern that expenditure was skewed towards recurrent expenditure rather the capital expenditure which is necessary to boost the economy. “Recurrent expenditure is currently at 72 percent while capital expenditure is at a low 28 percent.
“There is more being spent on recurrent expenses than on infrastructure presently, there needs to be an increase in capital expenditure for the economy to grow,” he said. The South African economy is experiencing a drop in commodity prices and high inflation at 5.5 against a backdrop of a weak exchange rate, high unemployment rates and slow GDP growth.
South African economic performance is of key importance to our economy due to the Rand and Loti exchange rate parity.
Speaking on the performance of the textile and clothing industry, the Lesotho National Development Corporation (LNDC)’s Mamoiloa Raphuthing said investors in the industry were all foreign due to lack of adequate skills locally.
“The education structure in the country does not meet the industry demands, children need be taught to be business-minded from early schooling and in the home,” Raphuthing said. Speaking at the same occasion, Acting Principal Secretary in the Ministry of Finance, Motena Ts’olo, thanked the acting governor and the Central Bank for the update on the state of the economy.
She said despite the budget surplus, there was still a prevailing development deficit. “It is true we have a surplus, but we have not done all we wanted to. Taking pride in this surplus would be like telling one’s kids to starve for the sake of more savings in the bank,” she said. She urged the private sector to do their bit and challenge the government to help the economy move forward. “The government alone cannot run the economy; the private sector drives the economy while the government’s role is to create an enabling environment for the private sector,” she said.
On unemployment, the acting principal secretary said employment creation rested largely on the shoulders of the private sector because the government could not absorb all job seekers. “The government can only provide so many jobs; all the good jobs lie in the private sector. “We need to develop the private sector, grow the economy so that employment can be created” she said.