MASERU — Finance Minister Timothy Thahane says local firms must boost production to create jobs and improve the welfare of the people.
Thahane made the remarks at the Southern African Customs Union (Sacu) centenary celebrations held in Maseru on Wednesday.
Sacu, which was formed in 1910, is the largest and oldest customs union in the world.
Sacu funds make up 60 percent of the government’s revenue.
But the revenue has been dwindling over the years, raising fears of uncertainty for small member countries like Lesotho.
“Lesotho has a small local market,” Thahane said.
“But it can increase its production for export into the Sacu region that has a population of 50 million.”
He said there was need for the government to improve the business environment to increase revenue.
“The first challenge is to create real jobs in the economy and improve tax collection,” Thahane said.
“We will increase our tax base if we have more people who are working in the (formal) economy and if there are more sustainable businesses.”
Lesotho is the lowest ranked country among the five Sacu countries in the World Bank’s ease of doing business survey.
The country has slumped from position 124 out of 183 countries in 2008 to position 130 out of 183countries in 2010.
The drop has been attributed to the stringent regulations that are in place that make it difficult for investors to set up businesses locally.
The finance minister said there was also need to clamp down on corruption that has seen individuals and businesses evading tax.
According to a first quarter report released by the Ministry of Finance, about 90 percent of all company tax collected in Lesotho comes from only 20 companies.
Thahane said the focus should be on the development of small businesses which are said to make up to 70 percent of all businesses registered in Lesotho.
“A country requires proper infrastructure development for it to grow,” he said.
“We have to look at how to develop our infrastructure to facilitate growth and develop the necessary skills to support that growth.”
Thahane said local businesses should view Sacu as a potential market that can be sustainable.
He urged local businesses to take advantage of the trade opportunities in the region.
The minister also urged local businessmen to diversify their export products.
Lesotho has a low export base with the country’s major exports being textiles, diamonds, water and agricultural products such as wool and mohair.
Thahane also expressed hope that there will be further investments in the banking sector following the passing of the Land Bill in June this year.
The controversial law was passed amid fierce resistance by opposition parties and civic groups which argued ordinary Basotho had not been adequately consulted.
The new law will among other things allow foreigners to own land in Lesotho, a practice which was barred under the country’s previous land laws.
Thahane said the country’s previous land tenure system had held back investments in the banking sector.
“What has been preventing the banks from investing in the country was the land tenure system,” he said.
“However, with the new Land Bill it is hoped that we may see banks reinvesting locally.”
Thahane added that in most economies banks play a significant role by investing in key sectors such as property.
“The local banks are very liquid,” he said.
“However they have not been investing in the country, they are investing elsewhere.”
Lesotho’s top three local commercial banks are subsidiaries of South African financial institutions.