Mohloai Mpesi
Prime Minister Sam Matekane says the government needs to create a stable macro-economic environment and promote investor friendly policies to rescue Lesotho’s comatose economy.
There was need for the government and the private sector to work together to foster the right conditions for the business sector to thrive and ensure private sector led economic growth.
“The decline in private sector investments signals a lack of confidence in the economy. We need to increase both domestic and foreign investment into our economy. To do so, the government, working hand in glove with the private sector, must focus on creating a stable macroeconomic environment, implementing investor-friendly policies, and promoting public-private partnerships (PPPs) to attract investment in key sectors such as agriculture, energy, manufacturing, tourism, and technology,” the Prime Minister said while addressing a dialogue forum for the public and private sectors in Maseru last week.
He added: “This requires further improvements to our business ecosystems. Nurturing the business ecosystem is vital for fostering innovation, economic, diversification and job creation. This could involve policy reforms to create an enabling environment for business, increasing access to finance for startups and SMEs, fostering an entrepreneurial culture through education and awareness programs, and facilitating market access, especially external market access, for aspiring entrepreneurs. The role of government is central in enhancing this ecosystem.”
The premier said there were gaps that needed to be filled for the realisation of a private sector led economy. Dwindling private sector investments were an indication of a weak economy.
A holistic approach that encompassed policy reforms, institutional capacity building, investment in infrastructure, and targeted interventions to support key sectors and vulnerable groups was a prerequisite to boosting the economy.
Mr Matekane said the weak economy was also a result of socio-political instability, keeping away foreign direct investment (FDI) from reaching the country.
Lesotho had also performed poorly on international indices that foreign investors relied upon in making decisions.
“Recent ratings show that Lesotho’s investment climate has been less than favourable. For instance, we rank low on the Transparency International Corruption Index, the Heritage Foundation/Wall Street Journal, and the Fraser Institute’s Economic Freedom Index rankings,” Mr Matekane said.
“International credit rating agencies consistently highlight our socio-political instability as a major obstacle to attracting foreign investment. Good rankings are a critical factor in attracting investment. We must move up the ranks.”
A decline in the private sector investments, he said, signalled lack of confidence in the economy and as such “we need to increase both domestic and foreign investment into our economy”.
To achieve this, Mr Matekane said, the government working hand in glove with the private sector, should focus on creating a stable macroeconomic environment and implementing investor-friendly policies.
He said the Covid-19 pandemic, whose lockdowns, especially in 2020-21 , had negatively affected Lesotho particularly in the key textile industry which had lost markets causing job losses, and in extreme cases, closure of businesses.
“We must acknowledge the challenges exacerbated by the COVID-19 pandemic, including significant loss of market by our textile manufacturing sector, leading to high job losses and business closures, particularly among informal operators. Our domestic market is too small for sustainable growth,” Mr Matekane said.
The premier said whilst it was important for business to appreciate constraints that government operated under “government must also be acutely mindful of the pressures that business operated under”.
“It is critical that we develop mutual respect and understanding of each other’s pain points. In the end, we are all in this lovely country and economy together. We must make it work for collective benefit,” he said.
“We must endeavour to build upon our great textile track-record to diversify to new products and new markets. This is our ultimate goal with this new Forum. To achieve this aim, we must overcome our poor investment climate.”
According to Mr Matekane, nurturing the business ecosystem is vital for fostering innovation, economic, diversification and job creation. The role of government was central in enhancing this ecosystem.