MASERU — Finance Minister Timothy Thahane is expected to present a tight budget on Friday, having to juggle pressing priorities with a smaller purse this time round.
Thahane faces the challenge of dealing with Lesotho’s dwindling share of the SACU revenues and an economy experiencing the aftershock effects of last year’s global recession.
The textile industry, Lesotho’s biggest private sector employer with about 42 000 workers, is battling to stay afloat with orders from the main markets drying up.
Alarm bells are already ringing in the sector with companies like P&T Garment in Mafeteng saying unless something dramatic happens to improve its waning fortunes it might have to send its 2 400 workers home.
There is also the agriculture sector that has seen production sliding over the past three years.
Added to these woes are Lesotho’s perennial challenges like a health sector severely strained by HIV and Aids as well as poverty.
Unemployment is still stubborn at 45 percent but analysts say Thahane might have an even bigger problem conserving the already existing jobs.
Analysts say Thahane’s budget will have to do something about all these urgent but old problems without forcing the country to borrow beyond its means.
So far the government has managed to avoid living on borrowed money but — with donor fatigue setting in and the usual sources of revenue for the treasury shrinking — the cautious Thahane might be left with no choice but to look elsewhere for bridging finance.
Thahane’s biggest problem might not be how to share the money but where to get it.
Solutions to Lesotho’s problems don’t come cheap, analysts say.
SACU, Lesotho’s major cash cow with a 60.1 percent contribution to the kingdom’s fiscus, is no longer coughing up as much as it used to.
Thahane warned last November that “mammoth challenges lie ahead”.
He warned that “dark clouds hang perilously over our future as a nation”.
“For Lesotho this means a decline in our share from M4 918 million in 2009/10 to M1 733 million in 2011/2012 or 65 percent decrease over three years,” the minister said in reference to Lesotho’s share from the world’s oldest customs union.
A few days after that chilling speech in parliament, Thahane told our sister paper the Lesotho Times that, to raise more money, the government might have to review charges on its services this year.
He said for a “long time our service charges have been stagnant”.
Thahane said because of the cash squeeze the government will rein in non-productive expenditure and some “things that had to be done now might have to be pushed to later dates”.
Friday’s budget will give an idea of how much people will have to tighten their belts.
Last year’s budget was mainly focused on keeping the economy afloat during the recession.
Government revenue covered 76.2 percent of the total expenditure with the remainder being financed through donations and soft loans.
Lesotho Chamber of Commerce and Industry deputy president Thabang Mokatse said the main challenge facing the government is finding other sustainable sources of revenue that will compensate for the declining SACU revenues.
“It will be interesting to see which strategies are there to find new sources of revenue and what can be done to create and save jobs in the manufacturing sector which is the main employer in Lesotho,” Mokatse said.
He said the current job cuts in the manufacturing sector could be controlled if the government works closely with the private sector.
“There has to be a drive for more participation by the private sector and we have to use the natural resources that we have to our advantage and for the benefit of the country,” he added.
Mokatse said it would be “too optimistic to expect a reduction in tax rates and tax credits that were introduced in the past two years because that would mean a significant cut in the government’s revenue at a time when it urgently needs more”.
He said Thahane’s budget should focus on strategies to cut government expenditure since ministries have consistently used up their allocations before the end of the financial year.
“I hope that the budget allocation for the development of SMMEs for this year has increased,” said SMME Support Network coordinator Makama Masitha.
“We hope that the budget caters for the new structure and addresses the issue of equitable distribution of the funds allocated for the development of SMMEs.”
Lesotho Institute of Accountants technical manager Moahloli Mphaka said the budget should focus on stimulating growth.
“The budget must focus on improving the private sector and public sector services which will drive economic growth and generate more government revenue,” he said.
Mphaka said education, health and infrastructure should form the core of Thahane’s budget.
“Our agricultural sector has to be revived since it is one of the important sectors which have not been performing well for some time now,” he added.