INVESTMENT
OPPORTUNITIES IN
LESOTHO
HAVE A SHARE OF THE HIGHER GROUND
INVESTMENT OPPORTUNITIES IN LESOTHO
PROFILE OF LESOTHO
Lesotho is a democratic, sovereign and independent country which is located within
Southern Africa. It is a landlocked country entirely surrounded by RSA. The name
Lesotho translates into “the land of the people who speak Sotho”.
Formerly a British protectorate until she gained independence in October 1966, the
Kingdom of Lesotho is one of the three remaining monarchies in Africa.
The country has a land area of approximately 30 355 km², roughly the size of Belgium or Taiwan, or the American state of Maryland. Located at the southern tip of
Africa, Lesotho is completely outside the tropics and enjoys a cool, temperate climate. Often referred to as the “Switzerland of Africa”, it is blessed with a beautiful, often snow-capped range of mountains, the Maluti. The Kingdom’s central position in the heart of Africa’s most developed economy, that of South Africa, is well
served by air, rail and road links to all its major centres.
The capital, Maseru, is only 600 km away from South Africa’s busiest harbour, Durban, and is one-hour drive from Bloemfontein, a judicial and academic centre. It is
also only 45 minutes by air or four hours by road from Johannesburg, in the Republic
of South Africa. Is well served by air, rail and road links to the latter’s major cities.
The Kingdom is home to the largest and most ambitious civil engineering project in
the whole of Africa, the Lesotho Highlands Water Project (LHWP), which has harnessed and commercialised her upstream surplus water resources – often referred
to by Basotho as their “White Gold”.
BASIC FACTS ABOUT LESOTHO
Size:
30 335 sq. km
Altitude:
Lowest 1 388m (above sea level)
Highest 3 400m (above sea level)
Capital city:
Maseru
Population Country: 2 million (2009 est)
Population (Maseru):
393,000
Languages
:
Sesotho & English
Monetary Unit
:
Loti, plural Maloti;
at par with South African Rand (ZAR)
Measuring System: Metric system
Exchange Rate:
M8,27 = 1 US$ (2009 average)
G.D.P. Growth:
1.4% (2009)
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WHY INVEST IN LESOTHO?
Lesotho offers investors a dynamic and business environment complemented
by a healthy Government administered incentive regime which includes:
Stability
A stable social and political environment which is investor friendly.
A free enterprise and free market economic system, which forms the basis
for sustained development and growth.
Labour
Young, abundant, predominantly English speaking, literate, well motivated
Labour force with a tradition of manual dexterity at competitive wage rates.
Market access
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Lesotho is part of the Southern African Customs Union (SACU)
comprising Botswana, Lesotho, Namibia, Swaziland and South Africa.
There are about 52 million consumers in the region.
Duty free and quota free access provided by the regional trade and
investment block of the Southern African Development Community
(SADC).
Preferential market access of Lesotho originating products into the
Australian market, affording them duty free access or reduced rates of
duty.
Duty free access for a large list of products except for dairy, poultry and
egg products granted by Canada under the GSP system.
A preferential treatment agreement between SACU and MERCOSUR
(comprising of Argentina, Brazil, Paraguay, and Uruguay,) grants trade
preferences on specific products originating from Lesotho as member of
SACU.
The SACU EFTA gives SACU originating industrial and fish products duty
free and quota free access to Switzerland, Norway, Iceland and
Liechtenstein.
Lesotho can also export all products to the European Union duty free
provided under SACU EPA Agreement.
99% of Lesotho’s industrial products, including textiles and clothing can
be exported duty and quota free to Japan.
Lesotho’s products are eligible to duty free access to New Zealand and
Turkey under a GSP scheme
Lesotho benefits from the lucrative American market provided by the
African Growth Opportunity Growth (AGOA).
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INVESTMENT OPPORTUNITIES IN LESOTHO
Tax incentives
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0% corporate tax on manufacturing profit generated from
exporting manufactured goods outside of the Southern African Customs Union (SACU).
A maximum manufacturing corporate tax rate of 10% on profits for intra-SACU trade.
No withholding tax on dividends distributed by manufacturing
firms to local or foreign shareholders.
No advanced corporation taxes are paid by companies on the
distribution of manufacturing profits.
Training costs are allowable at 125% for tax purposes.
Payments made in respect of external management skills and
royalties related to manufacturing operations are subject to
withholding tax of 10%.
Easy repatriation of manufacturing profits.
A VAT rate of 14% (ensuring harmonisation with the RSA).
Furthermore, the Lesotho Revenue Authority has introduced
flexible VAT payment systems, to tax compliant firms, to
ease cash flows
INVESTMENT OPPORTUNITIES IN LESOTHO
1.
Investment opportunities in knitted fabric mill, accessories and
Packaging materials
Lesotho’s garment sector produces approximately 90 knitted garments and
26 million pairs of jeans annually. There is therefore need to ensure local
access to all the raw materials and accessories required by the garment
sector in order to satisfy the international market access conditions demand for a fully integrated garment industry,. An opportunity, therefore,
exists for investment in knitted fabric mills, trims and finishing facilities.
2.
Leather and footwear
The leather industry in Lesotho is at its infancy stage. The country has 3
shoe manufacturing factories despite the fact that shoes qualified for all
the benefits under AGOA. The 3 firms produce mainly for export while a
large share of the domestic market has to rely on imports from South Africa. Foreign direct investment in this sector would give a boost to the
leather industry particularly in tanning and finishing, footwear and footwear components, leather garments, leather goods including bags, car seat
covers, wallets, belts, gloves and other accessories.
3.
Assembly of consumer electrical and electronic appliances
The country boasts a pool of labour resource which includes people who
have graduated with different technical diplomas. The knowledge and skills
acquired will enable them to work on subassemblies or the final assembly of
an array of finished electrical and electronic products or components.
Opportunities exist in the production of a wide range of finished goods
from manufactured parts or subassemblies. These could involve assembly
of intricate manufactured products, such as engines, computers, electrical
and electronic components, radio or test equipment, machine-tool controls,
and prototypes of different types of products to meet the domestic and
international markets. Currently Lesotho hosts 4 companies in electronic,
electrical accessories and electrical assembly. They supply the SACU market competently.
4.
Food processing
Opportunities also exist in processing of organic, fortified foods and grain.
Historically, processing of fruit and vegetables in its simplest form like
pickling, sun drying or making preserves was practised in the country from
very ancient times in almost every home. The practice has been abandoned
with the result that these products are now being imported.
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INVESTMENT OPPORTUNITIES IN LESOTHO
As such there is a market for these products locally and internationally.
In the case of canned foods, a Cannery already exists which produces
mostly for the EU market and operates for seven months per annum, from
September to March of the following year. During the asparagus, apricots
and peaches off season, the Cannery processes juices from the peaches
purity and also processes vegetable salad. Through an improved supply chain
management and additions of more product lines, the facility can operate at
full capacity for nine months per annum. Therefore, there is potential to
expand the facility.
5.
Water bottling
Lesotho’s major natural resource is water, often referred to as ‘White
Gold’ by the Basotho people. The water is considered one of the most pure
in the world with very little microbiological and chemical contamination
which does not require intensive treatment.
Many natural springs of Lesotho flow year round. They are fed by renewable groundwater reserves recharged by rainfall and cleaned by the natural
environmental system with little or no anthropogenic influence. The waters
from most of these springs are physically, chemically and biologically clean/
acceptable and are sparkling, cool and refreshing.
The country has about 137 documented springs and 6 springs are within
close proximity of Maseru the capital town. The 6 springs have an average
yield of 0.5 litres of water per second which is low in concentration of micro organisms and chemical pollutants. There are also a total of 90 documented boreholes countrywide.
Bottled water is also considered a food product internationally, thus investment in water bottling would have the benefit of creating a positive
impact on public health in the region by providing safe drinking water for
areas with poor water supply.
6.
Accessories and Packaging Materials
Lesotho’s garment industry produces approximately 90 million knitted garments and 26 million pairs of jeans a year. It is estimated that 220 metric
tons of knitted trims and accessories such as collars, ribbed cuffs and
hems are used by the garment industry per annum. In addition, over 20
million pieces of packaging materials are consumed by the industry per
annum.
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INVESTMENT OPPORTUNITIES IN LESOTHO
Knitwear and jeans manufacturers in Lesotho manufacture large volumes of
clothing mainly for the US market, which require a lot of finishing accessories and packaging materials. All accessories and most of the packaging
materials are imported into Lesotho.
Thus opportunities exist in the manufacture of accessories and packaging
material to different customer specifications, especially in materials which
will provide a complete range of packaging products for the local and export markets.
7.
Resources-based projects. e.g. ceramic ware, brick making and sandstone
Sandstone deposits are found all over Lesotho and can be exported in different forms and thicknesses. The whole industry is in the hands of small
artisans with limited investment capabilities.
In Lesotho, sandstone is extensively used in the construction of residential
houses, office buildings, commercial complexes, hotels, restaurants and
special monuments. Artifacts made of sandstone have become popular. The
present demand is to make such carvings in the best possible manner with
man and machines. However, for large scale production, mechanization is
required to some extent.
The demand for sandstone slabs and tiles as well as veneering stones has
been increasing every day and different applications, in different designs,
are being made. The main advantage of using these stones has been that
they require negligible maintenance. It is hoped that with additional capital
that could be brought in by joint venture partners and proper marketing it
would be possible that the export market of natural and calibrated sandstone shall also increase.
Joint venture partnerships are encouraged with local companies which cannot only create value addition, but also generate employment and earn foreign exchange for the country, while reviving the talent of artisans in a
significant manner.
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INVESTMENT OPPORTUNITIES IN LESOTHO
8.
Environmental projects. e.g. Waste recycling
The textile industry includes dyeing, finishing, and printing, and final cutting into garments, and fabrics, etc. These include products such as cotton,
flax, rayon, nylon, acrylic, polyurethane and others. The primary environmental aspects of the textiles industry involve water use and wastewater
discharge from washing, chemical use in dyeing and finishing, and management of scrap and solid waste.
There are many low-cost improvements possible at every stage in the textile production life cycle. Therefore, investment opportunities exist which
will include process measurement and control, water recycling, chemical
substitution and reduction, energy efficiency, and new product development using waste materials.
9.
Development of infrastructure
Further opportunities exist in developing commercial and industrial properties on LNDC sites:
37m² of serviced land at Tikoe industrial estate situated in Maseru
is available for lease and further factory shells construction
31 hectares Nyenye industrial area which is 80km North of Maseru
140 hectares tourist attraction site at Caledonspoort for the develo
-pment of an eco-lodge.
9,400 m² Clifford commercial site
7160 m² Fairways commercial site
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INVESTMENT OPPORTUNITIES IN LESOTHO
THE LESOTHO ECONOMY
Exports trend (million Maloti)
Year
2004
2005
2006
2007
2008
Manufacturing Exports
1064
987.9
1129
1218
1215 1228.6*
Total Exports
4522
4255
5141
6106
2009
6942 5093*
Destination of Exports
Year
2004
2005
2006
2007
2008
2009
SACU
North America
Europe
%
14
70
15
%
17
63
17
%
24
60
13
%
27
48
21
%
38*
35*
24*
%
42.8
36.6
19
GDP Composition by industry
Primary:
15.9%
Secondary:
45.4%
Tertiary:
37.8%
(The manufacturing sector accounts for 17.2% of the country’s GDP)
WHAT LNDC CAN DO FOR YOU
LNDC is the first point of contact for investors who intend to set up projects in the
manufacturing and processing industries in Lesotho.
The Corporation’s mandate is to initiate, promote and facilitate the development of
manufacturing and processing industries, mining and commerce in a manner calculated
to raise the level of income and employment in Lesotho.
Investment promotion and industrial development
The Lesotho National Development Corporation (LNDC) is a development institution
created by an Act of Parliament. It is a statutory body and a quasi Government
institution which seeks to facilitate economic growth and development in Lesotho.
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SERVICES OFFERED BY LNDC
The LNDC offers a host of supportive services which
include the following:
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Serviced industrial and commercial sites at competitive rentals.
Provision of industrial and commercial buildings
at competitive rentals;
Financial assistance to investors on a selective
basis;
Investment facilitation services;
Assistance to procure all permits and licenses;
Provides assistance in company registration;
Provides assistance in industrial relations issues;
Undertakes investment projects appraisals;
INVESTMENT OPPORTUNITIES
IN LESOTHO
Lesotho national development Corporatio
Private Bag A96, Maseru 100, Lesotho
Tel: (+266) 22 312 012. Fax: (+266) 22 310 038.
[email protected]
Website: www.lndc.org.ls