Lesotha Economy - History

Lesotha Economy - History

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GDP (2003): $1.43 billion.
Annual growth rate (2003): 3.8%.
Per capita GDP (2003): $550.
Average inflation rate (2003): 10%.

Budget: Income .............. $56 Billion Expenditure ... $60 Billion

Main Crops: Wheat, corn, sorghum, soybean, sugar beets.

Natural Resources: Lead, Zinc, Tin, Copper, Iron, Petroleum.

Major Industries: Food Processing, Motor Vehicles, Consumer Durables.


Lesotho's economy is based on water and electricity sold to South Africa, manufacturing, earnings from the Southern African Customs Union (SACU), agriculture, livestock, and to some extent earnings of laborers employed in South Africa. Lesotho also exports diamonds, wool, and mohair. Lesotho is geographically surrounded by South Africa and economically integrated with it as well. The majority of households subsist on farming or migrant labor, primarily miners in South Africa for 3 to 9 months. The western lowlands form the main agricultural zone. Almost 50% of the population earns some income through crop cultivation or animal husbandry, with over half the country's income coming from the agricultural sector.

Water is Lesotho's only significant natural resource. It is being exploited through the 30-year, multi-billion-dollar Lesotho Highlands Water Project (LHWP), which was initiated in 1986. The LHWP is designed to capture, store, and transfer water from the Orange River system and send it to South Africa's Free State and greater Johannesburg area, which features a large concentration of South African industry, population, and agriculture. Completion of the first phase of the project has made Lesotho almost completely self-sufficient in the production of electricity and generated approximately $24 million annually from the sale of electricity and water to South Africa. The World Bank, African Development Bank, European Investment Bank, and many other bilateral donors financed the project. Lesotho has taken advantage of the African Growth and Opportunity Act (AGOA) to become the largest exporter of garments to the U.S. from sub-Saharan Africa. Exports totaled over $320 million in 2002. Employment reached over 50,000, marking the first time that manufacturing sector workers outnumbered government employees. Asian investors own most factories.

Lesotho has received economic aid from a variety of sources, including the United States, the World Bank, Ireland, the United Kingdom, the European Union, and Germany.

Lesotho has nearly 6,000 kilometers of unpaved and modern all-weather roads. There is a short rail line (freight) linking Lesotho with South Africa that is totally owned and operated by South Africa. Lesotho is a member of the Southern African Customs Union (SACU) in which tariffs have been eliminated on the trade of goods between other member countries, which also include Botswana, Namibia, South Africa, and Swaziland. Lesotho, Swaziland, Namibia, and South Africa also form a common currency and exchange control area known as the Common Monetary Area (CMA). The South African rand can be used interchangeably with the loti, the Lesotho currency (plural: maloti). One hundred lisente equal one loti. The loti is at par with the rand


Economic summary: GDP/PPP (2013 est.): $4.265 billion per capita $2,200. Real growth rate: 4.1%. Inflation: 5.0%. Unemployment: 25% (2008). Arable land: 10.14%. Agriculture: corn, wheat, pulses, sorghum, barley livestock. Labor force: 874,200 (2013) 86% of resident population engaged in subsistence agriculture roughly 35% of the active male wage earners work in South Africa industry and services 14%. Industries: food, beverages, textiles, apparel assembly, handicrafts, construction, tourism. Natural resources: water, agricultural and grazing land, diamonds, sand, clay, building stone. Exports: $941.2 million (2013 est.): manufactures 75% (clothing, footwear, road vehicles), wool and mohair, food and live animals. Imports: $2.148 billion (2013 est.): food building materials, vehicles, machinery, medicines, petroleum products. Major trading partners: U.S., Canada, UK, Hong Kong, China, India, South Korea, Germany (2004).

Member of Commonwealth of Nations

Communications: Telephones: main lines in use: 43,100 (2012) mobile cellular: 1.312 million (2011). Broadcast media: 1 state-owned TV station and 2 state-owned radio stations government controls most private broadcast media satellite TV subscription service available transmissions of multiple international broadcasters obtainable (2008). Internet Service Providers (ISPs): 11,030 (2012). Internet users: 76,800 (2009).

Transportation: Railways: none. Highways: total: 5,940 km paved: 1,069 km unpaved: 4,871 km (2011). Ports and harbors: none. Airports: 24 (2013).

International disputes: South Africa has placed military units to assist police operations along the border of Lesotho, Zimbabwe, and Mozambique to control smuggling, poaching, and illegal migration.

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page 293 note 1 Ward , Michael , ‘Economic Independence for Lesotho?’, in The Journal of Modern African Studies ( Cambridge ), 5 , 3, 09 1967 , pp. 355 and 368.Google Scholar

page 293 note 2 For alternative views stressing politics more than economics, see Weisfelder , Richard F. , ‘Lesotho: changing patterns of dependence’, in Carter , Gwendolen M. and O'Meara , Patrick (eds.), Southern Africa: the continuing crisis ( Bloomington , 1979 ),Google Scholar and ‘ The Basotho Nation-State: what legacy for the future ’, in The Journal of Modern African Studies , 19 , 2, 05 1981 , pp. 221 –56.CrossRefGoogle Scholar

page 294 note 1 For a further discussion and references, see Cobbe , J. H. , ‘Growth and Change in Lesotho’, in South African Journal of Economics ( Braamfontein ), 46 , 2, 06 1978 , pp. 135 –53.Google Scholar

page 294 note 2 See Palmer , Robin and Parsons , Neil (eds.), The Roots of Rural Poverty in Cental and Southern Africa ( London , 1977 ).Google Scholar

page 294 note 3 Leistner , G. M. E. , Lesotho: economic structure and growth ( Pretoria , 1966 ), p. 4 .Google Scholar

page 295 note 1 ‘South Africa's 10 o'clock Trap’, in The Economist ( London ), 4 09 1982 , p. 76 .Google Scholar

page 295 note 2 Great Britain, Commonwealth Relations Office, Economic Survey Mission to Basutoland, Bechuanaland Protectorate and Swaziland. Report ( London , 1960 ).Google Scholar

page 296 note 1 Compiled from various offical and unofficial sources, as well as the author's estimates, none of which should be regarded as likely to be completely accurate.

page 296 note 2 Ward, loc. cit.

page 297 note 1 Growth of G.D.P. is believed to have continued at about a 6 to 8 per cent per annual real rate in 1980 and 1981, but to have fallen to almost zero in 1982. Rakhetla , K. T. J. , ‘ Budget Speech Presenting the 1983/84 Estimates of Revenue and Expendinture ’, Maseru , 1983 , p. 2 .Google Scholar

page 299 note 1 Compiled from a variety of Lesotho, South African, and secondary sources.

page 300 note 1 Supposedly in 1975 a target of 50 per cent South African blacks was adopted. ‘Manning the Mines’, in Mining Survey , supplement to Financial Mail ( Johannesburg ), 22 10 1982 , pp. 23 –4.Google Scholar

page 300 note 2 Contracts were very short in 1976, reflecting not only the slow adjustment of expenditure to greatly increased wages, but also the abolition of the Masters and Servants Act, permitting blacks to quit before the end of their signed contracts.

page 300 note 3 On the Customs Union, see Cobbe , James , ‘Integration among Unequals: the Southern African Customs Union and development’, in World Development ( Oxford ), 8 , 4, 04 1980 , pp. 329 –36.Google Scholar

page 301 note 1 Kingdom of Lesotho. First Five-Year Development Plan, 1970/71–1974/75 ( Maseru , 1970 ), p. 252 .Google Scholar

page 301 note 2 In 1979–80, the top 10 per cent of crop farmers in the lowlands and foothills of Lesotho produced crops with an average value well under M400. See Cobbe , James , ‘Labour-Related Aspects of Rural Development in Lesotho’, Institute of Labour Studies , Discussion Paper No. 6, Maseru , 1982 , p. 10 .Google Scholar

page 302 note 1 World Bank, Accelerated Development in Sub-Saharan Africa: an agenda for action ( Washington, D.C. , 1981 ), p. 146 .Google Scholar

page 302 note 2 Kingdom of Lesotho, Second Five-Year Development Plan ( Maseru , 1976 ).Google Scholar

page 303 note 1 These are World Bank figures the Lesotho Minister of Finanace estimates total aid in 1982–3 at M115 million, or about $74 per capita, which suggests an increase of perhaps 20 per cent in real terms since 1979, although the figures may not be comparable. Rakhetla, op. cit. pp. 6–7.

page 304 note 1 The Lesotho Government's views on South Africa's actions of this kind are well decumented in the offical Lesotho Weekly (Maseru). Although the December 1982 attack on Maseru (which killed 42 persons, 12 of them Lesotho citizens) is the best-known incident, substantial violence continues in the last week of March 1983, armed clashes with the Lesotho Police and Paramilitary Force, allegedly involving South African Defence Force personnel, were reported in six differernt places in the country, “An Emeny Strikes Again’, in ibid. 1 April 1983, p. 1. A detailed discussion of Pretoria's policy, its possible motivations, and its implications, from a South African viewpoint, is found in Geldenhuys , Deon , ‘Recrossing the Matola Threshold: the “terrorist factor” in South African's regional relations’, in South Africa International ( Pretoria ), 13 , 3, 01 1983 , pp. 152 –71. Geldenhuys seems to support the view that economic pressures to achieve political goals –e.g. restricting migration from Lesotho – should be used more actively by the South African Government. Pertoria is also refusing to renegotiate the Customs Union revenue formula, apparently also to put pressure on Lesotho (among others).Google Scholar

page 305 note 1 See Rakhetla , T. J. , ‘ Budget Speech Presenting the 1982/83 Estimates of Revenue and Expenditure ’, Maseru , 04 1982 .Google Scholar Interest charges alone have increased from less than 1 per cent of government revenue in 1979–80 to 8 per cent in 1982–3, and a projected 12 per cent in 1983–4 Rakhetla, 1983 Budget Speech, op.cit p. 8.

page 306 note 1 See Wellings , Paul A. and Crush , Jonathan S. , ‘Research into Tourism in southern Africa, with Particular Reference to Lesotho’, Institute of Southern African Studies , Roma , 1981 .Google Scholar

page 306 note 2 This tendency, which would exist anyway because of more developed infrastructure and easier availability of inputs and services elsewhere, is exacerbated by the very generous investemnt promotion package for the Homelands in South Africa, introduced after the so-called Good Hope Conference of April 1982, and South African's establishment of the Development Bank for Southern Africa (to begin operating in September 1983).

page 307 note 1 For a discussion of these ‘exposure’ effects, first explicitly proposed by Sandra Wallman, see Cobbe , James , ‘Emigration and Development in Southern Africa, with Special Reference to Lesotho’, in International Migration Review ( New York ), 16 , 4, Winter 1982 , pp. 837 –68Google Scholar also Wallman , Sandra (ed.), Perceptions of Development ( Cambridge , 1977 ).Google Scholar

page 307 note 2 Broadcast by the Commissioner of Sales Tax on Radio Lesotho in early 1983, reported in a personal communication from David Ambrose, 3 April 1983.

page 307 note 3 Rakhetla, 1983 Budget Speech, op. cit. p. 7.

page 308 note 1 A fuller discussion, with illustraive numbers, is found in Cobbe, ‘Labour-Related Aspects of Rural Development in Lesotho’ pp. 16–17. The 1983–4 budget allocates over M9.5 million of capital funds for this Food Self-Sufficiency Programme, although plans call for planting only 40,000 acres, and if the drought continues, none may be planted. Rakhetla, 1983 Budget Speech, p. 10. Lesotho's exchange of Ambassador with the poeples Republic of China, resulting in the withdrawal of Taiwna's Embassy and technical assistance in May 1983, may lead to a de-emphasis of this programme, which was supported strongly by Taiwan.

Lesotho - Unemployment Rate

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Lesotho - Market OverviewLesotho - Market Overview

Lesotho, with a population of 1.88 million, is geographically surrounded by and economically integrated with South Africa, from which it receives approximately 80 percent of its imports for final consumption.

Lesotho held free, fair, and transparent general elections in February 2015, in which a seven-party coalition government, the second coalition in Lesotho’s history, ousted the ruling coalition government. The election marked Lesotho’s second democratic and peaceful transition of power between parties since its independence. The elections followed a period of instability following clashes between the police and army on August 30, 2014, which led to the Prime Minister briefly fleeing the country. In this context, Freedom House ranks Lesotho’s as “free” in its 2015 Freedom in the World Report, and Fitch upgraded its sovereign credit outlook for Lesotho to stable, citing improvements in political stability and infrastructure investment.

The 2015 World Bank Doing Business report reveals that Lesotho has eliminated some binding constraints to private investment, despite the negative impact of recent political instability and subsequent prorogation (temporary suspension) of Parliament in June 2014, which largely hindered implementation of investment climate reforms. The country moved up four places from 97 to 93 in the area of registering property and two places from 163 to 161 in the area of issuing construction permits. The Land Act of 2010 and the establishment of the Land Administration Authority have made transferring property easier by streamlining procedures and increasing administrative efficiency.

Lesotho is a member of the Southern African Customs Union (SACU), and as such, does not pay tariffs to export goods to other SACU members (Botswana, Namibia, South Africa, and Swaziland). With the exception of Botswana, these countries also form a common currency and exchange control area known as the Common Monetary Area (CMA). Within Lesotho, the South African rand can be used interchangeably with Lesotho’s currency, the loti, since the loti is pegged one to one (1:1) to the South African rand. The loti-rand peg provides some level of economic stability, and the Government Lesotho also has a record of pursuing prudent macroeconomic policies.

Lesotho gets most of its foreign exchange through earnings from the Southern African Customs Union (SACU), water exports to South Africa, and, to a decreasing extent, remittances from migrant laborers employed in South Africa.

Lesotho has relatively low inflation, around 5.4% at the end of 2014. The economy is mostly export driven. Major export products are garments, diamonds, water, electricity, wool and mohair. The major economic sectors are manufacturing, mining, agriculture and services.

Lesotha Economy - History

Economy - overview:
Small, mountainous, and completely landlocked by South Africa, Lesotho depends on a narrow economic base of textile manufacturing, agriculture, remittances, and regional customs revenue. About three-fourths of the people live in rural areas and engage in animal herding and subsistence agriculture, although Lesotho produces less than 20% of the nation's demand for food. Agriculture is vulnerable to weather and climate variability.

Lesotho relies on South Africa for much of its economic activity Lesotho imports 85% of the goods it consumes from South Africa, including most agricultural inputs. Households depend heavily on remittances from family members working in South Africa in mines, on farms, and as domestic workers, though mining employment has declined substantially since the 1990s. Lesotho is a member of the Southern Africa Customs Union (SACU), and revenues from SACU accounted for roughly 26% of total GDP in 2016 however, SACU revenues are volatile and expected to decline over the next 5 years. Lesotho also gains royalties from the South African Government for water transferred to South Africa from a dam and reservoir system in Lesotho. However, the government continues to strengthen its tax system to reduce dependency on customs duties and other transfers.

The government maintains a large presence in the economy - government consumption accounted for about 26% of GDP in 2017. The government remains Lesotho's largest employer in 2016, the government wage bill rose to 23% of GDP – the largest in Sub-Saharan Africa. Lesotho's largest private employer is the textile and garment industry - approximately 36,000 Basotho, mainly women, work in factories producing garments for export to South Africa and the US. Diamond mining in Lesotho has grown in recent years and accounted for nearly 35% of total exports in 2015. Lesotho managed steady GDP growth at an average of 4.5% from 2010 to 2014, dropping to about 2.5% in 2015-16, but poverty remains widespread around 57% of the total population.

Agriculture - products:
corn, wheat, pulses, sorghum, barley livestock

food, beverages, textiles, apparel assembly, handicrafts, construction, tourism

Labor force - by occupation:
agriculture: 86%
[see also: Labor force - by occupation - agriculture country ranks ]
industry and services: 14% (2002 est.)
note: most of the resident population is engaged in subsistence agriculture roughly 35% of the active male wage earners work in South Africa

History of Conflict and its Impact on Basotho Development

The political instability in Lesotho can be attributed to institutional crisis and constitutional disorder since independence [2] . These two are compounded by the structure of the economy given that the Government of Lesotho plays a central role as the employer of choice in the context of limited private economic opportunities [3] . The public service wages are 43.0% more than the private sector and hence the sector accounts for 60.0% of the country’s employment [4] . The foregoing explains why a significant number of Basotho either migrate, mostly to South Africa to look for jobs, or depend predominantly on government for their livelihoods. This provides an environment where the politics of patronage thrive. In addition, access to state power becomes very central as a vehicle of accumulation so much that people are prepared to use violence to remain in or take over office.

Political instability in Lesotho can be traced as far back as 1970 when the first post-independence elections were held where the ruling BNP lost to the Ntsu Mokhehle’s Basutoland Congress Party (BCP). However, BNP leader Leabua Jonathan refused to relinquish power, annulled the election, and declared himself Prime Minister, in what was Lesotho’s first “parliamentary” coup [5] . In 1973, Leabua Jonathan formed an interim National Assembly which lasted until 1986, a period that was effectively a one-party state. It was in the same era that the security sector was expanded and politicised in order to enforce repression and patronage [6] . The opposition, BCP, fought relentlessly for political space in the interim culminating in an uprising in 1974. Some party loyalists were even sent abroad for military training and returned in 1979 to launch another wave of insurgence. On both accounts Leabua Jonathan’s government responded by clamping down on BCP leadership and their sympathisers.

The waves of conflict between 1970 and 1985 are reflected in the economic sphere as shown by the annual average GDP growth rates. For instance, while in the entire period GDP growth was 5.5%, in the most turbulent period 1979-1985 it shrunk to -0.8%. This is also a direct contrast from another four-year period of 1974 to 1978 where GDP grew by 10.3% [7] . As the clampdown on BCP members intensified hundreds of people were displaced and some were forced into exile, including party leader Ntsu Mokhehle, thereby negatively impacting on their livelihoods. Business activities were disturbed hence the poor GDP growth.

During Leabua Jonathan’s reign, the appetite for state power grew among the securocrats and the results are evident in the military meddling in politics from 1986 to 2000, and to a large extent even beyond. After a failed election in 1985 the army launched a military coup in 1986. Between 1986 and 1993, Lesotho was ruled by the Military Council under General Justin Lekhanya (up to 1991) before he was deposed by another military strong man Major-General Phisoane Ramaema following a mutiny. The military rulers forced King Moshoeshoe II to flee into exile and replaced him with his son King Letsie III.

Lesotho Defence Force

While the military technically ceded power to the civilian government of Ntsu Mokhehle-led BCP after the 1993 elections, their meddling in politics have become systematic. For instance, the military was heavily involved in 1994 when King Letsie III staged a “palace” coup after temporarily suspending the constitution and taking over power from BCP. Partly, King Letsie III’s gripe with BCP was that the party was refusing to reinstate his father as the king. The impasse was solved after a South Africa-brokered truce in which the legitimate government of Ntsu Mokhehle returned to power in exchange of reinstating King Moshoeshoe II.

As mentioned earlier, the constitutional crisis has not only blurred the lines between the military and civilian rule, but has also caused confusion among the political parties. Ntsu Mokhehle used the disorder to his advantage in 1997 when divisions within the ruling BCP became irreconcilable. He broke away with a following of two-thirds of the MPs to form the Lesotho Congress for Democracy (LCD). In the process he staged a “parliamentary coup” in that he remained the Prime Minister until the end of his term in 1998 at the expense of BCP that had the popular vote. The LCD went on to win the 1998 elections with a landslide victory and Pakalitha Mosisili took over as the new Prime Minister. With the first-past-the-post electoral system, losing political parties were as good as excluded in the affairs of the country hence BCP felt disenfranchised. It was under these circumstances that opposition parties intensified protests and became violent as the SADC commission led by Pius Langa had given the election outcome a green light. Once again, the role of the military was evident when junior officers refused to take orders to quell the violence and looting following the disputed election. Eventually there was a mutiny which resulted in direct military intervention by South Africa and Botswana. The SADC military intervention ended in 1999 and in the meantime, Lesotho was ruled by an Interim Political Authority that lasted until 2002 elections.

The political upheavals of 1985 to 2000 are reflected on the economic front as shown by a drop in negative balance of payments (BOP, at current prices) and GDP growth. These respectively declined from USD 142.2 million and 9.4% in 1985 to an average of -USD 62.5 million and 4.9% from 1986 to 2000 [8] . In fact, from 1990 to 2000 Lesotho had a continuous negative BOP. At the height of the conflict in 1998, property worth ZAR 160.0 million (approx. USD 29.1 million) was damaged 246 firms were shut down with 400 workers losing their jobs, and 100 people including soldiers died [9] . Manufacturing which had picked to 60.5% in 1984, deteriorated to an average of 7.5% in 1985-1999 [10] . Therefore, the period of conflict and political instability affected local production as factories were closed thereby forcing the country to import more than it exported. In addition to that, infrastructure was damaged, and with more people losing jobs, it negatively impacted on internal spending resulting in poor economic performance.

In the post-2000 epoch, the constitution was amended to allow for a proportional electoral system. Through it, additional 40 proportional representation seats are distributed to contesting political parties. The move was plausible as it brought relative calm from 2000 to 2010. It led to two successive peaceful elections, in 2002 and 2008, which were both won by LCD. It must be noted also that the new electoral system also gave birth to the politics of coalitions whose intricacies are tackled later in this article. The political stability in this era is mirrored by the confidence in the economic sphere as shown by the improvement in FDI which increased from an average of USD 20.26 million in 1986-2000 to USD 50.48 million in the period 2000-2010 [11] . The GDP growth also improved in this era from 3.3% during 1995-2000 period to 4.8% in 2005-2010 [12] . More so, incomes also improved as shown by the GNI per capita (current) which moved up from an average of USD 630.66 during the period 1986-2000 to USD 1030 during 2001-2010. In other words, a peaceful epoch encouraged more foreign investors to plough their money in Lesotho and it also gave domestic industries a new lease to improve on production thereby leading to positive GDP growth.

Lesotho Defence Force Emblem

In the post-2010 period, political instability at micro-level in Lesotho has become synonymous with the names of Pakalitha Mosisili and Thomas Thabane on the political front as well as Lieutenant Tlali Kamoli and Brigadier Maaparankoe Mahao on the military side. Besides the four strong men, coalition politics have also led to instability in the same period. Thomas Thabane assumed office as Prime Minister after the 2012 elections through the All Basotho Convention (ABC) led coalition. His term was cut short as elections were brought forward to February 2015 instead of the scheduled 2017 due to the ructions within the coalition [13] . At the heart of the misunderstanding between Thomas Thabane and his coalition partners was the demotion of Tlali Kamoli as Lesotho Defence Forces (LDF) commander and his replacement with Maaparankoe Mahao without consultation.

When Pakalitha Mosisili returned to office as Prime Minister in 2015 under the Democratic Congress-led coalition, he immediately reinstated Tlali Kamoli as commander of LDF and in the process demoted Maaparankoe Mahao. The move divided the rank and file of the military with the younger recruits (better known as Intake 21) said to be behind Maaparankoe Mahao, while the old guard sided with Tlali Kamoli [14] . Under Tlali Kamoli, impunity on the military front intensified as shown by the refusal to submit to civilian rule and it was under these circumstances that soldiers who committed crimes were not handed over to the police. The problematic nature of the security cluster overlap into politics can also be noticed in the SADC Mission on the Kingdom of Lesotho recommendation to send Tlali Kamoli, Maaparankoe Mahao and then Police Commissioner Khothatso Tsoona to exile on what was later called leave of absence in the aftermath of the skirmishes in 2014 [15] . The three were only allowed to return home after the 2015 elections. Maaparankoe Mahao was eventually killed on 25 June 2015 in an operation to arrest him following trumped up mutiny allegations [16] .

Pakalitha Mosisili’s new reign only lasted slightly above two years (13 March 2015 to 8 June 2017) when yet again the coalition partners turned against him and passed a vote of no confidence. An election ushered Thomas Thabane back into the office under yet another coalition of four political parties in September 2017. A year later, Thomas Thabane was at odds again with his coalition partners this time over the sacking of Motlohi Maliehe as tourism minister in August 2018, and his subsequent suspension as chairperson of ABC [17] . In addition to that there are ructions over rights given to the Chinese national to be the sole buyer of mohair, a major means of livelihood for the subsistence farmers. Opposition parties are also at loggerheads with Thomas Thabane after the discharge of the chief justice. To demonstrate their displeasure the parties pulled out of the peace building initiative, SADC Preventive Mission in the Kingdom of Lesotho, which was deployed in December 2017. These latest misunderstandings are a fertile ground for another political impasse in Lesotho.

Political fragility does not augur well on GDP growth and has made the situation worse in the development arena. As noted by the minister of finance in his 2018 budget speech, peace and stability are the bedrock on which to formulate successful development policies and hence the current coalition sort to secure rule of law [18] . Invariably, GDP growth takes a knock when there are political upheavals. While in the period 2005-2010 the growth rate reached its peak at 4.8%, it fell to an average of 4.2% in 2010-15 and worse still as political instability intensified from 2012-2017 the GDP growth went down further to 3.3%. Similarly, GDP per capita PPP (constant 2011) shows that it improved from USD 1626.8 in 1991-1999 to USD 2002.9 during the peaceful period of 2001-2009 [19] . The rapid turnover of government – three administrations in five years- brought policy uncertainty which in turn destabilises economic activities. That had a bearing even on BOP which plummeted from an average of USD 128.1 million in the peaceful years of 2001-2010 to -USD 184.7 million in 2010-2017. As the economy continues on an unfavourable trend, unemployment has remained high with a direct variation to poverty which remains high in Lesotho estimated at 57.0%. To compound the situation, Lesotho is one of the most unequal countries in the continent ranking in the top five with a Gini Coefficient of over 55 [20] . Wages have also continued to tumble, for instance in the manufacturing sector, a decrease of 19.1% was observed in the fourth quarter of 2017 compared the third quarter of the same year, with indications that the private sector salaries have remained stagnant since mid-2000s [21] .

The negative GDP growth has a bearing on education and health indicators. Education outcomes have either stagnated, or even worsened. For instance, literacy levels for people above 15 years which stood at 86.0% (adults) and 91.0% (youth) in 2000, dropped to 76.0% and 87.0% respectively in 2014 [22] . Life expectancy is at 56 years with health coverage of 67.0% and the government targets 100% by 2020, a target that might not be reached if the current ructions in Thomas Thabane-led coalition continue and lead to yet another vote of no confidence [23] .

While internal socio-political dynamics have impinged on growth and development in Lesotho, it is important to highlight that the country is exposed to a lot of external shocks. As an enclave, entirely surrounded by South Africa, it is no surprise that the bigger and only neighbour has disproportionate influence on GDP growth and even political stability. South Africa has been at the forefront of interventions in Lesotho to try and bring peace in 1994 1998 and post-2014. Recently when South Africa increased its VAT to 15.0%, Lesotho followed suit in what the minister of finance said was an effort to preclude smuggling [24] . That underlies the fact that Lesotho does not have a unilateral financial and tariff system but a multilateral one that hinges on its neighbours, especially South Africa. Lesotho has also heavily depended on SACU remittances, as part of the country’s revenue mix, which have however declined in 2018/19 by LSL 616.1 million (approx. USD 45.0 million) from its 2017/18 level. In fact, as percentage of GDP, SACU revenues fell from 20.3% in 2015/16 to 13.5% in 2016/17 [25] . The IMF has noted that there has been a volatility in the SACU revenues as a percentage of the GDP since 2013. Lesotho’s SACU revenue income averaged 20.2% of GDP from FY2013/14 to FY2017/18 and is projected to decrease to 16.3% in FY2018/19 before decreasing further to an average of 14.36% of GDP from FY2019/20 to FY2022/23 [26] . Planning becomes challenging when any part of revenue declines from as far as 24.0% to 13.2%. Therefore, while internal dynamics affect GDP growth and development in Lesotho, it must be pointed out that the country is susceptible to many external shocks, especially coming from South Africa.

To redress the challenges that Lesotho has been facing, there is a need for political stability which in turn will inform sound economic policies that can enhance development. The major sources of conflict have been the constitutional and institutional crises bedevilling the country. These have manifested through fights for political participation, legitimacy of government and distribution of resources [27] . At micro-level, military personnel and political elites have been at the centre of all the conflicts. The most turbulent period was between 1986 and 2000 in which military, royal and parliamentary coups occurred. Three military mutinies were also witnessed. In the same period lives were lost and unemployment increased to 37.0% compared to 32.5% in 2000-2009.

For the military, a constitutional and policy mechanism ought to be found to define their mandate and stop the overlap into politics. Mistakes such as demoting army commanders instead of retiring them need to be nipped. For the political elites, state power has been seen as pathway to economic accumulation and the contestation for this power turns into a zero-sum game, hence a need for constitutional reforms to dissuade them from wanting to take over power at all costs [28] . In that light, it may be prudent to have a limit of terms for Prime Ministers rather than having same faces swopping chairs like it has happened with Pakalitha Mosisili and Thomas Thabane. While the amendment of the electoral law brought about an element of political inclusion for the losing parties, it has ushered in unstable coalitions. There is a need to spell out clearly the roles of coalition partners so that they will not feel cheated, lest the country continue to experience quick turnover of governments. That is not good for economic stability as policy uncertainty erodes investor confidence. It is partly for that reason that GDP growth fell from 4.8% in 2005-2010 to 3.3% in 2012-2017.

SADC interventions must come up with sustainable solutions to guarantee personal freedoms instead of following a similar trend which invariably obtain similar results. Policies that enhance Basotho participation in the economy must be promoted. For instance, the textile and apparel sector which employs nearly 47,000 has failed to diversify in terms of sources of investment with control of the businesses in Taiwan and other Asian nationals, linkages with the Lesotho economy limited, and participation by indigenous investors non-existent [29] . In fact, 53.6% of manufacturing sector is fully foreign owned of which in the textile alone it accounts for 78.0% [30] . Financial inclusion remains a huge challenge for Lesotho as close to 35.0% of the population is either in informal or excluded from mainstream banking, hence access to loans remains a dream for many people [31] . Most of these challenges can be addressed with policy certainty, which however depends on political stability.

Lesotho - Country history and economic development

1600s. Sotho people arrive in present-day Lesotho, intermarry with the Khoisans, and establish trade links in Southern Africa.

1800. White traders introduce cattle. Boer pioneers usurp Sotho.

1820. Basotho emerge as Moshoeshoe the Great unites Sotho.

1860s. Boer wars and British intervention cost Basotho much of the western lowlands.

1880. The British gain control and prevent Lesotho's inclusion into the newly formed Union of South Africa, which spares Lesotho from apartheid.

1966. Basotholand becomes independent "Lesotho."

1970. The first prime minister, Chief Jonathan, is defeated at the 1970 poll he suspends the constitution, expels the king, and bans the opposition.

1983. South Africa closes Lesotho's borders after Jonathan criticizes South African apartheid, strangling the country economically.

1984. Lesotho Highlands Water Development Project (LHWDP) initiated.

1986-97. A period of political unrest, coups, and skirmishes between rebel troops and government loyalists. Moshoeshoe II eventually gains power then dies in a car accident.

1994. Lesotho joins the Southern African Development Community (SADC).

1998. Elections are held under alleged cheating. Fearing violence the government calls on SADC treaty partners (Botswana, South Africa, and Zimbabwe) to help restore order. South African troops enter the kingdom and heavy fighting engulfs Maseru. Eighty percent of the shops and other businesses are severely damaged.

2000. Government promises to call new elections and privatize more enterprise.

About Lesotho

Beautiful, culturally rich, safe, affordable and easily accessible from Durban and Johannesburg, mountainous Lesotho is a vastly underrated travel destination.

This is essentially an alpine country, where villagers on horseback in multicolored balaclavas and blankets greet you round precipitous bends. The hiking and trekking – often on a famed Basotho pony – is world class and the infrastructure of the three stunning national parks continues to improve. An astonishingly beautiful country, this ‘Mountain Kingdom’ needs to be seen to be believed.



Lesotho was originally inhabited by local tribes of hunter-gatherers called the Khoisan. Later came the Bantu tribes and eventually the Sotho-Tswana peoples. In 1822 King Moshoeshoe I united the land under one rule for the first time. Lesotho (formerly Basutoland) was constituted as a native state under British protection by a treaty signed with the native chief Moshoeshoe in 1843.

It was annexed to Cape Colony in 1871, but in 1884 it was restored to direct control by the Crown. The colony of Basutoland became the independent nation of Lesotho on October 4th, 1966, with King Moshoeshoe II as sovereign . For the first 20 years the Basotho National Party remained in power. The country has since had changes in power and leaders with some protests and some unrest.

Lesotho - Consumer Price Index (CPI)

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Watch the video: Discover Lesotho the Mountain Kingdom of Africa. 90+ Countries With 3 Kids