About Lesotho
Lesotho is small and landlocked, with limited natural resources and a narrow production and export base. Aside from subsistence agriculture, the garment sector plays a critical role in generating employment, output, and exports. The economy is highly open, with imports amounting to about 90% of the gross domestic product (GDP), and depends heavily on inflows of workers' remittances and receipts from the Southern African Customs Union (SACU). Lesotho is also a member of the Common Monetary Area (CMA). The Lesotho Maloti is pegged at a par to the South African Rand which is legal tender in the country.
Real per capita GDP growth averaged 3.3 % over 1991-2007, which is above average for sub-Saharan Africa. However, this growth has been erratic. Lesotho's growth path has been closely linked to the external environment, weather conditions and the strength and weakness of the South African Rand (ZAR) to which the Lesotho Loti (LSL) is pegged. Real GDP rose 8.5% in 2006, driven by booming diamond production, a recovery of the garment industry, and good performance in the agriculture and services sectors. Drought returned in 2007 and agriculture's contribution to GDP growth was negative. Mining, the garment industry, and construction remained vibrant, and overall GDP growth of about 4.3 % was achieved. GDP growth is estimated to have rebounded somewhat in 2008 to about 6% but is expected to have been much lower in 2009 as a result of the impact of the global economic crisis.
The global crisis is affecting Lesotho through the following main channels:
- textiles, due to the economic slow down in the United States, which is Lesotho's main export destination for garments, and the resulting job losses;
- mining, including weak prices for diamonds and reduced production and export of diamonds;
- drop in SACU revenues due to the economic slow down in the South African economy, and
- reduction in worker remittances due to weakening of the South African economy and the contraction of the mining sector and its related job losses in South Africa.
The latest review of Lesotho's economy by the International Monetary Fund (IMF), is in stark contrast to the picture normally painted of the small Southern African kingdom. "Economic growth has been above the average for sub-Saharan Africa, macroeconomic stability has been largely achieved, and the public debt has declined," was the IMF review's basic conclusion.
In fact, the IMF said, "Lesotho has made commendable progress" during the last year. The extraordinary economic growth, whose figure the IMF does not state, was mostly driven by the textile and clothing industry, which "continues to be the key source for economic growth." Therefore, Lesotho was making progress in achieving its poverty reduction aims.
The IMF's broad conclusions on Lesotho are exactly what any African Finance Ministry wants to hear from the Fund. The IMF-prescribed Poverty Reduction and Growth programme is going smoothly, targets are met and Maseru authorities can now look forward to a US$5 million loan disbursement from the Fund. All is seemingly well in Lesotho; the economy grows and poverty decreases. Or not?
Even the Fund's review reveals there are problems in the Kingdom of Lesotho. Economic growth had come "despite the continuing drought and an unfavourable external environment". Furthermore, the drought had indeed "worsened the humanitarian situation and a substantial part of the population might need food assistance in 2004/05." Reading between the lines, the IMF review thus admits that poverty might actually have spread despite the otherwise positive tendencies - due to external shock, of course.
According to the IMF's Deputy Chair, Takatoshi Kato, Lesotho is bound to meet "substantial challenges" over the medium and long term. In Lesotho's "quest to raise economic growth, reduce poverty, and improve social conditions,". The main challenges include increasing competition in the textile sector, a decline in miners' remittances from South Africa, the fragile food situation, and the HIV/AIDS pandemic, according to Mr Kato.
Foreign companies have settled in Lesotho's Export Processing Zones (EPZs), as Maseru authorities could offer favourable conditions, luring them to resettle from other poor countries.
Tourism
Global
Tourism is one of the most resilient sectors of the current global economy. It is also one of the fastest growth industries, accounting for over a third of the value of the services trade worldwide. The total number of global tourist arrivals increased from 842 million in 2006 to 903 million in 2007 (UNWTO Tourism barometer volume 6, no. 2 June 2008).UNWTO estimates that by 2010 total tourists arrivals will reach the 1 billion mark and 1.6 billion by 2020.
Africa
Africa experienced the highest growth in international tourist arrivals of 8.2% in 2006. In terms of arrivals the continent recorded a total of 44 million in 2007 (ibid). The current growth trend is forecast to continue given the continent's relative peace and security. The industry's role in contributing to the economic wellbeing of the continent is therefore going to be more significant in the future, despite the short-term decrease of global growth resulting from the current international credit crunch.
Southern Africa
In 2005, the SADC region received 15.7 million tourist arrivals (RETOSA 2007). This constituted 1.8% of the global tourist market, accounting for 1.7 million jobs and 1% of global share of tourist receipts. In 2007 the number of arrivals had increased to 20 million. The SADC region has immense potential given the varied attractions it posses. The hosting of the FIFA World Cup Soccer in 2010 in South Africa will bring unprecedented numbers of visitors to the region. However the most important factor for the region as a whole is the amount of publicity the event will generate, which it can utilize to increase its long-term visibility in the traditional and new markets worldwide.
Lesotho
Lesotho has experienced a limited growth in tourist arrivals in recent years. For example, whilst the country recorded a total of 301 000 arrivals in 2000, the figure had hardly changed by 2006 which stood at an estimated 330 000. The country has therefore not been able to benefit from the general global growth in tourism which has been reflected at continental level in Africa as well as at a regional level in SADC.