LESOTHO
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POLICY, PLANS AND PRIORITIES
Plans and Strategy
Under Lesotho's Vision 2020 produced in 2002 and Poverty Reduction Strategy
(2004), a key aim is to attract more Foreign Direct Investment (FDI) and promote
domestic investment. A number of measures were envisaged: further reducing
administrative impediments for investors, providing water supply and other basic
infrastructure, improving labour productivity and stability, and identifying industries,
other than textiles and clothing, to add value to local products and diversify the
economy (e.g. agri-business, mining, and tourism). An Interim National
Development Plan 2009/10 – 2010/11 has been issued to bridge the time gap
between the end date of the Poverty Reduction Strategy and a National
Development Plan that is to commence in 2011/12.
Lesotho Investment
Climate Assessment
World Bank (2007) “Key reforms that would reduce the high burden of regulation in
Lesotho include:
(i) Reduce the cost and time it takes to start a business by streamline
licensing and registration processes,
(ii) Simplify the procedures to issue foreign workers with visas, work permits
and residency permits and improve immigration services at Lesotho’s
points of entry,
(iii) Improve customs procedures and streamline the customs clearance
process for import transactions,
(iv) Lay foundations for a business-friendly legal and regulatory environment
by developing and implementing a modern legal framework,
(v) In addition, there would be strong benefits to harmonizing legislation
governing private sector development with that in South Africa.
Strengthening the institutional capacity of public and private institutions
supporting private sector development and improving and institutionalizing
the public-private consultative mechanism would also be useful.”
Pace of Reform
DFID / Government of Lesotho (2008) “Despite the commitment to reform, Lesotho
is falling behind its competitors in terms of the pace of reform. International and
regional competitors are reforming faster, with the result that Lesotho is losing
trade, investment and job opportunities to competitor countries. Moreover, as
reform to the business environment is being delivered predominantly through donor
programmes - the implication is that these donor funds are not being utilised to the
maximum benefit for Lesotho.”
WTO Trade Policy
Review: Lesotho
WTO (2009) “Over the last few years, Lesotho has taken steps to improve its
investment climate, notably through the establishment of the trade and investment
facilitation centre to serve as a one-stop-shop to speed up the licensing process.
Nonetheless, in general, FDI in Lesotho has been inhibited by structural
constraints, such as high transport costs; underdeveloped legal, judicial, and
regulatory framework; labour market rigidities; limited access to bank financing;
and prohibition on land ownership by foreigners.”
The One Stop Shop is an initiative intended to consolidate services that include,
issuing of permits, trade licenses, residence permits, import permits and export
visas into one premise to advance business services.
Lesotho Trade and
Investment Vision
Lesotho's trade vision is to achieve a pre-eminent position in the sub-region, and in
Africa, as an investment destination of choice, and be competitive in the
multilateral trading system while maintaining the highest consumer protection
standards. Lesotho hopes to achieve this through development of policies
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conducive to promotion of entrepreneurial skills and transfer of appropriate
technology, and through smart partnership of the public and private sectors.
Lesotho seeks "to create and maintain a more equitable and enabling environment
for industrial, agri-business and commercial development".
Industrialisation
Master Plan
The Ministry of Trade, Industry, Commerce and Marketing (MTICM)
Industrialisation Master Plan 2007-10 (IMP) (see Sources: Government of Lesotho
MTCIM 2007) was agreed between Government and the World Bank under the
Private Sector Competitiveness and Economic Diversification Project. It aims to
further promote the manufacturing sector, create more employment, and help
reduce poverty. The private sector is expected to be the main engine of growth,
with the Government facilitating the process by creating an enabling environment.
The IMP lists 29 specific measures to address obstacles including:
 Development of a centralised structure for formulating and monitoring
industrialisation policy, so as to address the lack of administrative coherence
and failures in coordination,
 Improvements in the investment-incentive regime,
 Diversification of manufacturing activities,
 Securing access to export markets through improvements in trade negotiating
capacity,
 Infrastructure development,
 Improving the business environment,
 Facilitating access to credit from commercial banks,
 Promoting labour productivity, and
 Developing Small, Medium and Micro Enterprises (SMMEs).
Tourism
In 2007 the Ministry of Tourism, Environment and Culture (MTEC) issued the
Tourism Strategy 2020. The key challenges identified are: market demand,
including the need to distinguish Lesotho from competitor destinations, product
development and diversification, including the need to diversify the product base to
increase the length of stay and retain a higher spend per visitor; an enabling
environment for rapid tourism growth, including improved visitor access to and
within Lesotho, and management, including establishing appropriate policy,
planning, and legal frameworks. Some of the main goals are: improving the
packaging and presentation of existing attractions; supporting and promoting
tourism investment and facilitating SMMEs and community based tourism; and
ensuring that the infrastructure is adequate and is further developed. (Micro
enterprise employs less than 3 people, small enterprise employs 3 to 9 people and
medium enterprise employs 10 to 49 people).
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INVESTMENT PROMOTION
2.1
Institutions
MTICM seeks to:
The Ministry of
Trade and Industry,
Cooperatives and
Marketing
 attract foreign investment in order to broaden the country's industrial base and
improve employment opportunities for the local population,
 identify and assist local entrepreneurs and the farming community to utilise
export opportunities in order to improve the country's foreign exchange
earnings, and create growth in the industrial, commercial, and agriculture
sectors,
 facilitate the creation of a conducive and appropriately regulated environment
for commercial and marketing activities in order to improve the performance,
and to support the growth, of local entrepreneurs and farmers,
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 foster Lesotho's effective participation in international and regional trade
organisations and maximizing its benefits from treaties to which it is a signatory,
and increasing market shares, profit margins, and on-farm income.
 The MTICM undertakes to:
 formulate, and monitor the implementation of appropriate commercial,
marketing, and industrial development policies, and enforce supporting
legislation,
 establish institutional frameworks that promote foreign direct investment and
domestic participation in terms of the country's commercial, marketing, and
industrial activities, and
 foster the global competitiveness of Lesotho's economy.
Trade Promotion
Unit (TPU)
TPU in MTICM is responsible for supporting exporters to market products outside
Lesotho. TPU was established in 1978 to promote, coordinate and develop
exports. TPU offers technical assistance and advice to exporters, promotes and
publicises exports, undertakes research and studies on specific exportable
products, and assists foreign buyers. TPU facilitates participation of local
manufacturers and exporters at regional and international trade fairs and
exhibitions. The Government provides marketing assistance, but does not provide
direct financial support for costs of trade fair participation.
One Stop Shop
The One Stop Shop set up in 2007 at MTICM gives guidance and support to
complete the steps of obtaining a Manufacturing or Trading License, registering as
an importer, import and export permits and obtaining work,andresidency permits
and registration of companies started in 2011 after the introduction of companies
Act, 2010.
Lesotho National
Development
Corporation
LNDC is formed under the LNDC Act No 20 of 1967. While the Act stated that the
mandate of the Corporation 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, it has focussed
on industrial development. The LNDC core functions include finance, foreign
investment promotion, domestic investment promotion, monitoring and appraisal,
legal services, property management, and in these matters, it works as a one-stop
shop for investors. LNDC administers four serviced industrial estates, in Maseru,
Thetsane, Maputsoe, Mohale’s Hoek and Ha Nyenye, and a factory building at
Mafeteng. So far, Tikoe Industrial Estate is only partly serviced. LNDC seeks to
promote Lesotho as a location for investment and the establishment of
commercially viable medium to large-scale enterprises by foreign and domestic
investors.
Tourism
The Ministry of Tourism, Environment and Culture (MTEC) is responsible for
tourism policy. The Lesotho Tourism Development Corporation (LTDC) established
under the Tourism Act No. 4 of 2002, has wide powers, including the designation of
tourism development areas and provision of financial assistance in the form of
grants, loans or tax exemptions for tourist development. The LTDC is 51% stateowned and its Board has representatives of Government, local associations, and
the private sector. The Lesotho Council for Tourism (LCT) is the private sector
representative body in tourism.
2.2
LNDC Assistance
Investment and Export Incentives
LNDC as well as the One Stop Shop at MTICM can assist with getting a business
started
 Reserving a company name
 Registering a company
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Getting a manufacturing license
Registering for tax
Registration of a workplace
Registering for municipal rates
Immigration Issues - Visitors visas, Residence permits, 6 month border
concessions
 Connecting to Utilities - Electricity, Water, Telecommunications
 Labour issues - Work permits
LNDC may provide loans to finance projects or take equity investments in projects.
Export Finance and
Insurance Scheme
The Central Bank supports an exporter by guaranteeing 50% of credit extended by
the exporter's bank. The credit facility is only for working capital requirements. The
key objective of the scheme is to enhance economic growth by assisting local
exporters gain competitive advantage in the international markets, with the aim of
achieving poverty reduction and job creation. Exporters must meet the following
criteria:
 The applicant must have been in the export business for at least one year,
 The applicant's business must export at least 50% of its annual production,
 All of the exporter's merchandise/service must be manufactured in Lesotho with
a Value Added component of least 35%,
 The applicant must have a valid export order,
 A large scale exporter must have a linkage with Basotho businesses,
 The applicant must keep a proper set of business records,
The minimum amount that can be borrowed under the scheme is M50,000.
(US$6700) and the maximum for a small business is M1,000,000 (US$134,000)
while a large business can borrow up to M5,000,000 (US$670,000). A small
business has less than 50 employees or annual turnover less than M5,000,000
(US$670,000).
The term of the guarantee cover is one year from the date of issue. The scheme is
administered by commercial banks that charge interest up to the maximum of the
prevailing prime rate and there is an application fee. A financed exporter is charged
a quarterly guarantee fee at the rate of 0.75% on the highest amount outstanding
in each quarter. The exporter must take insurance cover against commercial and
political risk. The uninsured component of the lending is secured against the
exporter’s assets or irrevocable letters of credit, bills insured by the bank of the
buyer, advance payments or any other form of security that may be agreed upon
between the bank and the exporter.
2.3
EPZs, Freeports and other Special
Economic Zones
There are no export processing zones in Lesotho. Serviced industrial sites and
factory shells are available for rent at competitive rates.
2.4
Tax Incentives
The Government Tax Policy states that “tax incentives, by their nature, on several
occasions, come in conflict with the principles of good taxation and should
therefore be kept to the minimum possible as this over-complicates the tax system,
making it more expensive to monitor the beneficiaries of such incentives and
therefore increase the possibilities for tax evasion”.
The Lesotho tax regime contains the following incentives:
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 0% tax on income generated from exporting manufactured goods outside of
SACU,
 A maximum manufacturing tax rate of 10% on profits derived from sales within
SACU,
 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,
 Mining companies are exempted from taxes on capital items during mine
evaluation and construction, and there are exemptions from withholding taxes
on dividends and interest payments,
 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 15%,
 Easy repatriation of manufacturing profits,
 VAT rate of 14%,
 Lesotho Revenue Authority has flexible VAT payment systems for tax compliant
enterprises to ease cash flow constraints.
2.5
International Trade & Export
Promotion
Certain goods imported into Lesotho from outside of SACU require import permits.
Under Lesotho's Export and Import Control Act No. 16 of 1984 as amended, all
importers are required to register with MTICM in order to be eligible for import
permits. Clearing agents must register with the Lesotho Revenue Authority (LRA)
and submit a bond of between M 25,000 and M 50,000 on the basis of the
Customs and Excise Act 1982. The LRA was established in 2001, as an
autonomous body, to strengthen tax administration and increase revenue collection
and it commenced operations in January 2003. The LRA is responsible for the
assessment, collection, and remittance of all taxes.
All goods brought into Lesotho are subject to customs control. The declaration form
used is the Single Administrative Document (SAD), introduced in 2006. The SAD
applies to all imports and exports regardless of origin or destination. Goods
imported into Lesotho from within the SACU, are cleared (for VAT collection
purposes) at the land borders with South Africa, the international airport or as
parcel post. These goods are not subject to customs duties. In general, goods
imported from outside the SACU pass through South Africa. Customs clearance on
SACU imports takes only a few minutes as they are processed instantly on
submission of declaration documents. Customs clearance for imports from outside
SACU takes about two days but is depending on the availability of relevant
documents and other requirements of the law.
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ACCESS AND ADMISSION OF
FOREIGN INVESTORS
3.1
Foreign Investment & Capital
Mobility
There is no FDI legislation but FDI regime is liberal, does not discriminate between
foreign and domestic investors, and there are no limitations on foreign ownership
of a Lesotho registered company.
Small-scale activities with less than ten employees in artisan and personal service
activities are reserved for citizens and require a reserved trading licence. Reserved
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activities include agent of a foreign firm, barber, Basotho beer shop, butcher, snack
bar, domestic fuel dealer, dairy shop, general café, general dealer, hawker, street
photographer, broker, mini-market, hair and beauty salon, petrol dealer, and
tentage dealer.
3.2
Foreign Investment Establishment,
Registering and Licensing
Processes
Establishing a
Business
Most foreign investors form a company under the Companies Act 2010 (as
amended). The steps involved are set out here.
Reserve Company
Name
 To reserve a Company Name to make sure a preferred name is available to be
used, an applicant must complete a form listing at least three company names
in order of preference,
 Submit the Reserve Company Name application form to the Registrar of
Companies in the Ministry of Trade and Industry, Cooperatives and Marketing
(One –Stop Business Facilitation Centre (OBFC),
 Fill in all the necessary aaplication forms
 Pay statutory stamp duty when informed that a company name has been
reserved,
 Certificate issued that specifies that a company name has been reserved.
Register a Company
 Complete and submit application form to the Registrar of Companies along with
the following documents,
 Confirmation of reservation of company name,
 Power of attorney from the subscribers (proposed shareholders) that allows an
attorney to represent them in the registration process,
 A Memorandum of Association signed by each of the subscribers, in the
presence of witnesses. The Memorandum of Association must include: the
name of the company, its main and other objects, a statement that the liability of
the members is limited, the amount of the share capital or guarantee, the
number of shares or amount of guarantee for each subscriber,
 the Articles of Association,
 Details of the registered office, in particular its registered address and contact
details of the proposed company secretary,
 A list of the directors of the company and certified copies of each director’s
identification documents / passport,
 A declaration by the attorney of compliance with the requirements of legislation,
 Pay statutory fees,
 Certificate of Incorporation is issued.
Manufacturing
License
The licence permits a company to commence manufacturing operations under the
Industrial Licensing Act (1969) and Pioneer Industries Encouragement Act (1969) –
although the latter does not appear to have been repealed it seems to have fallen
into disuse.
 Complete an application form for a manufacturing license with the following
documents and submit to the Department of Industry/OBFC at MTICM with the
statutory application processing fee,
 Certified copies of the Memorandum of Association, and the Articles of
Association, and the Certificate of Incorporation,
 Agreement of sublease/lease for the premises where manufacturing will take
place,
 Certified copies of each director’s identification documents / passport,
 Applicants will be expected to appear before the Pioneer Industries Board (PIB)
in order motivate your applicationand answer any questions,
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 Pay the statutory annual license fee if the application is successful,
 Manufacturing License is issued by the One Stop Shop Business Facilitation
Centre, MTICM,
Other certificates may be required:
 Environmental Certificate,
 Occupational Health & Safety Certificate for business premises,
 Health Certificate for food handlers.
Taxation
Registration
The main legislation is contained in Income Tax Act 1993 as amended and in the
Value Added Tax Act 2001 as amended.
Income Tax
Registration
Company Income
Tax
 A completed Company Initial Form should be submitted to Lesotho Revenue
Authority (LRA),
 Certified copies of the Memorandum of Association, the Articles of Association,
the Certificate of Incorporation, and the Manufacturing License,
 Certified copies of each director’s identification documents / passport,
 Banking details (for a local bank).
For registration it is usual that the company directors pass a resolution appointing a
director or other person to register the company for tax, or alternatively a person is
appointed with power of attorney to act on behalf of the company:
Pay-as-you-Earn
(PAYE)
 A completed Employer’s Registration Form,
 Certified copies of the Memorandum of Association, the Articles of Association,
the Certificate of Incorporation, and the Manufacturing License,
 Certified copies of each director’s identification documents / passport,
 Banking details (for local bank),
 A list of all employees, including part-time, casual, labourers, and temporary
staff.
Income Tax: Self
Employed
 Resident Individuals: a self-employed individual must complete an Individual
Initial Form and furnish LRA with full information about his/her business and
personal details,
 Non-Resident Individuals: if the individual is a non-resident an “Individual Initial
Form” must be completed and certified copies of the persons’ work permit and
identity document / passport must be supplied,
 Banking details.
Value Added Tax
Registration
 Completed registration forms,
 Certified copies of the Memorandum of Association, the Articles of Association,
the Certificate of Incorporation, and the Manufacturing License,
 Certified copies of each director’s identification documents / passport,
 Details of the company’s Lesotho banking accounts.
Registering as an
Importer
 Customs & Excise Act (1982) requires registration to import and export into and
out of SACU,
 Complete and submit application form to the Department of Trade which is
located in MCITM,
 A completed application form,
 A certified copies of Memorandum of Association, the Articles of Association,
the Certificate of Incorporation, and the Manufacturing Licence,
 Certified copies of each company director’s identity documents / passport.
Registering a
Bonded Warehouse
 Applicants will need to register should they wish to import and export under the
Customs & Excise Act 1982,
 Complete and submit an application form (CE 185) to Lesotho Revenue
Authority,
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 A certified copies of Memorandum of Association, the Articles of Association,
the Certificate of Incorporation, and the Manufacturing Licence,
 Certified copies of each company director’s identity documents / passport.
Registration of a
Factory
Registering for
Municipal Rates
Under the Labour Code Act 1992 a work place must be registered:
 Complete an application form and submit an application to the Commissioner of
Labour in the Ministry of Employment & Labour at least 60 days prior to the
occupation of a factory premises,
 Submit a layout plan of the proposed factory.
To register with the appropriate municipal authority:
 Complete an application form and submit an application to the Maseru City
Council or appropriate municipal authority,
 Certified copies of Memorandum of Association, the Articles of Association, the
Certificate of Incorporation, and the Manufacturing Licence,
 Certified copies of each company director’s identity documents.
Mining
The Mines and Minerals Act No. 37 of 2005, provides for the allocation of
prospecting and mining licences and leases, transfer and revocation of mineral
titles, granting of incentives to local and foreign investors, conditions for
possession of and dealing in rough or uncut precious stones or unwrought precious
minerals, and limitation of output, control, and disposal of precious stones. It
established the Commissioner of Mines and Geology and the Mining Board. The
Commissioner maintains a register of all mineral concessions issued under the Act.
The Board, investigates, negotiates or consults in all mineral right concessions.
Trade in precious stones is regulated by the Precious Stones Order No. 24 of
1970.
Under the Constitution, all rights of ownership in minerals are vested in the
Basotho nation. On the basis of the Mines and Minerals Act, the Board issues
prospecting licences, mining leases, and mineral permits for any mineral other than
diamonds provided the applicant (national or foreign) has adequate financial
resources, technical competence and experience, and makes proper provisions for
environmental protection. The holder of a mineral right must give preference to
employment of citizens and use products and equipment made in Lesotho, as well
as local services.
Financial Services
Regulation
The framework for financial services is the Central Bank of Lesotho Act 2000, the
Cooperatives Societies Act 2000, the Financial Institutions Act 1999 and related
legal notices, the Money Lenders Order 1989, the Anti-Money Laundering Act
2008, the Building Finance Institutions Act 1976, and the Insurance Act 1976.
Central Bank of
Lesotho
Under the CBL Act of 2000, the Bank's functions include promoting the sound
development of the financial system. The CBL acts as Commissioner of Financial
Institutions under the Financial Institutions Act of 1999 and the Money Lenders
Order of 1989, as Commissioner of Building Finance Institutions under the Building
Finance Institutions Act of 1976, and as Commissioner of Insurance under the
Insurance Act of 1976. It may set required reserve ratios to be held by financial
institutions and impose penalties on financial institutions that fail to respect them. It
may also set temporary conditions and restrictions on total credit, if this objective
cannot be attained by other means.
Conditions for licensing and supervision of all banking and credit institutions are set
out in the Financial Institutions Act of 1999. Institutions providing only insurance
business in Lesotho are exempt. Any new bank or credit institution must be
licensed by the CBL, acting as Commissioner of Financial Institutions. There is no
limitation on foreign banks establishing branches or agents in Lesotho, as long as
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they fulfil the conditions of the Act. Financial institutions established in Lesotho
must maintain minimum capital as prescribed by the CBL.
3.3
Foreign Employment & Residence
Up to 5% (1 expatriate: 20 locals) of an enterprise's employees may be expatriate
staff.
Work Permits
To be employed in Lesotho a foreigner is required to be in possession of valid work
permits under the Labour Code Act 1992.
 Complete an application form
 Submit application to OBFC, MTICM
 If Work Permit is approved then applicant must go in person to the Central
Police Station (in Maseru) and be formally issued with a Work Permit (police
take photograph of successful applicant)
 A certified copy of the applicant’s identity document / passport
 A certified up-to-date tax clearance certificate (certified by the LRA only) from
the Lesotho employer
 Certified copies of applicant’s educational qualifications
 A letter from employer (applicant’s offer of employment) justifying the need for
an expatriate employee; in the case of a company director a certified copy of
the company’s Memorandum of Association is required
 A letter from applicant
 A certified copy of employer’s Manufacturing License
 Work permit card issued at Police Head quarters
Residence Permits
A foreigner intending to take up primary residence in Lesotho requires a residence
permit under Aliens Control Act 1966 and Lesotho Citizens Act 1971.
Two year residence permit but an indefinite residence permit may be granted in
exceptional circumstances.
 Complete an application form,
 Submit an application to the Immigration & Passport Services located in the
Ministry of Home Affairs and Public Safety and of Parliamentary Affairs in
Maseru,
 A certified copy of the applicant’s Work Permit,
 A certified copy of the applicant’s identity document / passport.
 A certified copy of manufacturing license, and certificate of incorporation,
 A valid and up to date tax clearance certificate (certified by LRA),
 Certified copies of educational qualifications,
 Two passport size photographs certified as to be images of the applicant,
 Doctor’s report / certificate on the physical condition of the applicant.
 Police Clearance from the home country for first applicants and locally for
renewals
3.4
Constitution: Land
vested in Basotho
Nation
Foreign Investor Access to Land
and Property Rights
Section 107 Without prejudice to any allocation of land that was made before the
commencement of this Constitution and was subsisting immediately before such
commencement or to any interests or rights in or over land that were otherwise
vested in any person immediately before such commencement and without
prejudice to any allocation of land or any grant of any interest or right in or over
land that may, in accordance with the provisions of this Constitution and, subject
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thereto, of any other law, be made after the commencement of this Constitution, all
land in Lesotho is vested in the Basotho Nation.
Constitution: Power
to allocate land
vested in the King in
trust for Basotho
Nation
Section 108 (1) The power to allocate land that is vested in the Basotho Nation, to
make grants of interests or rights in or over such land, to revoke or derogate from
any allocation or grant that has been made or otherwise to terminate or restrict any
interest or right that has been granted is vested in the King in trust for the Basotho
Nation.
(2) The power that is vested in the King by subsection (1) of this section shall be
exercised in accordance with this Constitution and any other law.
Constitution: Laws
regulating principles
on which land may
be allocated
Section 109 Parliament may make provision prescribing the allocations that may
be made and the interests or rights that may be granted in exercise of the power
conferred by section 108 of this Constitution, the grounds upon which and the
circumstances in which such allocations or grants may or shall be so made or may
or shall be revoked or derogated from or the interests or rights which may or shall
otherwise be so terminated or restricted, appeals in respect of the allocation or
refusal to allocate land or the revocation of interests to or in land and, generally,
regulating the principles according to which and the manner in which the said
power shall be exercised.
Foreign Investors
and Land
Foreign investors may not own land. Foreign investors may sub-lease land for
limited periods (generally 30 years) and generally LNDC sub-leases land and
buildings, including factory shells, to foreign investors.
Land Act 1979: Title
to Land
Section 6 (1) provides that No person shall be capable of holding a title to land
except
(a) A citizen of Lesotho;
(b) The holder of a permit for indefinite sojourn granted under section 6 of the
Aliens Control Act 1966;
(c) A company incorporated or registered under the Companies Act 1967 and
carrying on business in Lesotho and of which a majority shareholding of at
least 51% is, and remains, at all times in the hands of citizens of Lesotho;
(d) A company incorporated or registered under the Companies Act 1967 and
carrying on business in Lesotho of which a majority shareholding is held by
non-citizens of Lesotho, but only in relation to land held by such company at
the commencement of this Act;
(e) A corporation established under Lesotho law;
(f) A partnership of which the majority of the partners are citizens of Lesotho;
(g) Cooperative societies, friendly societies and any society or body of persons
other than a company or partnership, registered under the Societies Act 1966;
(h) Subject to the approval of the Minister, commonwealth or foreign governments
or public international organisations for purposes relevant to activities pursued
by the Government of Lesotho or to their missions in Lesotho.
(2) Subsection (1) shall not be construed as prohibiting any person qualified under
it from holding any right subsidiary to a lease, including a sub-lease or mortgage,
subject to the consent of the Minister being obtained where so required under this
Act.
Land Reform
Proposals
Land in Lesotho traditionally belongs to the people. The King, as Head of State, is
responsible for allocating land on behalf of the nation. The 1979 Land Act grants
Village Development Councils authority to administer allocation of arable land to
individuals by issuing a permit, which guarantee exclusive rights for a specified
period. This is a licence which does not give the license holder any ownership
interest or title to the land. The 1992 Land Regulation (Agricultural Lease) allows
for 90 year-leases on land, but this is rarely applied to agricultural holdings.
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A Land Policy Review Commission report in 2000, recommended a complete
overhaul of the land tenure system, and that foreign investors be allowed to hold
freehold land in designated industrial areas and for commercial property
development.
Industrialisation
Master Plan and
Land
The IMP 2007-10 (Government of Lesotho MTCIM 2007) states that “The most
significant departure from the principle of market-driven industrial activity will lie in
the continuing need for government provision of an infrastructure of industrial
locations fully serviced with electric power, water and liquid-waste disposal facilities
and equipped with shell factory units for leasing to entrepreneurs. This is
necessitated by the market imperfection arising from the present system of landtenure enshrined in the Land Act which has the effect of strongly discouraging such
infrastructural development by private capital.
However, the plan recognises that this effect of the Land Act is a grave weakness
and that the difficulty experienced by the government in providing an adequate
supply of locations is probably discouraging potential industrial investors from
locating in Lesotho. To address the problem of infrastructural under-supply the plan
envisages that ways will be explored of enabling private capital to participate in
infrastructural projects in the context of the Land Act in its present form with a view
to speeding up the development of existing sites to adequate standards,
particularly that at Ha Tikoe on the eastern outskirts of Maseru.
However, in the longer term the government will seek changes in the Land Act
which will allow private investors to acquire leasehold and freehold titles in land
designated for industrial use. This will encourage private provision of industrial
locations. It will also make possible the use of land holdings as collateral for
business loans which is expected to go some way to addressing the problem of
under-representation of Basotho enterprises in the industrialisation process which
is in large measure a factor of their difficulty in raising credit from commercial
banks.”
Drafting of Land
Legislation
Labour Code
A draft Land Bill was prepared in 2009 and is under review. The legal and
institutional aspects of the draft Land Bill cover the broad land tenure conditions
necessary for successful farming and urban-based livelihood and economic
activity.
4
FOREIGN INVESTMENT
OPERATIONS
4.1
Employment
The Labour Code 1992 (as amended) provides for the amendment, consolidation
and codification of laws relating to employment including wage-fixing machinery,
contracts of employment, termination, dismissal, severance pay, protection of
wages, health, safety and welfare at work, employment of non-nationals, trade
union organisations and employers' organisations, unfair labour practices,
settlement of trade disputes, as well as provisions on strikes, lockouts and
essential services.
4.2
Business Taxation
For income tax see 2.4 Tax Incentives
Value Added Tax
In 2003 VAT replaced the GST and VAT is applied to all imported and locally
produced goods and services. The LRA administers VAT, which is applicable on
11
goods and services, whether locally produced or imported. There are four rates of
VAT:




14% (the standard rate) on most goods and services,
15% on alcoholic beverages and cigarettes,
5% on electricity and telephone services, and
Zero on certain goods (e.g. maize and pulses) as well as exports of goods and
services (except exports of diamonds for which the VAT rate is 14%).
VAT is levied on all imports based on the cost, insurance, freight (cif) price, plus
duties and storage fees on board. VAT does not include storage fees at
destination.
VAT Exempt Items
The following goods and services are exempted from VAT: education, financial
services, passenger transport services, public postal services, supply of
unimproved land, leasing or letting of immovable property (for manufacturing
purposes), water supply, supplies to diplomats and diplomatic missions upon
identification, sales or transfer of second-hand motor vehicles already registered in
Lesotho, services of doctors and dentists, sporting activities (non professional),
cultural activities, supply of charity arrangements, and sale/lease of residential
property.
Customs and Excise
Under Lesotho's Customs and Excise Act No. 10 of 1982 as amended, customs
regimes are classified into imports for home use, inward processing, temporary
imports, and warehousing. For imports under free circulation or home use,
Customs examines the import declaration, and customs and excise duties, as well
as VAT, are collected before the goods are released. Imports for manufacturing
purpose, processing or repair before re-export, are relieved of applicable duties.
Lesotho's registration procedures are set out in the Export and Import Control Act
No. 16 of 1984. Exports that require certification of origin must be declared to the
Customs Office, which operates a one-stop shop for registration, licensing, and
export processing. Customs only verifies compliance with the requirements as
there are no duties or taxes applicable to exports. The only special export
registration or documentation requirements relate to exports of diamonds, for which
the exporter must obtain an export permit and pay export duties.
Mining Royalty
Under the Mines and Minerals Act No. 37 of 2005, the Government requires
payment of a 10% royalty on precious stones and 3% on other minerals or mineral
products. Royalty is defined in the Act as the gross sale value receivable at the
mine gate. The Minister may, in the public interest, remit all or part of any royalty
payable on any mineral product for a period he/she may determine.
4.3
Standards
Environment, Physical Planning,
Health & Safety, Consumer
Protection
Lesotho relies on the South African Bureau of Standards as it does not have its
own standards bureau. A draft bill to establish a standards bureau was prepared in
2006 but has not been enacted.
The Standards and Quality Assurance Department, within MTICM, was established
in 2004 and it the enquiry point for the WTO Technical Barriers to Trade
Agreement. Its main objectives are to promote fair trading practices, contribute to
consumer protection, enhance the competitiveness of Lesotho's products through
quality and productivity improvement, and promote adoption and application of
national, regional, and international standards. The department is a subscriber
member of the International Organisation for Standardisation (ISO), the focal point
12
for SADC efforts on standards and quality assurance management, and the
contact point for the WHO / FAO Codex Alimentarius Commission. Through an
FAO project, the department has established a food control system and
microbiology laboratory. It has also been instrumental in preparing standards and
food control bills.
Metrology
The Weights and Measures Order of 1970 and the Weights and Measures
(Metrological Supervision) Regulations of 2007 aim to provide the legal framework
for the establishment of the basic metrology infrastructure covering the regulation
of weighing instruments used for trade, the labelling and sale of goods, and the use
of legal units of measurement.
Environment:
Constitution and
Policy
Section 36 of the Constitution of Lesotho, states that Lesotho shall adopt policies
designed to protect and enhance the natural and cultural environment of Lesotho
for the benefit of both present and future generations and shall endeavour to
assure to all its citizens a sound and safe environment adequate for their health
and well-being.
Lesotho developed the National Environment Policy in 1998 and is a signatory to a
number of international environmental conventions. The goal of the National
Environment Policy is to ensure protection and conservation of the environment
and sustainable development. One of the policy objectives is to ensure formulation
of environmental legislation. The policy has been translated into a legal framework,
the Environment Act 2008, which came into force in June 2009.
Environment Act
2008
The purpose of the Act is to protect and ensure proper management of the
environment, conservation and sustainable utilisation of natural resources of
Lesotho. The Act defines the broad activities and general principles of
environmental management in Lesotho. It also invests each individual with a right
to a clean and healthy environment, imposes a corrective duty to protect, maintain
and enhance the environment and defines a citizen’s right to take legal action
against acts or omissions that damage the environment. The Act creates an interministerial institution, the National Environment Council chaired by the Minister
responsible for environment. Its responsibility is to formulate environmental policy
and to facilitate the co-ordination and harmonisation of the policies, plans and
activities of government organisations in the environment and natural resources
field. The Act provides for Environmental Impact Assessment (EIA), audits and
monitoring of projects.
The Act provides for environmental planning. The Department of Environment
(DoE), together with Line ministries, is to prepare the National Environment Action
Plan (NEAP) as the basis for national environmental planning and implementation
of development programmes. NEAP provides general guidance for management
and protection of the environment and identifies principal environmental problems
facing the country. Planning at the local level is intended to ensure sensitivity to
local concerns and needs, particularly with regard to the use of local resources.
EIA Licence
Section 25(1) of the Environment Act states that no person shall operate, execute
or carry out a project or activity specified in a schedule to the Act without an
Environmental Impact Assessment Licence issued by DoE. In issuing a licence, the
environmental authority must issue a Record of Decision (RoD), which should
include:
 The decision of the Director,
 Key factors of that decision including responses to material issues raised by any
person during the environmental impact assessment process,
 The date of the decision,
 A copy of the environmental impact assessment licence if issued,
13
 Information with respect to the right of any person to seek reconsideration of the
decision of the Authority and how such reconsideration may be sought (s. 25(3)
of the Act).
After an EIA Licence has been issued, if there is a substantial change to the
project, or a significant environmental threat materialises which was not envisaged
at the time of the EIA, the Director can request a new EIS (s. 26 of the Act). An EIA
Licence can be transferred to another party but only if it is in respect of the same
project that was originally authorised.
4.4
Competition Policy & Law
Lesotho has no competition policy, although under the Privatisation Act
privatisation is to promote competition and reduce monopolistic behaviour.
Price Control
In 2006, an investigation by MTICM revealed restrictive practices (agreement
between firms with respect to prices to reduce competition) by the biggest bakeries
in Lesotho. The MTICM intervened and introduced minimum and maximum bread
prices pursuant to the Price Control Act No. 4 of 1979.
Oil products and electricity are subject to price control to maintain prices at
affordable levels. The Fuel and Services Control Act of 1983 (No. 23 of 1983) gave
the Minister responsible for water, energy, and mining broad powers to regulate the
supply and price of fuel, including electricity.
4.5
Monetary Policy, Foreign Exchange
and Foreign Investors
Lesotho is a member of the Common Monetary Area along with South Africa,
Namibia and Swaziland and the South African rand and loti are pegged at par in a
fixed exchange rate. There is ready access to foreign exchange. Authorised
dealers are appointed by CBL to administer foreign exchange in accordance with
rulings.
4.6
Legal and
Institutional
Framework
Public Procurement
Public Procurement Regulations 2007 and the issuing of Procurement Manual and
the Government Code of Good Practice Procurement changed the public
procurement regime. The Procurement Policy and Advisory Division (PPAD), under
the Ministry of Finance and Development Planning (MFDP), is the regulatory body
with overall responsibility for the development of Lesotho's public procurement
regime. The PPAD aims to secure legality, rationality, efficiency, and transparency
in the implementation of public procurement, while providing contracting authorities
and the business sector with policy advice, guidance, and assistance.
Individual ministries, districts councils, state-owned enterprises, and other
government bodies have their own procurement units. Each of these contracting
authorities operates its own tender panel as the Central Tender Board was
abolished in December 2006. Each tender panel is responsible for the public
opening of tenders and for the decision on the award of contract.
Price Preference for
Nationals
In evaluating proposals, the procurement unit grants a margin of preference of:
 15% to a "Basotho business" (the majority of directors are Lesotho nationals,
and the majority of shares or ownership is held by Lesotho nationals) with a
majority shareholding of at least 51%;
 10% to (a) a business owned between 30% and 50% by Lesotho nationals, (b)
a tenderer bidding to supply goods of Lesotho origin, (c) a tenderer performing
14
at least 50% of the contract in Lesotho and using and developing the capacity of
Basotho staff, (d) a tenderer subcontracting at least 50% of the contract to one
or more Basotho businesses, (e) a tenderer that has the largest use of locally
produced goods, materials, and services, or (f) a tenderer employing the largest
share of local labour; and
 5% to a business owned between 10% and 30% by Lesotho nationals.
4.7
Intellectual Property
The Registrar General's office in the Ministry of Law and Constitutional Affairs is
the focal point for all intellectual property issues.
International IPR
Lesotho is a signatory to the WIPO Convention, the Paris Convention on Industrial
Property, the Berne Convention on Literary and Artistic Works, Article 3bis (second
version) of the Madrid Convention on Registration of Marks, the Rome Convention
on Protection of Performers and Patent Cooperation Treaty. Lesotho is also a
member of the African Regional Industrial Property Organisation (ARIPO).
WTO and TRIPS
As a least developed country, Lesotho is not required to notify its legislation under
the WTO TRIPS Agreement [World Trade Organisation Trade Related Aspects of
Intellectual Property Rights] until 1 July 2013. Lesotho benefits from the waiver for
least developed countries in respect of the obligation under Article 70.9 of the
TRIPS Agreement (protection of existing subject matter). The Government has
established an inter-ministerial committee to review intellectual property issues and
the TRIPS Agreement. It comprises representatives of the Ministry of Law and
Constitutional Affairs, MTICM as the focal point for all WTO issues, Ministry of
Agriculture and Food Security, Ministry of Science and Technology, and the
Lesotho Association of Inventors.
Patents, Designs,
Marks
The Industrial Property Order (IPO) 1989 (as amended) regulates patents,
industrial designs, marks, collective marks, trade names including marks well
known in Lesotho, and utility models. Patents are granted for 15 years, extendable
by five years, industrial design marks for five years, extendable for two successive
periods of five years, and trade mark rights for ten years, extendable for
consecutive periods of ten years. Utility model certificates are not extendable. The
IPO provides for compulsory licences. There are no explicit restrictions on parallel
imports since they are not provided for in the IPO.
Copyright and
related rights
Copyright protection covers works of Lesotho-based resident authors, and works
first published in Lesotho regardless of the nationality or residence of their authors;
performers who are nationals of Lesotho, and performances taking place, fixed in a
phonogram or broadcast in Lesotho, performers, phonograms, and broadcasts
originating in foreign countries prescribed by the Minister of Law and Constitutional
Affairs, unpublished works and works first published by foreign authors or in foreign
countries if the country in question grants similar protection to Lesotho and
expressions of foreign folklore, foreign authors, performers, phonograms, and
broadcasts.
The IPO defines the substance of copyright as the economic and moral rights of
the author of a protected work (original or derivative). Works are protected for the
life of the authors plus 50 years, cinema and audiovisual works for 50 years from
the making of the work or its communication to the public. Other provisions include
authorisation and contract for the use of works, use of works in the public domain,
expressions of folklore, neighbouring rights, authorisation by performers, protection
of phonograms, and other relevant procedures. The IPO created a Society of
Authors and Artists and a register (and registrar) of works, and established civil
remedies and sanctions, including fines and imprisonment.
15
Geographical
indications,
integrated circuits,
new plant varieties
A Bill on geographical indications, based on the WIPO Model Law, has received
Government approval and is before Parliament. Conditions for protection of
integrated circuits and undisclosed information are under discussion, as is
legislation on new plant varieties, on the basis of the International Union for the
Protection of New Varieties of Plants (UPOV) Model Law. Lesotho does not have
specific legislation concerning genetically modified (GM) organisms, although it has
accepted GM foodstuffs as part of food aid.
Enforcement
The IPO contains provisions for civil and criminal remedies for owners of patents
and other rights, including fines and imprisonment. Lesotho has fragmented laws
dealing with enforcement of IPR and lacks well trained law enforcement officials.
4.8
Constitution
Investment Protection and Dispute
Settlement
Section 17 Freedom from arbitrary seizure of property
(1) No property, movable or immovable, shall be taken possession of compulsorily,
and no interest in or right over any such property shall be compulsorily
acquired, except where the following conditions are satisfied, that is to say (a) the taking of possession or acquisition is necessary in the interests of
defence, public safety, public order, public morality, public health, town and
country planning or the development or utilisation of any property in such
manner as to promote the public benefit; and
(b) the necessity therefor is such as to afford reasonable justification for the
causing of any hardship that may result to any person having an interest in
or right over the property; and
(c) provision is made by a law applicable to that taking of possession or
acquisition for the prompt payment of full compensation.
(2) Every person having an interest in or right over property which is compulsorily
taken possession of or whose interest in or right over any property is
compulsorily acquired shall have a right of direct access to the High Court for
(a) the determination of his interest or right, the legality of the taking of
possession or acquisition of the property, interest or right and the amount of
any compensation to which he is entitled; and
(b) the purpose of obtaining prompt payment of that compensation:
Provided that if Parliament so provides in relation to any matter referred to in
paragraph (a) the right of access shall be by way of appeal (exercisable as of right
at the instance of the person having the interest in or right over the property) from a
tribunal or authority, other than the High Court having jurisdiction under any law to
determine that matter other than the High Court, having jurisdiction under any law
to determine that matter.
(3) The Chief Justice may make rules with respect to the practice and procedure of
the High Court or any other tribunal or authority in relation to the jurisdiction
conferred on the High Court by subsection (2) or exercisable by the other
tribunal or authority for the purposes of that subsection (including rules with
respect to the time within which applications or appeals to the High Court or
applications to the other tribunal or authority may be brought).
(4) Nothing contained in or done under the authority of any law shall be held to be
inconsistent with or in contravention of subsection (1) or (2) (a) to the extent that the law in question makes provision that is necessary in a
practical sense in a democratic society for the taking of possession or
acquisition of any property, interest or right (i)
in satisfaction of any tax, duty, rate, or other impost;
(ii)
by way of penalty for breach of the law, whether under civil process
or after conviction of a criminal offence under the law of Lesotho;
(iii)
as an incident of a valid contract or of the terms and conditions of
service of a public officer;
16
(iv)
in the execution of judgments or orders of a court in proceedings for
the determination of civil rights or obligations;
(v)
in circumstances where it is reasonably necessary to do so because
the property is in a dangerous state or injurious to the health of
human beings, animals or plants;
(vi)
in consequence of any law with respect to prescription or limitation
of actions;
(vii)
for so long only as may be necessary for the purposes of any
examination, investigation, trial or inquiry or, in the case of land, for
the purpose of carrying out thereon of work of soil conservation or
the conservation of other natural resources or work relating to
agricultural development or improvement (being work relating to
such development or improvement that the occupier of the land has
been required, and has without reasonable excuse refused or failed,
to carry out); or
(viii)
in satisfaction of the right conferred under section 14(4); or
(b) to the extent that the law in question makes provision for the taking of
possession or acquisition of the following property (including an interest in or
right over property), that is to say
(i)
enemy property;
(ii)
property of a deceased person, a person of unsound mind or a
person who has not attained the age of twenty-one years, for the
purpose of its administration for the benefit of the persons entitled to
the beneficial interest therein;
(iii)
property of a person adjudged insolvent or a body corporate in
liquidation, for the purpose of its administration for the benefit of the
creditors of the insolvent or body corporate and, subject thereto, for
the benefit of other persons entitled to the beneficial interest in the
property; or
(iv)
property subject to a trust, for the purpose of vesting the property in
persons appointed as trustees under the instrument creating the
trust or by a court or, by order of a court for the purpose of giving
effect to the trust by order of a court, for the purpose of giving effect
to the trust.
(5) Nothing contained in or done under the authority of any Act of Parliament shall
be held to be inconsistent with or in contravention of this section to the extent
that the Act in question makes provision for the compulsory taking possession
of any property or the compulsory acquisition of any interest in or right over
property where that property, interest or right is vested in a body corporate
established by law for public purposes, in which no moneys have been invested
other than moneys provided by Parliament.
4.9
International Agreements and
Obligations – Trade and other
Agreements, BITs, DTTs
Lesotho is a member of the WTO and a member of SACU, SADC, and the African
Union. Lesotho's membership of SACU means that it is directly affected by the
Trade, Development and Cooperation Agreement (TDCA) between South Africa
and the EC. Lesotho benefits from preferential access to the markets of most
developed countries under the Generalised System of Preferences (GSP).
In 2009, Lesotho, along with Botswana, Mozambique, and Swaziland signed an
interim Economic Partnership Agreement (EPA) on goods with the EC. Lesotho
believes that EPA negotiations are intended to cover much more than goods, and
that the economic adjustment resulting from a more liberal trade in services
regime, investment or procurement environment would bring more substantial
benefits.
17
Lesotho qualifies under African Growth Opportunities Act (AGOA) for access to the
U.S. market for textiles and clothing.
Lesotho is a Contracting State of the Convention on the Settlement of Investment
Disputes and a member of the Multilateral Investment Guarantee Agency (MIGA).
The Government is willing to accept international arbitration, though no disputes
have arisen so far.
18
5
SADC RELATED ISSUES
Lesotho is an active member of SADC and is committed to SADC regional
integration processes with access to the large market critical to the development of
the economy.
Bilateral Investment
Treaties
Bilateral Investment Treaties with Lesotho
Lesotho Partner
Date of Signature
1.
2.
3.
Double Taxation
Agreements
Germany
Switzerland
United Kingdom
11 Nov 1982
16 June 2004
18 Feb 1981
Double Taxation Treaties with Lesotho
Lesotho Partner
Type
1.
Mauritius
2.
South Africa
3.
United
Kingdom
Date of Entry
into Force
17 Aug 1985
Income
Capital
Income
Capital
Income
Capital
&
Date
Signature
29 Aug 1997
&
24 Oct 1995
&
29 Jan 1997
18 Feb 1981
of
Date of Entry
into Force
Sources included
Government of Lesotho MTCIM (2007) Industrialisation Master Plan 2007-10
http://www.trade.gov.ls/documents/Lesotho_Industrialisation_Master_Plan_May07.
pdf
Government of Lesotho Ministry of Trade and Industry, Cooperatives and
Marketing (2008) A Practical Guide to Investing in Lesotho 2008-9
http://www.trade.gov.ls/business/Lesotho_Doing_Business_3rd_Edition_2008_08_
28.pdf
Government of Lesotho Tax Policy
http://www.finance.gov.ls/data/National_Tax_Policyv2_2.pdf
Priority Support Programme Supporting Investment Climate Reform for Growth in
Lesotho, August 2008
http://www.trade.gov.ls/documents/Better_Regulation_for_Growth_Rep_10_Sep_0
8.pdf
World Bank (2007) Report No.38295 Lesotho An Assessment of the Investment
Climate January 7, 2007 Private Sector Unit Africa Region
http://siteresources.worldbank.org/INTAFRSUMAFTPS/Resources/Lesotho_Final_
Gray_Cover.pdf
WTO (2009) SACU Trade Policy Review Annex 2 Lesotho WT/TPR/S/222/LSO
http://www.wto.org/english/tratop_e/tpr_e/s222-02_e.doc
19