VZCZCXRO8204
RR RUEHLMC RUEHMR
DE RUEHMR #0162/01 0900732
ZNR UUUUU
R 310732Z MAR 06
FM AMEMBASSY MASERU
TO RUEHC/SECSTATE WASHDC
INFO RUEHLMC/MILLENNIUM CHALLENGE CORP
RUEHMR/AMEMBASSY MASERU

UNCLAS SECTION 01 OF 02 MASERU 000162 
 
SIPDIS 
 
AIDAC 
SIPDIS 
 
TAGS: EFIN EINV EAID ECON PGOV LT
SUBJECT: MINISTER OF FINANCE MEETS WITH NEPAD BUSINESS GROUP 
 
REF: MASERU 93 
 
¶1.  SUMMARY:  Lesotho's Minister of Finance and Development 
Planning Timothy Thahane  met with private business players in 
Lesotho at a dinner organized by the Lesotho NEPAD Business 
Group on March 16 to share ideas on the ways in which the 
business community can partner with government in implementing 
the 2006/07 budget, and to explore modalities through which the 
business community can contribute to the budget process ahead of 
its tabling in parliament.  A spokesperson for the group lauded 
the interventions that the government has embarked on to assist 
the textile sector remain competitive in international  markets, 
and called on government to implement policies that would 
encourage partnerships between outside investors and the local 
business community.  The government was encouraged to urgently 
enact legal reforms to enhance private sector growth.   The 
minister was receptive to the group's comments but also urged 
them to become more effective partners with the GOL in boosting 
the country's economy.  END SUMMARY. 
 
¶2.   The dinner was a successful event, attracting private 
sector participants in the banking, insurance, industry, trading 
and transport  industries.  The Minister attended the event with 
his Principal Secretary Moeketsi Majoro, the newly Appointed 
Director General of the Lesotho Revenue Authority, Charles 
Jenkins, and the Chief Executive Officers of his newly re- 
structured ministry.  MCC and Embassy staff also attended. 
 
¶3.  The NEPAD Business Group is a registered organization that 
consists of individuals, organizations and companies that 
subscribe to the principles of The New Partnership for Africa's 
Development, NEPAD, and work together with government to 
accomplish NEPAD's goals and objectives. The group explores 
business opportunities for its members in the NEPAD program, and 
works with government to achieve national priorities under the 
partnership. Country-specific sectors which have been identified 
by the group are: Agri-business; Infrastructure development; 
Investor Promotion; Professional Services; Tourism; Financial 
Services; and Trade. 
 
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------------------------------------ 
THE GROUP'S VIEWS AND QUESTIONS FROM PARTICIPANTS 
--------------------------------------------- -------------- 
------------------------------------ 
 
¶4.  Chairman of the Group, Mrs. May Moteane set the stage for 
the minister's presentation and subsequent discussion by calling 
on the minister to confer more widely with stakeholders 
including the private sector before government embarked on the 
budget process.  Anchoring her remarks on the theme of the 
Minister's budget, "Results do Matter" (ref) , she identifying 
the HIV/AIDS pandemic as a national challenge to productivity 
and economic growth, and said collaboration between government 
and the private business  as the only way in which the disease 
can be brought under control. 
 
¶5.  She went on to criticize the exclusion of Lesotho from debt 
forgiveness, asking if defaulting on payments might put Lesotho 
in a better position for future programs of forgiveness. Note. 
Lesotho, which  has traditionally borrowed on concessionary 
terms from both the IMF and the World Bank, was not included in 
the debt forgiveness program for HIPC countries.  Both the Prime 
Minister and the Minister of Finance  have expressed dismay at 
the lending institutions' "perverse incentives that punish those 
who manage their economic affairs prudently and pay their debts 
on time".  (2006/7 Budget Speech), although the Governor of the 
Central Bank has remarked that Lesotho's non-HIPC status shows 
it manages its fiscal affairs well and makes the country 
potentially more attractive to investment.  End Note. 
 
¶6.  Mrs. Moteane congratulated the government on the 
interventions it had undertaken to retain    and strengthen the 
textile industry, crucial as it is to job creation and foreign 
exchange earnings.  She called on government to put in place 
mechanisms that would ensure that the gains which had been 
extended through zero-rating in the manufacturing sector were 
ploughed back into the economy.  Note.  The GOL has this year 
instituted a zero per cent company tax rate on income generated 
from exporting manufactured goods outside the Southern Africa 
Customs Union, SACU (South Africa, Botswana , Namibia, Swaziland 
and Lesotho).   The move specifically benefits the textile 
sector, which exports garments to the United States under the 
African Growth and Opportunity Act, AGOA.   End Note.  She 
called on the government to entrench the textile industry by 
using its influence to establish linkages between outside 
investors in the textile industry to effect transfer of skills 
to local business community. 
 
¶7.  Moteane touched on other topics.  Regarding financial crime, 
she suggested that the Ministry of Finance establish a focal 
point where the public could volunteer information on corrupt 
practices they have observed.   Antiquated licensing laws should 
be revisited urgently because they serve as a barrier for 
 
MASERU 00000162  002 OF 002 
 
 
private sector development, for example requiring a person who 
can operate a business from home to nevertheless have a business 
address. 
 
¶8. Questions from other attendees centered  around government's 
inability to regulate the private sector, for example informal 
money lenders who charge exorbitant interest rates; a taxi 
industry that did not respect traffic rules, poor waste 
management; and the  mushrooming of businesses in residential 
areas. 
 
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THE MINISTER RESPONDS 
----------------------------------------- 
 
¶9.   The Minister was receptive to the participants' comments 
but also suggested how the private sector could be more 
effective partners with the government in spurring economic 
development. 
 
--  Agreeing that he could meet with stakeholder groups at least 
twice a year to discuss the next year's budget priorities, 
Minister Thahane urged the private sector to form interest 
groups that could make well-researched presentations to the 
Ministry of Finance ahead of the budget process.   He,  however, 
 pointed out that the budget process is a collaborative one, and 
that more specific room for private sector activity could be 
better elaborated at ministry level. 
 
 
--  The banking sector  should devise service products that 
could steer the public away from loan sharks.   The Governor of 
the Central Bank had been ordered to work together with informal 
money lenders and investment vehicles to ensure that they 
complied with the law.   Enforcement of regulations, he 
admitted, left a lot to be desired. 
 
--  Observing that the South African border towns around Lesotho 
were thriving as a result of Basotho  customers,  the  GOL was 
considering incentive schemes that would attract popular South 
African chain stores to open branches in Lesotho. 
 
-- Government service provision to the private sector  was 
slow, not recognizing the importance of time to a 
businessperson.   Public servants need to be re-oriented to 
adopt a more facilitative corporate culture to their service 
delivery.  The local private sector could  assist in this. 
 
-- During the Prime Minister's  trip to China in December last 
year, GOL officials had discussed partnerships with Chinese 
investors that would facilitate the transfer of skills to 
Basotho.  They had also requested lines of credit that would 
enable Lesotho investors to import machinery, and  encouraged 
Chinese interest in the telecom, agriculture and livestock 
sectors. He asked    private sector players to let his ministry 
know their particular interests so that he could introduce 
business people to relevant investors when they visit the 
country. 
 
¶10.  COMMENT: 
Minister Thahane, a former Lesotho Ambassador to the United 
States, and  World Bank Vice President,  was appointed to this 
position because of his long experience in development issues. 
His technocratic approach and support for transparent and 
consultative processes, of which this event is but one example, 
is appropriate to finance and economic issues, especially when 
trying to energize Lesotho's private sector.    Having also 
worked as Deputy Governor of the Reserve Bank of South Africa, 
Thahane has contacts with South African investors who could 
assist in Lesotho's development.  The group he met with included 
players from varied political backgrounds and retired civil 
servants now turned businesspeople.  Thahane's willingness to 
lend  an ear to dialogue with private business may build 
support for him as he strives to reach the objectives of 
improved government effectiveness and economic growth 
highlighted in his budget speech.  END COMMENT. 
PERRY