VZCZCXRO6943
RR RUEHBZ RUEHDU RUEHJO RUEHRN
DE RUEHMR #0227/01 1061521
ZNR UUUUU ZZH
R 161521Z APR 07
FM AMEMBASSY MASERU
TO RUEHC/SECSTATE WASHDC 2881
INFO RUCNSAD/SADC COLLECTIVE
RUEHMR/AMEMBASSY MASERU 3234

UNCLAS SECTION 01 OF 02 MASERU 000227 
 
SIPDIS 
 
SIPDIS 
 
DEPT ALSO FOR AF/S 
 
E.O. 12958: N/A 
TAGS: ECON EIND EINV EMIN PGOV LT
SUBJECT: LESOTHO: APRIL 2007 ECONOMIC ROUNDUP 
 
MASERU 00000227  001.2 OF 002 
 
 
¶1.  SUMMARY: 
 
 
 
- SADC Council of Finance Ministers Convened in Maseru 
 
- World Bank Considers Lesotho for Non-Concessional Loans 
 
- UNFPA Presents 5th Five-Year Country Program 
 
- New Diamond Mining Areas Explored.  END SUMMARY. 
 
 
 
--------------------------------- 
 
SADC COUNCIL OF FINANCE MINISTERS 
 
--------------------------------- 
 
 
 
¶2.  On March 22-23, the SADC Council of Ministers convened in 
Maseru to assess Lesotho's progress towards launching the SADC 
Free Trade Agreement (FTA) in 2008, to be followed by a Customs 
Union in 2010 and a Monetary Union in 2016.  The chair of the 
meeting, Lesotho's Minister of Finance and Development Planning 
Dr. Timothy Thahane, stated during a press briefing that an 
audit of SADC member states' tariff reduction schedules was 
begun in February 2007 and will conclude at the end of April. 
He also noted that in February 2007, SADC's member states began 
to update the organization's 2004 inventory report on non-tariff 
barriers.  Concerning the planned Customs Union, Thahane said 
that SADC will study various customs union models as well as the 
compatibility of states' national trade policies while the 
customs union roadmap is being finalized. 
 
 
 
¶3.  The SADC Council of Ministers reviewed the tax and revenue 
laws of various member states as well as possible alternative 
mechanisms for compensating the revenue lost by some member 
states due to the customs integration measures.  A comprehensive 
study of these issues will be available in June 2007.  The 
Council also highlighted two other problems: 1) member states' 
overlapping multiple membership in other regional organizations 
pursuing a similar economic integration agenda; and 2) a lack of 
political will to cede national sovereignty on tariff and 
industrial policies to SADC.  [NOTE: All SADC member states 
except Mozambique have dual or multiple memberships in the 
Southern African Customs Union (SACU), the Common Market for 
East and Southern Africa (COMESA), and the East African 
Community (EAC).  END NOTE.]  The resolution of these two issues 
will prove crucial to implementing of SADC's economic agenda. 
 
 
 
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World Bank Considers Lesotho for Loans 
 
-------------------------------------- 
 
 
 
¶4.  On March 29, the World Bank met with experts from Lesotho to 
consider the nation's creditworthiness for International Bank 
for Reconstruction and Development (IBRD) loans.  Lesotho's 
external debt composition is currently 87.8% of the total public 
debt, of which 83% is concessional.  Lesotho's foreign debt as a 
percentage of GDP is presently 40%, which is considered 
sustainable. (NOTE:  The debt sustainability threshold is 60% of 
GDP for Highly Indebted Poor Countries.  Lesotho's long-term 
foreign currency credit rating BB-.  END NOTE.)  Lesotho's 
capacity for continued loan repayments is viewed as dependent on 
a continued favorable economic environment.  Lesotho's current 
rating is in the same bracket as Nigeria, Indonesia, Turkey and 
Ukraine.  The GOL's stated policy is to borrow on concessional 
terms in order to moderate the country's future debt burden. 
 
 
 
--------------------------------- 
 
UNFPA/GOL's Fifth Country Program 
 
--------------------------------- 
 
 
 
¶5.  The United Nations Population Fund (UNFPA), in collaboration 
 
MASERU 00000227  002.2 OF 002 
 
 
with the Government of Lesotho, organized a workshop from March 
22-26, to develop a five-year population program of assistance. 
This is the fifth Lesotho/UNFPA country program, and is to be 
implemented between 2008 and 2012.  Lesotho's Director of the 
Bureau of Statistics, Mrs. Lefosa, officially opened the 
workshop, stating that Lesotho is faced with challenges 
including high unemployment, drought, and HIV/AIDS.  Mrs. Lefosa 
said the past four UNFPA/GOL programs had not addressed these 
issues, and urged that they be included in the fifth program. 
The UNFPA Director acknowledged USAID assistance in the struggle 
against HIV/AIDS, however, he urged USAID to concentrate on 
poverty reduction strategies in order to have the greatest 
impact on the crisis. 
 
 
 
--------------------------------- 
 
New Diamond Mining Areas Explored 
 
--------------------------------- 
 
 
 
¶6.  Following major diamond finds in 2006 and early 2007, four 
companies -- European Diamonds, Thabex/Angel Diamonds, Motapa 
Diamonds, and Lesotho Diamonds Corporation -- have begun 
exploring or building mines in Lesotho.  European Diamonds has 
applied for prospecting rights on a 2000 square kilometer area. 
Angel Diamonds, which is 80% South Africa-owned, is exploring 
the Kolo pipe (Mafeteng region) which potentially offers large 
rough diamonds but at a high capital cost.  In March 2007, 
Motapa Diamonds began an $8 million sampling program to evaluate 
the economic potential of the Mothae area, about 6.5 kilometers 
northwest of Letseng.  The Government of Lesotho levies an eight 
percent royalty on diamonds mined the country, with proceeds 
channeled directly into the national treasury.  The 
participation of local mining companies in all mining projects 
is required by law.  Also, unskilled mine workers are required 
to be hired locally and Basotho skilled workers are legally 
given preference in the mining sector.  The GOL has recently 
modernized its mining legislation to make foreign investment 
more attractive. 
PERRY