. . . amid Brexit, SACU shocks
CENTRAL Bank of Lesotho (CBL) Governor, Dr Retšelisitsoe Matlanyane, has urged all sectors of the economy to instigate reforms that will ensure Lesotho’s resilience against current and impending challenges.
Addressing a medium-term macroeconomic outlook seminar for 2015 -2018 organised by the CBL this week, Dr Matlanyane indicated that while global and regional economies were showing signs of recovery over the medium-term, there were emerging threats that needed to be tackled head on for the economy’s well-being.
The seminar was attended by representatives of the business community, public sector, academia and development partners among others.
She said Britain’s withdrawal from the European Union after a referendum held on 23 June 2016 would continue to wreak havoc on global markets for several years, adding that it necessitated the need for bolstering economic resilience. Brexit, which is an abbreviation of “British exit” roiled global markets, including currencies, causing the British pound to fall to its lowest level in decades.
“Brexit will bring about volatility in the global market for about two to 10 years, if not more. Brexit will shake the global economy, and we have to deal with it,” Dr Matlanyane said.
“The only thing we can do is build up the resilience, which is what has seen us through in the past. Everybody has a role to play, and sectors of the economy should help to build the resilience.”
She said it was about time that the private sector stopped only looking at the government as their major client, since the government would not have enough to spend due to the economic slowdown.
“For business, you can no longer rely on government to be your major client. You have to develop your productive capacity.”
The CBL chief also said Lesotho needed to identify underlying opportunities that were being presented by the global economic slowdown.
She said the current shift in the Chinese economy from industry to services was an opportunity that Lesotho could seize by building its production base so that manufacturing companies in China can consider relocating to Lesotho.
Dr Matlanyane also called for value addition in the wool and mohair industry in order improve the country’s foreign currency earnings.
She said there had been significant reforms in the financial sector in recent years as part of efforts to bolster economic resilience.
“Some of the milestones include the setting up of the Maseru Securities Market, and we are happy that we are getting positive responses from companies interested in learning how it functions.”
Other strides, the governor said, were the introduction of a credit information registry, insurance regulations as well as the consumer protection framework in the financial sector.
CBL Director of Research Lehlomela Mohapi said global economic growth was expected to pick up from 3.1 percent in 2015 to 3.6 percent in 2018.
He said the upswing would be mainly driven by emerging markets and developing economies while advanced economies were projected to grow moderately between 2016 and 2018.
“In particular, advanced economies are expected to register an average growth rate of two percent in the medium-term. In emerging markets and developing economies, growth is projected to increase from four percent in 2015 to 4.8 percent in 2018,” Mr Mohapi said.
“This is driven primarily by domestic demand as well as gradual normalization of distress conditions in a number of large emerging market economies including Brazil and Russia.”
In the domestic market, he said challenges were expected in the manufacturing sector and agricultural sectors. He said Liqhobong, Mothae and Lemphane mines were expected to commence operations during the period under review, with an improvement in the weather conditions expected to allow for better agricultural production.
“Real gross domestic product (GDP) is expected to accelerate steadily from 2.9 percent 2015 to 4.6 percent in 2018, mainly supported by the mining industry as well as the services sector,” said Mr Mohapi.
“Advance infrastructure development associated with the second phase of the Lesotho Highlands Water Project is also set to boost economic growth starting from 2018.”
Lesotho Chamber of Commerce General Secretary, Fako Hakane, stressed the need for a mindset change in the working relations of the public and private sectors, saying they should operate as partners in economic development.
He said it was surprising that the government did not prepare for the impending reduction of South African Customs Unions (SACU) revenues. Finance Minister Dr ‘Mamphono Khaketla revealed in February this year that SACU revenues to the fiscus would decline from 23 percent to 17 percent of GDP in the 2016/17 financial year.
“We all saw it coming in the past few years, but the government did nothing to address the situation,” Mr Hakane said.
Businesswoman, ‘Marethabile Sekhiba, who operates the Scenery Guest Houses, said there was a need to encourage domestic investment to prevent capital flight.
She said financial institutions were favouring low risk investments like personal finance as opposed to business finance thereby stymying economic productivity.
For his part, Standard Lesotho Bank Chief Executive, Mpho Vumbukani, said while it may be easy to criticise banks for not lending enough money to businesses, financial institutions had to play a balancing act.
Mr Vumbukani said banks had the responsibility of safeguarding their clients’ deposits which they lent to businesses in a sustainable manner.
Meanwhile, in a bid to provide easier access to economic information, the Central Bank of Lesotho CBL has launched two new avenues to improve information dissemination.
The Macroeconomic Statistics Depository is a portal where statistical economic information can be found, while the Research Bulletin is a compilation of researched articles on economic issues ranging from 2015 to 2016.
Found on the CBL websites, the depository is under the publications heading and contains data dating from as far back as 1982.