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‘Cheap labour our competitive edge’  

by Lesotho Times
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Bereng Mpaki

LESOTHO’S apparent apathy in implementing investment reforms means the country is stuck with few options apart from cheap labour as a basis for global competition.

This was said by the Private Sector Foundation (PSFL) chief executive Thabo Qhesi in the wake of Lesotho’s poor ranking in the Global Competitiveness Index (GCI) report that was released earlier this month.

Lesotho’s economy has been ranked 130 out of a total of 140 other world economies in the latest GCI report.

While the ranking improved by one place from last year’s 131, Lesotho’s general ranking has been steadily declining over the past two years according to the report which shows that in the 2014/15 period, Lesotho’s position was position 107.

The annual report, which is compiled by the World Economic Forum (WEF), assesses the competitiveness landscape of 140 economies to provide insight into the drivers of their development.

It defines competitiveness as a set of institutions, policies and factors that determine the level of productivity of an economy which in turn set the level of prosperity that a country can achieve.

The report assumes that as a country becomes more competitive, productivity will increase and wages will rise with advancing development.

In an interview with the Lesotho Times, Mr Qhesi said it is worrying that Lesotho is ranked poorly on many factors that influence a country’s competitiveness.

The country is ranked last (140) on efficiency air transport services; 139 on venture capital availability; 139 on healthy life expectancy; 137 on cooperation of labour employer relations; 134 on flexibility of wage determination and 136 on strengthening of auditing and reporting standards among others.

In addition, Lesotho is currently ranked position 104 out of 140 countries on the ease of doing business rankings. The Doing Business report uses 11 indicator sets to measure aspects of business regulation that matter for entrepreneurship.

“This is a very poor state in which our country is in and it can only spell bad news for us in terms of attracting investment,” Mr Qhesi said.

“Given how poorly we are performing on many of these indicators which would otherwise be our basis for competing with other economies, the only type of investors we are likely to attract under this circumstances are those looking for cheap labour to exploit and that is a real shame,” he added.

He said the impact of such a situation is slow economic growth and less opportunities for meaning jobs.

Mr Qhesi further indicated that investors normally consider such global rankings as the GCI report before deciding which economies to invest their resources in.

“No investor would want to invest in a country where it is costly to install a supply line where water is a production input. Same with air transport services and the labour market.

“There is a high level of skills mismatch in this country which has discouraged many prospective investors from investing because they could not find the right types of skill for their business,” he said.

To address these challenges holistically, the PSFL has recommended that the Investment Climate Reforms Section within the Ministry of Development Planning must fast track implementation of the reforms.

“The government must improve consultative mechanisms at all levels with all key stakeholders especially business organisations and civil society organisations. We are referring to the following areas: Planning processes through National Planning Board; budget formulation; quarterly reviews through effective monitoring and evaluation mechanism; and constant and effective public private dialogue both at district and national level.”

Specifically addressing access to finance problem, Mr Qhesi said the government should establish a financing institution where entrepreneurs who have been equipped by BEDCO can go to for funding.

“The government should take a leaf out of Botswana’s book, which has an equivalent of BEDCO which is called Local Enterprise Authority (LEA) but in addition has Citizen Entrepreneurial Development Agency (CEDA) which is a vehicle for financing MSME’s,” Mr Qhesi said.

Improving the determinants of competitiveness, as identified in the 12 pillars of the GCI, requires the coordinated action of the state, the business community and civil society.

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