By Tsitsi Matope
MASERU — The Private Sector Competitiveness and Economic Diversification Project (PSCP) will enter its second phase next month, following the successful implementation of the first phase between 2007 and June 2013.
The Second Phase, which is funded to the tune of US$13.1 million (approximately M135 million) by the Government of Lesotho and the World Bank, ends in 2019.
However, the first phase worth US$10.1 million, pushed for the improvement of the business environment and doing business through the review and introduction of various legal instruments.
It targeted the development of sectors such as tourism, horticulture and garments and textiles.
The Lesotho Times this week caught up with the Project Manager, Chaba Mokuku (CM), to discuss the objectives of the Second PSC Project and also reflect on the first phase.
LT: What is the focus of the second phase of the project?
CM: The project will focus on key growth sector such as tourism and commercial agriculture. Support provided under the horticulture and tourism components of the new project will increase opportunities for skills development and employability of the local Basotho workforce.
The project will also seek to diversify the economy by creating an enabling environment for investment in other non-textile sectors resulting in increased private sector investment, firm growth and job creation.
LT: Do you have any specific, targeted areas that the project would facilitate?
CM: Yes, the project will facilitate implementation of targeted programmes that would facilitate linkages between foreign investors and domestic Small to Medium Enterprises (SMEs). Support measures would help facilitate improved information flows and targeted instruments to help increase business opportunities between the two groups while simultaneously also improving the capacity of the local SMEs.
The project will support tie-ups with external investment promotion agencies and the Basotho Diaspora for business development.
It will also help facilitate programmes that would develop local firms as input suppliers and support building partnerships with the local and regional private sector, through the mapping of existing service provider capacity and gaps.
LT: What are the expected impacts of these interventions?
CM: We expect improvement in the capacity of local SMEs, building a pipeline of domestic service providers, opening new markets for SMEs and creating new and improved jobs.
LT: How much money will the government (Ministry of Finance) contribute to this project?
CM: The project is supported to the tune of M131 million with the current exchange rate. The government will contribute more than M19 million to the project.
LT: The first phase of the project has managed to push for various economic reforms, what should we expect during its second phase, particularly in the area of business licensing?
CM: The second phase will support the drafting and implementation of the Business Registration Bill which aims to cover all businesses, including sole traders and partnerships.
This will enable the benefits of the One-Stop Business Facilitation Centre (OBFC) system, established in the first phase to go beyond company registration and register sole traders and partnerships, and also increase formalisation of businesses.
The project will also support the drafting of the accompanying Business Registration regulations to facilitate the implementation of the Bill, such that these supporting regulations are compatible with the current OBFC system and international best practice.
LT: In the area of trade, which is of utmost importance among local entrepreneurs, should people expect any positive developments?
CM: Yes, the project will also support the replacement of the outdated Trading Enterprises Act (1993) with a modern trade licensing regime. We expect this reform to reduce the number of days taken to obtain a trader’s license from 15 days to one day.
LT: Let’s discuss the support to be provided to ensure more locals participate in the private sector? In what way will you ensure that this time around the dominance of Basotho in the private entities is increased?
CM: The important role played by the Small and Medium Enterprises (SMEs) in economic development cannot be overemphasised.
Therefore, we have made a conscious decision to focus on strengthening skills development and market linkages.
In addition, the implementation of targeted programmes I referred to earlier on would strengthen backward linkages and facilitate spill-over in-terms of skills and technology transfer from foreign firms to local SMEs.
One of the project’s components, the Lesotho Enterprise Assistance Programmes (LEAP), will also focus more on supporting the growth and dominance of the local SMEs.
LT: Let’s talk about the challenges in the first phase of the project. What were the main causes of hiccups?
CM: The main challenge was limited capacity within the public sector to implement reforms. We found limited skills, a slow pace to implement legal reforms and limited data for monitoring the impact of the project quite challenging.
LT: Is it because the design of the first phase was too demanding or did not consider possible challenges in its design?
CM: Yes, the first design was rather ambitious as it did not take into consideration institutional capacities of implementing agencies as well as realistic timeframes for legislative and administrative reforms.
LT: So this time around, how are you going to ensure you overcome these challenges?
CM: Well, this time around we are hoping for better operations. We have designed the new project in such a way that we do not repeat the same mistakes. We have also set aside a budget for specific capacity building programmes during implementation by government agencies.
LT: What are the tangible achievements made in the first phase?
CM: The project supported the drafting and enactment of the new Companies Act, and the strengthening of the One-Stop Business Facilitation Centre (OBFC).
The reform resulted in a more simplified and streamlined company registration system in Lesotho and these improvements led to a decrease in the number of days required to register a business from 28 days to seven.
LT: What other positive impacts can you mention that emanated from the simplified system?
CM: Apart from an increase in the registration of companies, the country’s ‘Doing Business’ ranking moved by 65 positions in the starting a business indicator, also making Lesotho one of the top doing business reformers for 2013.
LT: The project was heavily involved in the development of the horticulture sector? What’s the future of this sector in this new project?
CM: The new project is designed to scale-up this initiative by expanding to new areas and strengthening the capacity of local on-farm technical support services. It will also support the downstream activities beginning in 2016.
We would expect the project to start increasing the volume of marketable produce entering the market from existing and new farms. The first project successfully established pilot farms to demonstrate the potential for commercial fruit farming in Lesotho.
We managed to pilot various varieties of fruit and their growing patterns.
We also worked closely with the government to ensure that policies and regulations are in place to support sector development.
LT: What achievements did you score from the pilot farms?
CM: The pilot farms have realised a number of successes, including Lesotho’s first fruit exports and production of the first grade apples in the country.
LT: What other initiatives are you introducing in the second phase to further improve on the current achievements?
CM: We are going to target first grade products for export markets, second grades would be sold locally, third grade and lower would be used in the domestic value-added processing.
In this regard, downstream activities will focus on the development of local supply and value chains for deciduous fruit and farm certification (GLOBAL G.A.P).
This would accord Basotho farmers the opportunity to export first grade products to any market in the world.
They would also be able to expand marketing options for local products both within and outside Lesotho.