Govt pushes indigenisation regulations
THE Ministry of Trade and Industry has issued new regulations to preserve certain businesses for indigenous Basotho only.
The Business Licensing and Registration Regulations, 2020, will soon be tabled before parliament. They tentatively listed 47 business activities that will be reserved for indigenous Basotho only.
Foreigners can participate in the 47 activities but only as minority shareholders of 49 percent or lower.
The regulations, once approved, will operationalise the Business Licensing and Registration Act of 2019.
Under that Act, foreigners who have invested in other businesses, falling outside the 47 sectors, will need to prove they have invested at least M2 million in their businesses to renew their trader’s licences.
Principal secretary (PS) in the Ministry of Trade and Industry, Maile Masoebe, said the regulations were meant to correct what should have never been allowed in the first place.
He said while foreign investment was welcome, it should concentrate on larger corporates which indigenous Basotho would ordinarily not have the capacity to operate. He described indigenous Basotho as citizens whose ancestry can be traced to at least three generations in Lesotho.
Mr Masoebe said most foreign business operators do not qualify for the type of foreign investment that Lesotho requires. Instead, most are just competing with local small enterprises in the small business sector.
The regulations are expected to be tabled in parliament anytime soon, he said. Once passed, the regulations would be implemented gradually to avoid disrupting economic activities, he said.
“We want to create an environment for the development of the domestic investors without competition from foreign players through the regulations,” Mr Masoebe said.
“We are simply correcting a system that should have never been this way.”
Asked whether the regulations were not xenophobic in character, Mr Masoebe said all they were trying to do was to protect the Lesotho economy.
Among the 47 activities targeted for preservation are transport, cleaning, repairing and retail motors sales; growing and selling fruits and vegetables; pharmaceutical wholesaling and retailing, real estate, retail of animal feeds, supply of fuel and retail of hardware. Raising horses, sheep and goats, piggery and poultry have also been proposed to be reserved for Basotho.
“This law will help to define investment. What the majority of foreign business operators are doing in this country is not the investment that we are looking for, so they were never supposed to be allowed in the first place,” Mr Masoebe inisisted.
“We are not expelling anyone; we are simply saying they should invest in other areas. They can merge their companies to form larger corporations. If they want to stay in Lesotho, they are welcome; especially because they have the financial muscle to do it.
“They can survive by partnering with Basotho businesspeople who will hold a majority ownership of 51 percent.”
He said foreign owned businesses will be given time to wrap up their operations to avoid economic disruptions that may lead to job and revenue losses. The process may take “a few years”.
The government will start by targeting certain businesses and review their licences when they are due for renewal while also considering Basotho’s readiness to takeover.
There is also a likelihood that more businesses would soon be added to the 47 business activities reserved for Basotho, he said.
Thabo Qhesi, the chief executive officer of the Private sector Foundation of Lesotho (PFSL), has welcomed the regulations calling them “a great achievement”.
He however, warned that the government must employ a transparent implementation strategy for smooth transition to avoid hurting the already ailing economy.
“This is a great achievement by the government. It is good that there have been prior consultations on the issue… this is an effort that reflects the general view of the public.
“However, where there is a new change, all the risks must be calculated to ensure a smooth transition and not hurt the economy.
“There must be a risk assessment to determine the possible implications of the implementation of the regulations. For instance, we must know the number of businesses that are currently operated by foreign investors and the number of jobs they have created to inform the implementation of regulations.”
The government must also empower locals who may not necessarily have the capacity to match foreign investors, he said.
David Telford, a foreign investor who runs Maluti Wool and Mohair Centre, said while he was yet to study the draft regulations, it will be important for the “government to be very careful not to discourage inward investment with these regulations”.
Foreign enterprises operating in other areas, outside the 47, would be compelled to provide proof of an investment of at least M2 million, a corporate social responsibility plan and progress made in transferring skills and technology to Basotho.