…move comes against the background of companies’ perennial failure to declare profits
THE government has begun the process of privatising parastatals and other companies where it has interests and it will soon sell some of its shares to Basotho through the Maseru Securities Market (MSM).
This was revealed by Trade and Industry minister, Tefo Mapesela, in an exclusive interview with the Lesotho Times this week.
Mr Mapesela said the move comes against the background of the persistent failure by most of the parastatals and companies to declare profits and dividends despite many years of operations and annual budget votes from the government.
The government owns shares in several major companies including Lesotho Flour Mills (LFM), Econet, Maluti Mountain Brewery, AVANI Hotels and Victoria Hotel. It also holds shares in the diamond mining companies, namely, Letšeng Diamonds, Kao and Liqhobong Mines.
Finance minister, Moeketsi Majoro, recently singled out AVANI and Letšeng Diamonds as the few companies that have declared dividends in recent years.
He expressed concern over the repeated failure by most companies to declare dividends and also blamed previous governments for their ignorance of business operations which resulted in them concluding contracts with investors which did not benefit the country.
Dr Majoro revealed that a fortnight ago, he and Mr Mapesela held meetings with representatives of AVANI Hotels, Econet Lesotho and Seaboard to discuss their operations and to impress upon them the need for turnaround strategies that would ensure profitability.
Seaboard is an American-based company which bought a controlling stake in LFM for US$10 million in 1998.
Twenty years down the line, LFM has never declared profits or dividends thus depriving the government and the nation of its share of revenue from the strategic investment.
Despite its claimed failure to make profits and declare dividends, Seaboard has paid itself tens of millions in management fees. It is now seeking a new 10 year contract to continue with its operations in LFM.
“They (companies) can come to my office to negotiate but we have a very clear policy that they are in business for profit and we want to see profit,” Dr Majoro told this publication.
“I had a meeting with Lesotho Flour Mills together with the shareholder representatives, namely the finance, agriculture and trade ministers. We explained to Seaboard the simple concept, saying, ‘gentlemen we are in business for profit and if you are in business for charity you are not the partner that we want’.
“We are proving leadership to Lesotho Flour Mills and before we discuss a renewal of their contract, the important thing is to reset Lesotho Flour Mills on a business footing where it will make a profit,” Dr Majoro said.
This week, Mr Mapesela said the government was looking to sell off some of its shares in some companies after concluding that the state did not have the expertise to run the businesses hence the failure to make profits over the years.
Mr Mapesela said during their meetings with the investors, the latter said that the government should shoulder some of the responsibility for the companies’ failure to make profit.
The investors said the government was just as culpable because it had representatives on the boards of companies who had failed to reverse the tide of losses and ensure the companies operated profitably.
“For a while the government has not been satisfied with the way the parastatals operate where some investors have never declared any dividends to the government on the grounds that they were making losses,” Mr Mapesela said.
“We therefore met the investors together with the Minister of Finance (Dr Majoro) because our two ministries control the government’s stake in the companies. The investors shifted the blame onto the people that the government has been appointing to the boards of the companies over the years and they said the government representatives must also explain why they kept quiet when profits were not declared.
“It is very clear that those people who have been representing the government in the parastatals have been sleeping on the job and they have only been there to receive their salaries and allowances.
He said as a result, the government was working on the disposal of some of its shares to the public through the Maseru Securities Market.
“Therefore, since the government has failed manage its stake, we have decided to sell shares to Basotho through the Maseru Securities Market.
“We are still to discuss and agree as to how many shares we will allocate to the private sector. The shares will be managed and sold with the active involvement of the Central Bank to ensure that they are allocated to Basotho only. However, each individual will only be allowed to buy a limited number to ensure that as many Basotho as possible will be able to own shares,” Mr Mapesela said.
Mr Mapesela’s revelations come against the background of plans by the government to sell some of its shares in Econet.
A government document seen by the Lesotho Times this week states that “the government will soon set a timetable for the reduction of its stake in Econet Telecom Lesotho and it will consider privatising its shareholding in the EASSy/WACS undersea cable to a local company or consortium of companies in order to enhance efficiency in utilising EASSy/WACS”.
EASSy is an acronym for the Eastern Africa Submarine Cable System which is an undersea fibre optic cable system which runs from South Africa to Sudan and connects various countries including Lesotho to the rest of the world for voice and data services.
WACS is the acronym for the West Africa Cable System which is a submarine communications cable linking South Africa with the United Kingdom along the west coast of Africa.
The MSM is Lesotho’s only stock exchange facility and it aims to enable companies to access capital while mutually offering the public investment opportunities in company, bonds, shares or stock.
It was launched in 2016 and it is managed by the Central Bank of Lesotho.