On Friday 31 July, Peete Molapo, finished his four-year-term as chief executive officer of the Lesotho National Development Corporation (LNDC).
Motebang Mokoaleli has since been appointed LNDC acting chief executive officer.
This week, the Lesotho Times, caught up with Molapo to take stock of the successes and challenges that he experienced during his tenure at the LNDC.
Our Business Reporter, Mpeshe Selebalo, spoke to Molapo on these subjects. Below are excerpts of the interview:
Lesotho Times (LT): What can you say were your achievements as LNDC chief executive officer?
Peete Molapo (PM): When I was appointed LNDC CEO (in 2004) it was a time when the Multi-Fibre Agreement (MFA) was coming to an end. The industrialists were very tense. We as the LNDC were also anxious. The MFA allowed small countries like Lesotho access to international markets without quotas. The end of the MFA agreement meant that the quotas were lifted and Lesotho had to compete with countries such as India and China which had advanced garment manufacturing industries. So the challenge was to retain the industries that were operating in the country. The LNDC in collaboration with the Ministry of Trade and Industry, Co-operatives and Marketing worked very hard to retain the industry and strong buyers like Levis, Gap and Wal-Mart in the US. We worked hard to assure buyers that the government of Lesotho was prepared to help industrialists. Some industrialists left and there were huge retrenchments, but we managed to retain some companies.
LT: So you came in at a very difficult time?
PM: It was a baptism of fire. The LNDC together with the Ministry of Trade and Industry, Co-operatives and Marketing embarked on an aggressive strategy and engaged the US administration. We encouraged businesses to buy in small countries such as Lesotho. There were huge job losses more than 10 000 and about eight companies were closed. That was the biggest departure of foreign direct investment. In 2006 the Fabric Sourcing Promotion, which made a provision for developing countries to source fabric anywhere in the world without restrictions was to expire. This could have made industries from Lesotho less competitive since it was now expensive to source fabric. All these contributed to easing the uncertainty of the buyers. Then in 2005 the government introduced new tax concessions. These were mainly focused on making it easier for industries to export. The corporate tax was reduced from 15 percent to 10 percent for exporting within the SACU region and the tax rate was zero percent for exporting outside the SACU region. This was a huge morale booster and good indicator that that government was there to help them. The LNDC embarked on an aggressive investment promotion strategy in South Africa. The objective was to diversify our investor mix, to diversify markets and to diversify export products.
LT: What other products does Lesotho now export after the diversification of markets?
PM: The products that are produced in the country for exports, apart from textiles, include electronic products, electrical and high value garments. We managed to attract investors like SA Clothing (Nyenye Clothing) in Leribe, and some firms produce high quality products such as golf shirts, shirts and trousers for shops such as Woolworths. We have also managed to attract companies like Phillips Lighting which produce energy-saving light bulbs. All in all we attracted about 15 companies, and these companies provide employment opportunities to many Basotho. We have also attracted international investors apart from Asian investors. This has put the LNDC in a better position to attract other companies producing high value products anywhere in the world.
LT: What else did the LNDC achieve under you guidance?
PM: In the past years a number of buildings were destroyed through fire, since there was no fire fighting equipment in all our estates. However, we have now installed fire-fighting equipment including fire detectors and alarm systems. In addition to that the LNDC has built a fire station in Maputsoe and, with the assistance of the government, plans are underway to build other fire stations in Mafeteng and Mohale’s Hoek. All our estates now have fire-fighting equipment.
At LNDC we had two portfolios, the equity participation fund which comprises nine companies and the leasehold portfolio. LNDC has some equity in some of the companies in the country. Some of our subsidiaries were bad performers, one such company was Loti Brick which was making huge losses. As LNDC, together with the board of Loti Brick, we came up with turn-around strategies and appointed a new managing director to implement those strategies. In the 2008/2009 financial year the company has recorded a profit of M1 million after making a M22 million loss in 2007/2008. Other companies in the equity participation fund include Basotho Canners, Cashbuild, Maluti Mountain Brewery, Lesotho Milling Company and Shoprite.
LT: But some companies in that portfolio have not been performing, for example Basotho Canners has been performing badly over the years.
PM: Basotho Canners has not been performing at all for a number of years now. Personally I wanted it to be closed down but the government decided to revive the company and that process is still underway. The main challenge was in the constant supply of inputs. The plan is to increase and secure the supply of those inputs which should provide opportunities for Basotho. The brewery did have some problems because of the economic downturn in Lesotho but it has come around amid all that. Lesotho Milling was also struggling at some point mainly due to maize-meal demand and distribution problems, but it has also started to pay dividends. Other companies like Cashbuild and Shoprite have been performing fairly well.
LT: The issue of the CGM bail-out has caused quite a stir among the general public. Please give us your views on that matter.
PM: That was a total misconception bordering on ignorance. Personally, I am proud that the LNDC board and the government of Lesotho took that decision to help CGM. This was mainly based on the size of the company in terms of its workforce. When a company the size of CGM collapses it sends seismic shocks to the entire industry. On the other hand buyers would perceive this as a global problem for Lesotho and divert their orders elsewhere. Garment manufacturing companies cannot survive without orders, they would have to close down and Basotho would lose jobs. The main reason for the bail-out was to save jobs. This is one of the fundamental reasons why the LNDC exists. It is important to note that I did not single-handedly make that decision. It was a joint decision approved by the board and the government of Lesotho.
LT: Are you satisfied with the performance of the LNDC?
PM: I am proud of the things I, together with my colleagues, achieved at LNDC. The corporation invested in infrastructure development worth M101 million out of LNDC funds, in buildings, canteens, fire equipment. The projected profit for 2008/2009 stands at M40 million which is ploughed back to infrastructure development and the fixed assets are around half a billion maloti.
JHI indeed did perform badly but it improved its operations towards the end of its contract. We also set up some strategies to help develop the local private sector. One such instrument is the partial credit guarantee facility (PCG) aimed at providing collateral for SMMEs which do not have collateral when asking for loans from banks. We have managed to retain and attract companies even under difficult economic conditions.
LT: Your view on the future of the garment industry?
PM: The industry is fragile and vulnerable, but all is not doom and gloom. The industry is operating under difficult conditions. There is still uncertainty as long as the economy of the US is still in trouble, and lack of access to the EU market. There must be a well designed financial assistance scheme to replace the expired Duty Credit certificates.
LT: What’s next for you?
PM: I am going to take a short rest and I would like to be on my own when I come back.