Private sector remains key to job creation
The Private Sector Competitiveness and Economic Diversification Project (PSCEDP), under the Ministry of Trade and Industry, in partnership with the Ministry of Agriculture and Food Security, is rolling out the first-ever commercial horticulture projects throughout the country. The projects are set to see the country’s deciduous fruits farmers receiving expertise in producing apples, peaches, apricots, cherries and plums, for commercial use.
Project Manager Chaba Mokuku, speaks to Lesotho Times (LT) reporter, Lekhetho Ntsukunyane, about the initiative and other developmental strides the PSCEDP is engaged in.
LT: Could you please first tell us about the PSCEDP and its role in the country?
Mokuku: The project started way back in 2005. Government, together with various development partners including the World Bank as well as civil society and the private sector, met to try and identify ways of implementing Vision 2020. In particular, we were focusing on the issue of economic growth exploring how we can grow the economy. How do we create jobs and alleviate poverty? The forum led to the formulation of the country’s Poverty Reduction Strategy. The idea was to strengthen the private sector so that more jobs can be created. The project was conceived based on that principle that we need to do all we can to ensure that we grow the private sector and strengthen it. And so the Private Sector Competitiveness and Economic Diversification Project was established.
LT: What was the project’s main aim?
Mokuku: The idea was to improve private sector investment in the economy. Here we are saying government should get out of business. We should have the private sector playing a bigger role. One of the project’s main components is the need to improve the business environment. We identified obstacles to private sector investment and tried to remove them. Most obstacles are essentially legal, regulatory and administrative. For instance, people used to hustle to register a company. At that time company registry was still at Law Office, and it used to take more than 30 days to register a company. So the administration of that law was an obstacle. To improve the business environment we had to review that law. We tried to streamline procedures by removing unnecessary procedural steps. We also had to modernise the whole company registration system by computerizing it. We automated the system so that things were done electronically.
LT: What changes have you introduced in terms of registering a company and starting a business in Lesotho today?
Mokuku: The procedure is that you register a company, but it doesn’t operate immediately. You still need a license to operate the business. So licensing was at Ministry of Trade and Industry’s Ones Stop Business Shop, and company registration was being done at Law Office. We then moved the company registration function from Law Office to the Ministry of Trade. So you now have registration and licensing under one roof. We modernised the registration procedure and we are currently modernising the licensing aspect. We would like businesses to ultimately register to operate in one day. Even the company registration is not really fully efficient in the sense that we managed to reduce that 30-plus days to four days to register. We want the process to take a day. We have a new industrial licensing law but it is yet to be implemented. It is also a modern law. We are going to use automation to speed up the processes.
LT: Tell us about the commercial fruit project which you are currently rolling out throughout the country?
Mokuku: This is the second aspect of the project (PSCEDP) where, basing ourselves on the National Strategic and Development Plan, we have identified three key priority sectors for development, namely commercial horticulture, tourism and hospitality, and manufacturing. We had to plan interventions around these sectors. So we first identified subsectors within the commercial horticulture, and by just observing you can tell that there is plenty of fruit varieties we are able to produce in this country, but we are unable, conversely, to do that commercially. So we piloted this project with just three farmers starting from February 2007. The farmers were already into commercial deciduous fruit farming. We then planted apples, cherries, apricots, peaches and plums in the orchards of these farmers. We invested a lot in this because we had to install irrigation systems. It was more of an experiment because we wanted the fruits to grow under a conducive environment. So we did this in Thuathe, Qoqolosing and Mahobong. The trees we planted started bearing fruits in year three. This enabled us to identify which varieties were doing well than the others.
We started with 1600 trees per orchard but we have since extended that in the recent rollout up to over 14 000 trees in Mahobong. Now, these are rural farmers who used to grow grain, like maize, and made at most M2000 per hectare. And for fruit trees when they are mature the farmers are able to make M4000 to M5000 per hectare. So there is big difference. This is an opportunity for creating jobs because these fruits are not only being produced for the local market, but they are also being exported.
LT: Does Lesotho therefore stand a better chance of becoming a commercial fruit producing country?
Mokuku: Because of our altitude and weather conditions, we tend to have high quality fruits. With the same variety of fruits, you find that, because of our altitude and weather conditions, the taste is different from other countries. In Lesotho the fruit becomes sweeter than in say in South Africa. Again, the same varieties ripe earlier in Lesotho than in South Africa. This is important because it means we are the first on the market. Not only that, we also have varieties which ripe much later, which also is an advantage. We have that comparative advantage which we are now utilizing.
LT: How many farmers are already reaping the rewards from this project?
Mokuku: At the moment we a farmers’ company with nine shareholders in Mahobong; one farmer in Qoqolosing and one farmer in Thuathe Additional 27 households in the new roll out sites in Mahobong and Likhetlane will start benefitting when they get their first harvest in 2017. I must the maintenance of the existing orchards and establishment of new farms have also created employment for the local communities.
LT: Why did you choose Mahobong?
Mokuku: The roll-out site was selected after careful consideration and detailed assessment of climatic conditions, soil profile, access to water, proximity of powerlines and interest by villagers and the village chief which a potential roll-out site needed to have. The project has also produced national and suitability maps for deciduous fruits which serves as a basis for site selection.
LT: What about the other areas…?
Mokuku: The Thuathe pilot project has now become a demonstration center. We have signed a contract with the farmer there. He is now on his own. We don’t support him anymore financially. But we have agreed that he should pass on the knowledge to other farmers. We are going to use another demonstration center but that one we are going to own it in a different location but still in Mahobong. This is where we are going to test new varieties and encourage farmers to grow those which will grow well. We have expanded to cover 35 additional hectares in other areas of the country recently. But when looking at the suitability map, there are still many other areas identified. About 5000 square meters of land has been identified throughout the country. We can develop a whole new industry out of this. What we have also discovered is that we can have optimum production in year eight. Production increases every year as the tree grows and as the farmers develop more experience.
LT: Have you equipped the farmers enough to sustain the projects?
Mokuku: That’s exactly what we are doing. We are training them regularly with the help of experts from South Africa. We have also adopted international certification on good agricultural practices. Essentially, this is for export purposes. The Blessings farm in Thuathe has already been certified by Global Gap Certification, which is an approved international certification agency. International auditors will be coming soon to audit the farm.
LT: Will getting the markets not become a serious challenge as you continue the rollout?
Mokuku: The local demand from retailers such as Shoprite, Game, Pick’n Pay, Fruits and Veg, and is currently higher than the supply. However, as the initiative expands, we will have access to the regional and international markets as all farms would have attained international certification for good agricultural practices known as Global G.A.P. currently, one pilot farm is certified, and the Mahobong roll out the other pilot sites will be certified during the first quarter of current calendar year. As volumes increase, there will be more second and third fruits that for processing. This includes canning, juicing or drying.
LT: Who are your partners in these interventions?
Mokuku: We, as a project, are simply facilitators. We bring expertise and resources. There are specific ministries that are tasked with the responsibility. For instance the Ministry of Trade will be responsible for industrial licensing, so we work with it on that particular reform area. We also have other obstacles, such as access to finance. We are working with the Central Bank of Lesotho (CBL) in that regard. CBL is leading that particular initiative together with the Ministry of Finance. In fact CBL is our direct partner…… For instance, we are working with them on the credit bureau, which is already operational. Right now we will be assisting them to launch and implement the awareness campaign on 19 January 2016.
LT: Are there any other interventions which your project is engaged in together with the government?
Mokuku: We are also working on establishment of a collateral registry, which is a register of movable assets. This is going to assist credit providers to check whether certain assets have already been pledged for financial assistance because there are instances where you find that individuals double pledge their assets to get loans. So once you pledge your asset it will go into that registry. But still one asset can be pledged a number of times depending on its value. We have already drafted a policy with the CBL in relation to the collateral registry and a law that governs it.
Another intervention that we did was to draft a law governing financial leasing. This, essentially, is leasing of mainly movable assets. For instance, if you want to construct a road, you may not have all the excavators and other machinery and to procure such equipment will take you a very long time. Banks, on the other hand, may not be able to give you a loan. So what we are trying to do is to come up with a leasing industry where you can simply just lease equipment. What this means is that you can start a business almost immediately without owning equipment, but renting it. It’s a win-win situation because the leasing company gets rentals and you, on the other hand, are able to start generating revenue and paying rentals while you also retain the assets – simple. I took the CBL delegation to Mauritius where this industry is well developed. I also took them to Sri Lanka where it is operative and they were very excited about the initiative. In Mauritius, over 75 percent of vehicles are leased. People don’t own vehicles. They pay monthly rentals, which is more or less similar to the hire purchase initiative where you hire an asset or buy vehicle via bank finance and by the time you finish paying the bank you probably no longer want the asset. So leasing is a solution. We have since developed the law and a strategy to that effect. We are about to implement the strategy this year.
We are also working on the insolvency law. One of the biggest challenges is that if I give credit and you become insolvent, it becomes difficult for me to recover what you owe me. This has led to financial providers becoming reluctant to giving out the credit. Or if they give the credit, the interest rates are high because there is a risk. Some people may not want to invest where means of recovery are not easy. So we are working on that law with the office of the Master of High Court. The idea is really not to rush to liquidate companies when they could still be viable.
LT: Are there any challenges impeding your work?
Mokuku: Legislative processes are very slow. For any law, you need to have requisite capacity to implement it. It’s not just a matter of having the law in place. You need to have skilled people. For instance, you can’t talk about licensing without inspections, which means you have to have inspectors who know what to look for. We also don’t have clearly defined procedures in government systems. For instance, if you go to any ministry and ask what are the processes they follow when formulating a policy, one ministry will tell you something different from the other. There is no uniformity in doing all these things. We should have handbooks and guides because that way you won’t find yourself living in a situation where you leave things to the discretion of officials. Lack of transparency leads to corruption. So if there is transparency and publicity so that people know what procedures are in place; there are no grey areas; there will be no space for corruption.