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Surviving global competition

by Lesotho Times

IN the past, the economy of Lesotho was largely supported by revenue from the Southern African Customs Union (Sacu).

It also relied heavily on agriculture and remittances from South African mines.

Because of decreasing arable land area, the role of agriculture has diminished considerably. 

At the same time, significant retrenchments in South African mines pose a serious and continuous threat to Lesotho’s economy. 

Sacu revenue has also shown that it is vulnerable to global economic events 

Because Lesotho is not endowed with abundant natural resources, industrialisation and tourism appear to be the most viable sectors for economic development. 

Industrialisation adds value to any scarce resources that may exist or the little that a country may be able to import. 

Added value also means potential for increased export earnings and positive contribution to balance of payments. 

In addition, value addition contributes to employment creation and poverty alleviation. 

The small population of Lesotho suggests a limited market that does not offer any advantage associated with economies of scale. 

Thus, industrialisation in Lesotho has to be export-orientated in order to be viable.

Lesotho’s industrial goods and services have to compete favourably on the international markets.

The establishment of the World Trade Organisation (WTO) further underscores the issues of export orientation and competitiveness in open markets. 

The WTO seeks to promote free and fair trade so that all markets are accessible. 

While access to international markets is an obvious advantage to Lesotho, WTO rules ensure that, in the long run, Lesotho will be equally accessible to all commodities and services from any member states of the WTO, thus creating the need for competitiveness at home and abroad. 

Within the context of the WTO, failure of Lesotho’s products and services to compete effectively will mean loss of employment and waste of foreign exchange on imports.

That would create chaos in the economy.  

The Sadc Protocol on Trade, which seeks to establish free trade within the southern African sub-region, will bring about the same concerns as the WTO.

It is generally acknowledged that Japan, like Lesotho, has limited natural resources, yet it is one of the richest countries in the world.

It has been argued that, because of its poor natural resource base, Japan will not survive without highly competitive technologies.

That is, activities that add value efficiently and effectively. 

It can be shown that quality management has played a key role in Japan’s development. Interestingly, Japan did not embark on the road to quality by injecting huge amounts of investment in the programme. 

Rather the emphasis was always on fostering better attitudes and a conducive culture for quality.

This goes to show that quality is essentially affordable.

Contrary to popular belief that quality compromises productivity, the two go hand in hand. 

Reducing or eliminating mistakes will reduce rework and time and effort will not be wasted, allowing for more to be produced in a given time. 

Furthermore, specialisation and mass production are key strategies for increased productivity and both rely heavily on quality and standards.

Since quality management aims at doing things right the first time, a company that produces quality goods or services is likely to reduce costs of production since mistakes are few and rework or rejects are virtually eliminated.

Concern has been raised repeatedly that, in Lesotho, there is weak linkage between foreign-owned large industries and local SMEs with subcontracting considered a typical form of linkage.

The fact of the matter is that it is only possible to link small and medium enterprises (SMEs) with large companies if the latter have confidence in the ability of the former to deliver quality goods or services. 

Multinational corporations often source components from all over the world. 

Only those companies that have demonstrated quality capability and culture, including SMEs, are able to tap into this market.

Meaningful industrialisation often relies on substantial foreign direct investment.

Investors, on the other hand, select investment destinations on the basis of the business environment reigning in that destination. 

The business environment goes far beyond just the applicable legislation. 

It includes interlinking sectors such as transport, utilities and banking.

Efficiency and effectiveness in these sectors will influence the decisions of investors to a large extend. 

On the other hand sectors far removed from business, such as education and health, will always come into consideration when investment destination is assessed.  

The point I am making here is that quality has to exist in all sectors of the economy in order to make Lesotho an investment destination of choice. 

In so saying one is including the public sector since the government is easily the biggest and most influential player in commerce.   

Any positive change in the delivery of services in the public sector will influence the entire economy significantly.    

Tourism is akin to investment in terms of destination choice. 

While attractions are the main considerations by tourists, they are by no means the only ones.  

Means of travel as well as facilities or services available are always critical. 

Such facilities may include sectors far removed from the core tourism industry, such as health.

Indeed, there is no clear-cut demarcation highlighting the importance of universal culture of quality.     

Lesotho cannot hope to benefit from tourism as long as tourists prefer to stay outside Lesotho and refrain from using local facilities only because of their unsatisfactory quality.

In such a situation that tourist dollar, euro or pound will continue to elude the country.

As I see it, it has to be quality first.

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