‘We face a harsh reality’
Trade and Industry Minister Joshua Setipa faces a mountain of challenges in his effort to ensure the country’s economic prosperity. Mr Setipa was appointed to this very critical portfolio early this year and in this wide-ranging interview with Lesotho Times (LT) reporter, Lekhetho Ntsukunyane, spells out his vision for the ministry.
LT: First of all, could you please tell us the key priorities for your ministry.
Setipa: As government, we are guided by a number of priorities and objectives that are articulated in various documents such as the National Strategic Development Plan, Vision 2020 and then of course more recently, the Coalition Agreement of the seven parties that constitute today’s government. Out of the agreement, there are a number of priorities which we, as the Ministry of Trade, consider to be our direct responsibility. I think top of the list is sustainable employment creation, the economic empowerment of Basotho. Without empowerment, we cannot talk about decent jobs; we cannot also talk about empowering Basotho to be economically self-sufficient. Many countries that are at this level of development are facing different challenges. We face a harsh reality in that the global economic environment is deteriorating. The big economies on whose market we rely are experiencing continued recession. Others are experiencing high cases of sovereign indebtedness which undermines the ability to grow, which in turn cripples the ability to import or consume most of our products. Combined with the deteriorating climate in as far as the global market for commodities is concerned, that means the price of our diamond exports, for example, has gone down quite considerably. That is the global environment under which we operate, which of course, has a direct bearing on our ability to grow our economy.
LT: So what is being done to address these challenges?
Setipa: There is a whole range of interventions that government has to make to facilitate and encourage investment. The regulatory framework has to be improved to ensure that it is sensitive and conducive to investment. And by investment, we wish to be very clear that while we do admit that we have to consider foreign direct investment, there is a huge unpacked potential for domestic investment. We need to look at how we can unlock that potential by putting in place reforms that facilitate domestic investment; that recognise the potential that domestic investors have in shaping the future of our economy. We have to put in place interventions or incentives that would unlock that potential. We have a whole range of incentives for foreign direct investment and we need to mirror that to domestic investment. We provide infrastructure for investors from outside, so we also need to provide infrastructure for domestic investment. Only then can we realise the full potential of domestic investment. We also need to address other issues which impact particularly on local entrepreneurs, such as access to funding. It’s high time that we push and advocate for an inclusive financial system. Right now, on average, at the top of my head, I would say 35 percent of this country does not have access to the formal financial sector. Our banks are not sensitive to that. We need, as government, to push for that and that’s what we will do. We will start that dialogue to say the only way Lesotho can go is through an inclusive model for accessing the formal financial sector. We cannot go sustainably and inclusively if 35 percent of the population is excluded from the formal sector. South Africa had a similar situation a few years ago and they took a political decision and approached banks to say every South African, irrespective of his occupation, or how small his economic activity, has to have access to the bank. That’s what we mean and that’s what I believe will help us consolidate efforts to empower Basotho.
LT: How do you hope to achieve this goal?
Setipa: We need to look at how we can use or put in place a very aggressive preferential procurement system that will help government, through procurement, to empower Basotho in a manner that will also catalyse investment. We want intervention that will say, here we give you a government tender, for example, but use that to build a business model that will be sustainable. I don’t think there is anything wrong with positive discrimination – that means discriminating in favour of local, when it comes to government procurement. Take water for instance. Imagine if every ministry makes it a rule that no imported water should be consumed in government departments. We have at least seven local companies that are bottling water. Imagine what that will do to their business. Speaking of the water bottling industry, as a ministry, we are at a very advanced stage to set up a water-testing facility so that both bottling and sampling of water will be done in Lesotho.
There are some quality issues that come with this water that we buy from outside. But we are not able to confirm or even reject them because we don’t have a way of verifying them. So the ministry, through its Standard Division, is setting up that facility as part of efforts to build towards setting up the Bureau of Standards in Lesotho. So that is already underway. It was already budgeted for this financial year. I think we are on the right track. As we speak, you will not find foreign bottled water in the Ministry of Trade or the LNDC (Lesotho National Development Corporation), being one of our bigger affiliates. We are pushing to have this done across the government. The encouraging thing is there is willingness and political commitment to do that. The emphasis, however, is not on water bottling alone. It also extends beyond water. If you look at the range of products that are made in Lesotho and the continued sale and export of those products, it is what keeps Basotho in employment. I think it’s time that we start looking at this urgently. As a ministry, we are starting a process where we will build a database of every single product manufactured in Lesotho, irrespective of the ownership of the company that manufactures it. As long as it is manufactured in Lesotho, it is made in Lesotho, that’s all we are interested in. Starting with BIC pens. Do you know that BIC pens are made in Lesotho? Going up to overalls and other products? We are going to Basotho and the government at large to say look, if you have the Ministry of Works, for example, and we need to buy work clothing for staff, why not go to Maputsoe and buy that directly from the company that manufactures it instead of buying from a retailer in South Africa, because by doing that you are keeping Basotho jobs? If we can begin to change that, then we are on the right track in sustaining the investment that we have and also encouraging others to come because we would be supporting businesses that are here already. We maybe a small market, but we can support the investments. At the end of the day, we are consuming the same products that are made here. That’s how we want to use preferential procurement to drive job creation and empowerment.
LT: So do you mean you will be more concerned about domestic investment and not foreign direct investment?
Setipa: No. We are very much aware that at the end of the day, foreign direct investment, like in any other country, will continue to be a critical factor of what we are trying to do. No other country in the history of mankind has ever developed as a closed economy. We need to engage potential investors and partners from abroad to see how best can build relationships. We recently went to India to look at how we can cooperate with the government of India on a range of other industries, including manufacturing companies. There is commitment from the Indian government to support this initiative and also provide financing to catalyse this cooperation. So we spoke to a couple of Indian company leaders about the possibility of setting up an IT (Information Technology) park, for example, which will help unlock the potential we have, especially from a knowledge basis. We also looked at manufacturing opportunities to see if we can bring one of them to assemble agricultural equipment in Lesotho. We are also looking at how we can engage the Indian government to access the line of credit that is being made available to Lesotho to build entrepreneurship, for example, and to also provide financing for Basotho-owned start-ups that just require capital to begin with.
We are also looking at how we can attract new investment and to consolidate, or build on what we have already achieved in as far as the automotive component is concerned. We believe that we will be able to secure national investment in that regard. But the biggest and most ambitious programme, I believe, that we are pursuing right now in as far as investment and infrastructure is concerned, is what we want to do in Butha-Buthe, where we will build the first special economic zone for Lesotho. We believe that we have the potential to build a state-of-the-art facility that will put Lesotho up there with the best in the world. And then we will try and make sure that we bring the heavy industry to Lesotho. We want to build manufacturing investment that will change the face of our economy. So that’s what we are doing in Butha-Buthe. We also recently went to Malta as part of the delegation of the Right Honourable Prime Minister, to engage with the Commonwealth business fraternity and see how we can interest potential investment. I don’t think the average person on the street today knows that for every Ford Ranger Wildcat vehicle you see on the road in Lesotho and South Africa, their seats are made in Lesotho. I don’t think anyone is aware that we manufacture 20, 000 BIC pens per day here. If we had started educating and enlightening people about that, you would see positive change towards buying and supporting locally produced products.
LT: So when are you starting the awareness campaign?
Setipa: What we are doing now is first build the database of everything produced here. And then we will launch our campaign. I am hoping before the end of the first quarter, which is before the end of March next year, we would have launched it.
LT: And the IT hub; where is it going to be established?
Setipa: We want to put it next to Maseru Mall. Yesterday (Monday this week) I participated at the launch of the Vodacom Innovation Park, which I believe is a commendable development on the part of Vodacom. We need to build more on that. We also want to use that hub to basically launch the Lesotho call-centre industry, providing all the resources we need for running the call-centre. We are in negotiations with our partners overseas who are going to work with us in building the hub, together with the LNDC and Ministry of Communications. It is going to cost us between US$28 million and US$38 million.
LT: We heard about an Independent Advisory Committee you want to establish for your ministry. Could you tell us about it?
Setipa: One of the challenges that betrayed every trade minister in this town in the last 15 to 20 years, was how do you encourage and facilitate the localisation of the textile-improving industry? How do you get Basotho into this industry beyond just providing basic skills? And I realised that it’s not an easy thing for us. We tried a number of ideas but none of them seemed to work. So I thought why not put together a small group, and that group will have the mandate to work for about three months. In those three months, I expect them to come back with recommendations that we could look at implementing that will help us achieve that. In that group, I will have someone from the bank, somebody from the industry in terms of foreign investors and another one being a Mosotho investor, somebody from the LRA (Lesotho Revenue Authority), the ministry and LNDC. So those are the people who will form the core of that initiative.
LT: How true is it that former finance minister, Dr Timothy Thahane, is earmarked to chair this committee?
Setipa: He is one of the people I am thinking of requesting for their support. I can’t say he is in because the process has not been concluded.
LT: We also heard about a transport initiative introduced by a Maputsoe textile factory by the name of Jonsson. We also hear that government is involved in this. What is this all about?
Setipa: Jonsson employs about 4000 people, I think, in Maputsoe. It has 10 or so factories in Maputsoe. One of the challenges they face, like most companies, is that they cannot run, for example, three shifts a day because their workers live far away from the firm. So, as a demonstration of their commitment to Lesotho, they have decided to build a campus, basically, at the cost of M100 million. That campus will include living facilities for staff while also consolidating all Jonsson factories under one roof. We hope it will change the face of the manufacturing industry in Lesotho and also set an example to other companies about what a committed investor can do. That project has already been presented before cabinet which loved it and approved it. We are hoping to start it within the first quarter next year. At the end of the day, it is not government’s obligation to provide transport to workers, but where there is a possibility to provide that high level of support by any company, we will encourage them and see how best we can assist.
LT: Lastly, there are concerns over the renewal of the African Growth and Opportunity Act (AGOA), which provides a platform for African countries, including Lesotho, to export their products to the US duty-free, thereby allowing those countries to grow. Some people have raised concern that due to the prevailing unstable political environment in Lesotho, the country could be struck off from the list of beneficiaries of the legislation and leave over 35 000 textile factory workers jobless, since Lesotho mostly benefits from the Act through its textile industry. Can you reassure Basotho that this will not be the case?
Setipa: I am at a loss because I don’t think those who say that know what AGOA is all about. Those are the people who want to impose conditions that are simply not there. I mean, AGOA was renewed for 10 years but even after the renewal, there was a review, the way it happens every year, of Lesotho’s continued eligibility. That review was done by the US Congress and Lesotho passed. So Lesotho continues to enjoy the benefits of AGOA. There is absolutely no need for us to worry about AGOA, we have had so many meetings in the US about AGOA. We are going to the WTO (Word Trade Organisation) summit next week where I will be chairing and negotiating on behalf of African trade ministers in that forum. We are going to discuss a whole lot of issues, including the future of AGOA, and how we can ensure that our bilateral relations will not be undermined by the WTO process.