Nov. 2, 2022


3 min read

Broke govt, a challenge for new Matekane

Broke govt, a challenge for new Matekane

The new Prime Minister, Sam Matekane

Story highlights

    SACU revenue projected to decline by 22 percent
    RFP-led government has to double efforts in order to deliver

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WHILE Lesotho’s economy has been in recession for the past few years, coupled with a continuous increase in public spending, the country is well on its way to losing even more revenue from Southern African Customs Union (SACU) coffers this year.

Income from the regional body is projected to decline by 22 percent, putting more pressure on an already muted public purse.

SACU is intended to promote the integration of its five member states, Lesotho, South Africa, Botswana, Namibia, and Eswatini into the global economy through enhanced trade and investment as well as facilitate the equitable sharing of revenue arising from customs, excise, and additional duties levied by members. 

The decline in SACU, as one of the country’s main sources of revenue, is likely to affect its financial position and this could lead to increased levels of borrowing, despite an already high public debt.

 Lesotho’s pubic spending has increased over the last few years and reached 65 percent of GDP in this financial year according to reports.

Today, 86 percent of the country’s national budget is absorbed by government consumption, particularly through public wages that are estimated at 32 percent of the GDP.

The economy is largely driven by government spending which itself depends on debt to finance public investment. The inability of the private sector to play its part in creating employment has led to a situation whereby the public sector has become a critical source of employment for the people.

This scenario, therefore, means the new government will have to work twice as hard in an effort to stabilise the economy and source funding for government projects going forward.

The RFP-led government will have to dig deep into its pockets in order to deliver all its promises to the nation.

In his inauguration speech on Friday last week, the new Prime Minister Sam Matekane welcomed the challenges that lie ahead, admitting, however, that the journey is not going to be easy.

Among the challenges, and despite the continuous decline in revenues, Matekane bemoaned the fact that the public sector itself does not have a dependable income, a situation that he said is likely to worsen, going forward.

Sadly, he added, even the high spending in the public sector has not translated into satisfactory performance and high productivity.

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“Ours is all in all a very unsustainable model of economic growth, additionally, the manner in which we spend the little resources that we have also leaves a lot to be desired. Our capital budget is a tiny 27 percent of the total budget compared to the whopping 73 percent in the recurrent budget,” he said.

In real numbers, Lesotho spends only 6.7 billion a year on its development agenda and 18 billion on consumption, largely wages, and this, according to the PM is not a good investment model.

He said his government maintains a strong commitment to private investment and is generally open to foreign direct investment.

The government welcomes foreign direct investment (FDI) that creates jobs and opens new markets and industries in accordance with the national objective of diversifying Lesotho’s industrial base.


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