Budget Speech to the Parliament of the Kingdom of Lesotho for the 2020/21 Fiscal Year “Inter-ministerial collaboration, multi-disciplinary approaches and subsidiarity to tackle poverty, malnutrition, and joblessness focusing on service delivery at the local level”

Mr Speaker,

Allow me to pay my respects to you and through you to: His Majesty King Letsie III and Head of State

The Right Honourable the Prime Minister and Head of Government The Honourable President of the Senate

The Chief Justice and Judges of the High Court

The Honourable Deputy Prime Minister and Leader of the House My Colleagues, Honourable Ministers of His Majesty’s Government Honourable Members of both Houses of Parliament

Their Excellencies, Heads of Diplomatic Missions and International Organisations present here

Distinguished members of the Media

The entire Basotho nation here in Lesotho and abroad Ladies and Gentlemen

Introduction

Mr Speaker, this 2020/21 Budget marks the fourth Budget of this Coalition Government and paves way for the election in 2022. I am honoured to once again stand before this honourable House to present estimates for the coming fiscal year.

Mr. Speaker, for the past three years, this Administration has been leading an effort to rebuild our economy within very challenging economic and fiscal conditions, but on many occasions where our country has been under distress, it has demonstrated overwhelming resilience. When we took Office in June 2017, we inherited a financial and economic crisis characterised by depleted international reserves and slow structural growth. At the time, we assumed that the problem was merely cyclical and would soon disappear, but it has persisted and now we fully comprehend that our woes emanate in part from factors we have control over. Persistent economic slowdown in South Africa, slow growth of our exports and volatility of SACU revenues—none of which Lesotho has control over--have negatively impacted our economy. The domestic and external reserves cushion—which Lesotho has control over were already depleted in 2017, and thus provided little policy cover to absorb the external shocks.

Mr. Speaker, the mandate of this Coalition Government remains clear; to provide the citizens with an honest, clean, transparent and effective administration; revitalise an economy after several years of economic stagnation; implement an innovative approach to accelerating investment and job creation; and repair the fiscal accounts, which were seriously damaged by wasteful expenditure. We were also mandated by the people to regenerate confidence and trust in the management of the country’s fiscus.

At this stage, I would like to share with this Honourable House our report on the performance of the budget adopted at the end of March 2019.

Some results achieved from the 2019/2020 budget

Mr. Speaker, the Ministry of Finance has appointed the Public Procurement Tribunal that will addresses grievances from unsuccessful bidders, in a timely and less costly manner, compared to the traditional court system, thus leading to faster resolution of procurement disputes. This will also aid in creating transparency and accountability, thus creating a favourable environment for efficient private sector participation in the economy.

In an endeavour to enhance government revenue, the following bills have been tabled before the National Assembly: Tax Administration Bill, VAT Bill, Income Tax Bill and Customs Bill. VAT rate has also been standardized. Furthermore, oil levy has been revised from 80 Lisente to 110 Lisente for the period 2019/20. Mr. Speaker, the Bill on the introduction of 15 percent and 30 percent levies on alcohol and tobacco products is also in its final stages of preparation for tabling before Parliament. The policy on of unlimited telephone expenses was repealed by Circular 1 of 2018. Loans have been eliminated and government cannot pay an MPs.

Mr. Speaker, a year ago, we pronounced the need for ministries to review their fees and charges in order to keep them in line with the principle of annual cost recovery. The Ministries of Water, Home-Affairs, and Agriculture and Food Security

have reviewed fees and fines and are now poised to maintain cost parity. The Ministries of Water, of Home-Affairs, and of Agriculture and Food Security have reviewed fees and fines and are now poised to maintain cost parity. The Ministry of Police is presently working on legislation to review all its outdated fees and fines.

Mr Speaker, I can also confirm that Cabinet has approved that MPs loans be eliminated, and that Government should under no circumstances settle these loans. I can also confirm that ministers fly business class, whereas they used to fly first class. Expensive SUV vehicles for ministers and judges have been replaced with more cost-effective diesel Prado vehicles as well as diesel sedans.

Mr. Speaker, let me take this moment to also inform the House that the Ministry is exploring the possibility of introducing Mid-Year Budget Review that will be used to track progress on the policies outlined in the budget speech and also as an additional tool to improve budget transparency and allocative efficiency.

I now turn to the 2020/21 budget proposals, by first laying out the global, regional and domestic economic and financial contexts and summarising policies and financial proposals.

Global and regional macroeconomic developments

Mr Speaker, as a small and open economy, Lesotho is not divorced from developments in the global economy. The growth uptick in 2017, began to slowdown in late 2018. A great deal has changed: US-China trade tensions have escalated together with geopolitical tensions that have created and sustained volatility in world oil prices. markets. Credit conditions have tightened. Taken together, these factors have contributed to significantly weaker global expansion. The International Monetary Fund (IMF) has lowered its 2019 growth forecasts to 2.9 percent from an earlier forecast that saw growth exceeding 3 percent. Things could however pick up somewhat with global growth projected at 3.3 percent in 2020 and 3.4 percent in 2021. However, these rosy forecasts depend entirely on the extent to which the US and China will be able to resolve their trade tensions. The impact of the Novel Coronavirus is now an added risk which pundits are yet to accurately predict.

Growth in sub-Saharan Africa will strengthen to 3.5 percent in 2020 from an estimated 3 percent. Prevailing structural constrains and deteriorating public finances which tend to hold back business confidence and private investment in South Africa is expected to dampen these forecasts in the near term. And in turn have a knock-on effect on the entire SACU region, but more so on Lesotho given its close links with the neighbour.

Mr Speaker, I share these realities with this House, so that our economic turmoil or success is best understood in the wider global and regional contexts.Domestic economic developments and outlook

Mr Speaker, as I now turn to domestic economic developments and outlook, allow me to remind the entire Basotho Nation and the Honourable House that in 2000, the country participated in a National Dialogue where more than 5 hundred stakeholders from different sectors of the economy put their heads together to form a vision which we called “Vision 2020”. The Vision stated that “By the year 2020, Lesotho shall be a stable democracy, a united and prosperous nation at peace with itself and its neighbours. It shall have a healthy and well-developed human resource base. Its economy will be strong, its environment well managed and its technology well established”

Mr Speaker, this leap year 2020 is the test date for our vision. The Ministry of Development Planning should quickly undertake an assessment of our performance on this long-term goal. That said, Mr Speaker, it is anecdotally evident that we have not reached our lofty goals. Indeed, the purpose of this budget is to try to move the needle in all the goals of that powerful vision. Political stability remains in question; half of our people are poor and hungry; and nearly 2 in 5 children do not have the nutrition they need to achieve required body and cognitive growth.

Mr Speaker, as already indicated, Lesotho remains a poor and fragile country. Before I lay out Government’s plans, I would like to talk to my colleagues in this house so that we all understand in full the development challenges that face us. Poverty fell from 57 percent in 2002—3 in 5 people—to 50 percent in 2017—a 7 percent drop, but it took 15 years to achieve that modest goal; and the poverty level is still very high. It is important to note that while nearly 50,000 people escaped poverty in this period, it changed very little in the rural mountain areas over this same period. Nearly 800,000 people live in the rural areas and this is the population that must increasingly be targeted by this and future budgets. According to recent reports, more than 500,000 people in ten districts are now severely food insecure, 30 percent of which are in the rural areas and 13 percent in the urban areas. This represents an increase of more than 64 percent from last year. The areas that are hardest hit are Mosalemane, Thaba Putsoa, Makhaleng, ‘Maliepetsane, Qaqatu, Ketane, Hloahloeng, Thaba Moea, Semena, Mashai, and Senqu.

Education and skills development, formal jobs, and mining remittances explain the decline in poverty in urban areas. But to decisively target poverty in the rural areas, government must target delivery of basic road infrastructure, early childhood development, provision of schools and clinics and the raising of both education and health outcomes in these areas and provision of electricity to all rural schools and clinics.

Mr Speaker, Honourable Members; poverty comes with other very important deprivations. It is not by accident that our Majesty is the African Union’s Ambassador for Nutrition, World Bank’s Champion for Human Capital, and Special Ambassador of FAO on Nutrition. It is because Lesotho suffers high incidences of stunting; nearly 2 in 5 children under 5 years of age are stunted, which means they suffer retarded growth and development as a result of both prenatal and postnatal mother-child malnutrition. This also means that such children will perform poorly in school and will never be able to participate fully in the economy. Mokhotlong (43.3 percent), Thaba Tseka (43.3 percent), Mohale’s Hoek (36.7 percent) and Berea (37.8 percent) are the districts that are most affected. Most importantly, these are the same areas that are also affected severely by poverty.

To understand fully the impacts of malnutrition and learn best practices in the region his Majesty, in his capacity as the Nutrition Champion hosted a nutrition conference in early 2019. Two key outcomes of the conference were:

. The first 1000 days of child’s life are most critical for a healthy and knowledgeable life;

. Fighting malnutrition requires a multi-disciplinary approach, inter- ministerial collaboration and subsidiarity.

Mr Speaker, the key message to the Honourable House is that the Government of Lesotho will not achieve much by continuing to work in the traditional manner of silos and centralised power.

The house is also invited to note that the economic performance for 2019/20 was marked by weak recovery following disappointing growth in 2018/19. Economic growth for 2019/20 is estimated at 1.4 percent. This poor growth is attributed to poor performance in all sectors of the economy, particularly the manufacturing sub- sector, which recorded slower growth of 7.6 percent against strong growth of 12.4 percent in 2018/19. On the other hand, external demand conditions remain less encouraging for diamond exports following growth of synthetic diamonds coupled with poor US-China trade relations (Our diamonds are auctioned in Belgium, cut and polished in India and sold to China for further processing. The US is the major consumer).

Mr Speaker, as at December 2019, headline inflation as reported by the Bureau of Statistics, was estimated at 4.8 percent, reflecting 0.2 percentage points increase from the observed November 2019 rate. This increase in overall prices was specifically observed on Food and Non-Alcoholic Beverages which grew by 7.4 percent, followed by Clothing and Footwear at 4.4 percent. The 2020/21 inflation outlook is expected to remain roughly unchanged as food prices continue to dictate the medium-term price changes.

Regarding the official international reserves, the level of reserves remained 5 within the margins of 4 months of import cover and are expected to remain well above 3 months of import cover over the medium-term, with modest improvement during 2020/21 due to the expected increase in SACU transfers.

Turning now to the external sector, our balance of payments remains vulnerable to external shocks. Over the past two years, the current account deficit has declined as a result of improved diamond exports and the primary income account. In 2020/21, SACU receipts are set to recover by about 44.3 percent relative to the 2019/20 receipts. The current account position is therefore expected toimprove further. With the emergence of medical cannabis expected to boost job creation and the exports earnings in the short to medium-term.

The Government Sector

For the 2020/21 fiscal year, total revenue is expected to increase to 53.5 percent of GDP following stronger than expected SACU revenue shares, coupled with growth of VAT. SACU revenues shares for Lesotho are expected to total M8.9 billion against a projected M6.53 billion. VAT growth of 7.2 percent will result from additional 3 percent VAT on telecommunications. However, the grant component of our revenue is projected to drop to M1 billion against M1.2 billion received in 2019/20.

Mr Speaker, against these forecast in revenues we expect total expenditure to increase to 58.1 percent of GDP or M22 billion. Once again, we expect the general Government wage bill to drive total spending.

Sectoral policies and actions

Mr Speaker, having developed the second National Strategic Development Plan (NSDP II), which emphasises private sector development and pursuing sustainable inclusive growth, the Government is identifying the investments that will create jobs needed for Basotho. More than 77 bankable projects have been identified from the private sector with a total investment of M20 billion and more than 30 thousand jobs.

In 2019, Lesotho undertook a Voluntary National Review (VNR) as a mechanism for national introspection to assess progress, identify development gaps and priority areas where strategic interventions are required. The review revealed that notable progress has been made in integrating Sustainable Development Goals (SDGs) into national plans and policies. The main challenges that remain are effective operationalisation of the frameworks and reaching the bottom 40 percent (poorest and poor), as this agenda calls for leaving no one behind and reaching furthest first.

Mr Speaker, this shows that despite Lesotho registering moderate economic growth between 2010 and 2016 and having a relatively good social protection system in Africa, poverty levels (49.8 percent), unemployment (25.3 percent) and inequality are high. For these reasons, the government has prioritised combatting poverty the key priority and to address the underlying issues that are reflected in other SDGs. It also recognises the need to pay special attention to the most vulnerable groups including women, children youth, elderly and people living with disability as well as closing rural – urban disparities.

During the year 2020/21, the Government will conduct the Lesotho Demographic Survey (LDS) and an Agricultural Census. The LDS is conducted five years after the decennial census to update the census information and inform the Government on the immediate interventions needed on emerging issues. With the Government having identified agriculture as a pillar of economic growth, the Agricultural Census will provide data on the structure of agriculture in the country; for policy formulation, development planning as well as monitoring and evaluation.  With the Government having identified agriculture as a pillar of economic growth, the Agricultural Census will provide data on the structure of agriculture in the country for policy formulation, development planning as well as monitoring and evaluation. The data will be used to benchmark and improve crop and livestock statistics.

Investment Support

Mr Speaker, in an endeavour to improve the investment climate and reduce the cost of doing business in the country, the Ministry of Trade and Industry has enacted Business Licensing and Registration Act No. 3 of 2019, which will make it easier to start a business. The Act aims at introducing risk-based business licensing and flexible business regulation. Under this law, businesses will be licensed depending on the risk they pose to public health or safety, national security or environment protection. The law prescribes a licensing procedure that is simple, short, cost effective and responsive to the needs of the business operator. E- licensing and e-regulations system has been launched which will further improve the ease of starting a business, in that, application for a trader’s license and company registration will be done on-line.

The Ministry will also launch the Lesotho Standards Institution with staff recruited during the fiscal year and a dedicated building coming thereafter. The institution will promote domestic investment and exports by providing assurances on the quality of goods produced in Lesotho.

The procurement process for review and updating of investment policy and the MSME policy and development of associated legal frameworks has commenced and the task will be completed within 8 calendar months.The Government has developed a microfinance programme and preparations for implementation of the programme are at an advanced stage. The program is expected to create a vibrant and sustainable scheme that will increase access to quality and comprehensive products and services by economically active groups and individual MSMEs. The intervention will also strengthen capacity of various role players within the financial sector market system in Lesotho.

Mr Speaker, to address skills and jobs mismatch, the Government has developed an apprentice strategy with the assistance of the African Development Bank (AfDB). In order to operationalise the strategy, a tripartite Memorandum of Understanding (MoU) intended to facilitate establishment of a tripartite organization between Government, Institutions of Higher Learning and the Private Sector was signed by the three Parties in July 2019. A proposal for implementation of the Lesotho apprenticeship Strategy has been approved by AfDB for funding. The funding will facilitate implementation of the recommendations of the apprenticeship strategy and in particular, establishment of a dual-study program whereby the graduates of institutions of higher learning are sufficiently exposed to industry and business practices to match the needs of the market and/or can relatively easily go into self-employment and/or business.

The Government through the Private Sector Competitiveness and Economic Diversification Project has completed an Institutional Review of LNDC in order to improve the organization’s operational efficiency. The new LNDC structure has 3 strategic business units namely, Trade and Investment Promotion, Development Finance and Property Development, and supporting unit – Corporate Services. All General Managers have been recruited and a new strategic plan is under implementation. The strategic, functional and institutional reforms were designed to equip the LNDC to fulfil its mandate to initiate, promote and facilitate the development of manufacturing and processing industries, mining and commerce in a manner calculated to raise the level of income and employment in Lesotho.

Mr Speaker, the Government is working with the AfDB to undertake an institutional review of the Basotho Enterprise Development Corporation (BEDCO) and the Lesotho Tourism Development Corporation (LTDC) to establish whether the current structures of the two parastatals are fit for purpose as institutions operating in a highly competitive global environment and to reposition the two organisations to remain relevant and competent. Work on the institutional review has commenced while the procurement process for strategic review of LTDC is at an advanced stage.

Working with the AfDB financed Economic Diversification Support Project (EDSP), the Government has launched a Business Plan Competition (BPC) which complements the existing LRA-Standard Bank- BEDCO “Bacha Entrepreneurship Project”. The aim of BPC is to offer a comprehensive solution to the issue ofinaccessibility to finance and enterprise development support faced by Basotho start-ups and entrepreneurs with a clear goal to filter the best entrepreneurs with the most viable business plans that can make a marked difference in the Lesotho economy. The Competition combines four main success pillars for entrepreneurship, which are access to finance, business development services, technical assistance and mentorship to ensure a holistic approach to tackle the major challenges facing entrepreneurship ecosystem in Lesotho. The BPC portal has also launched and made accessible to key stakeholders including BEDCO, Administration, Technical Training Team, BEDCO Steering Committee and Adjudication Panel. To date, 146 applications have been received for review and the selection will be completed by April 2020.

Mr Speaker, to tackle youth unemployment, the Government is partnering with the World Bank to facilitate establishment of a Jobs Platform with specific focus on Entrepreneurship and youth employment. The initiative has three  mutually reinforcing pillars, namely: improving the business environment by accelerating business environment reforms, increasing market contestability, efficiency and equity, improving governance and transparency, deepening financial markets intermediation, and facilitating investment in infrastructure through PPPs; expanding the entrepreneurship ecosystem through, inter alia, direct support to entrepreneurs, broadening and deepening access to finance, strengthening value chain solutions for job in priority sectors, and creating business opportunities through digital platforms; and improving employability through skills development, mindset change, business development support, business incubation and smart intermediation services. The platform is expected to strengthen coordination and collaboration among ecosystem players thereby creating an enabling environment for competitiveness and job creation.

The Government continues to support the Lesotho Enterprise Assistance Program (LEAP). LEAP is a matching grant scheme launched by the Government of Lesotho with IDA/World Bank to help Basotho private companies and business associations to improve their competitiveness in domestic and export markets. The programme has to date been receiving a positive response from the private sector, considering the limited number of direct business development services available for private sector in the country. The number of applications received since the inception of the program has been increasing with 285 applications approved. The streamlined application processes also continue to ease processing of applications, thus reducing time taken from receipt of an application to its approval. The rate of disbursement has also been cumulatively increasing from M 2.8 million in December 2017 to M4.6 to million in December 2019.

Lesotho has ranked well across several World Bank Ease of Doing Business measures including starting a business, getting credit and trading across borders and this performance is expected to improve due to several interventions the Government is implementing through the Private Sector Competitiveness and Economic Diversification Project.

Mr Speaker, on Trading across borders, Lesotho currently ranks 40 out of 190 countries. Significant progress has been made in upgrading the Customs Management System–ASYCUDA. In addition, implementation of the LRA-SARS connectivity solution is at an advanced stage and procurement process for development of a Lesotho National Single Phase to connect LRA with other border agencies has been launched. Work on the single phase will be completed within a period of 12 calendar months.

Lesotho currently ranks 94 on Getting Credit and this performance  is expected to improve further with the development of credit scoring system and enactment of the Security Interest in Moveable Property Bill.

With regard to starting a Business, the Business Registration, Licensing and Inspection Reform is progressing well with licensing regime in place to make it less cumbersome, more transparent and predictable. As part of the initiatives to simplify the starting a business procedure in Lesotho, a reform of the inspection regime for traders’ licenses was introduced whereby a health certificate is no longer a requirement to obtain a traders’ license for most businesses it is required only for activities with potential public health or environment Consequently, the business creation process got shortened by 14 days (currently 0 days, from 14 previously). As a result of this reform, Lesotho improved by 35 positions on starting a business indicator and now ranks 84 amongst 190 economies in the 2020 Doing Business report rendering the country a Top Reformer on Starting a Business. Operationalization of the Business Licensing and Registration Act of 2019 is expected to further improve Lesotho’s performance on stating a business.

Mr Speaker, in order to support the drive to facilitate better access to finance for local private sector, the LNDC has developed financial instruments to address specific and peculiar needs of small to medium enterprises in manufacturing, agriculture and agro-processing, mining and quarrying as well as tourism. These instruments have been completed and will be launched and availed to the private sector during the year 2020 to address financing gaps in the preparation of private sector projects all the way to bankability. These are mostly projects that are aligned with the National Strategic Development Plans and have been gone through the Government of Lesotho Economic Labs programme. Other financial instruments will cover growth capital for fast growing SMMEs, specialized equipment and cash-flow risk for manufacturers and the commercial farming community, especially those geared towards exports or import substitution.

Allocations to Investment Ministries

Mr Speaker, at this stage I would like to turn to sectoral policies and budget proposals. The total expenditure proposal for 2020/21 amounts to M21.9 billion, of which M15.7 billion accounts for Recurrent Expenditure and M6.3 billion accounts for Government Capital Expenditure. The proposed Total Revenue amounts to M20.2 billion, of which M7.9 billion represents tax revenue, M1.1 billion represents grants, M2.1 billion represents non-tax revenue and M8.9 billion represents SACU revenue shares. These proposals result in a deficit of M1.8 billion, representing a deficit of 4.7 percent of GDP. The Heads of expenditure are too numerous to mention them all, but we have attached tables to the printed copies of this Budget Speech, which provide details on allocations by Head and Item.

Trade and industry

Mr Speaker, the Lesotho National Development Corporation (LNDC) continued with its efforts to support the industrialisation policy of the Government of Lesotho. In   the   last   financial   2019/2020,   LNDC   launched   the   construction   Tikoe   III infrastructure  and  factory  shells  in  Maseru.  The  investment,  to  the  tune  of  M450 million, entails the construction of roads, water treatment plant, and factory shells with  a  capacity  to  accommodate  about  3,000  workers  in  manufacturing  and processing. The project is expected to be completed at the end of next year in 2021.

The LNDC is also accelerating the construction of the M800 million Phase I of the Belo infrastructure and factory shells launched in 2018 and is expected to be completed by the end of this year. Upon completion of Phase I, the Belo Industrial Estate will create just over 14,000 jobs in manufacturing and processing. For both Tikoe and Belo, LNDC is already working on designing a package to invite the private sector to invest and build factory shells in the phases of the next phases of these developments.

Mr Speaker, in partnership with the private sector, the LNDC is conducting a range of studies for the development and operation of the first Special Economic Zone (SEZ) in Lesotho with pharmaceutical and cannabis hub, light engineering, and an agro-industrial zone in the district of Mafeteng. This will also mark the first public private partnership in the design, development and operation of SEZs in Lesotho. By the end of this year, some of the private investments are expected to flow into some the specialized hubs within the SEZ.

In the district of Berea, the Corporation will embark on feasibility and design studies for Public Private Partnership in the development and operation of a Special Economic Zone (SEZ) anchored primarily on agro-processing. The LNDC will also finalise its studies on the planned factory estates in TY which shall accommodate a diverse set of investments.

The Corporation has continued to attract new and expansion investments in the areas of non-textile manufacturing, particularly light engineering and automotive components, though limited factory space poses major constraints in conversion of

these opportunities.

In partnership with the private sector, the Corporation has launched a M405 million industrial hemp and super foods project in Qeme, Maseru this year that is expected to be rolled-out over a 3-year period. The project will create thousands of decent jobs from cultivating and processing of food and pharmaceutical products.

Mr Speaker, last year, the Corporation also embarked on extensive investment promotion activities, and undertook several detailed commercial feasibility studies and business plans with private partners in the areas of livestock, grains, horticulture, and aquaculture. Some of these projects are going for implementation this fiscal year, covering Butha Buthe (Muela) down to Mafeteng.

Continued Reforms and Localisation of the Wool and Mohair Industry

Mr Speaker, the Government of Lesotho recognises the importance of the wool and mohair industry and as a result has invested more than M400 million to improve economic and climatic resilience of the industry. Lesotho has 4 million small stock on approximately 1.8 million hectares of rangeland. The commercial industry is estimated at about M900 million, but government recognises that this value could be increased by carefully selected interventions and investments. Government also recognises that less than half of the sale value of wool and mohair goes to the farmers, with intermediaries benefitting more than our people who produce the wool and mohair.

The investment by government entails the following actions: Sustainable management of rangeland working with grazing associations, which themselves are being empowered for better management; promulgating legislation to strengthen control over the country’s rangelands; diffusing rangeland and animal knowledge amongst the farmers and their associations with a view to improve overall management of the industry—sentinel sites have been selected on which rangeland health statistics are being sampled and collected; and advocating for improved breeds and fibre quality including through supplementary subsidised feeding for better nutrition, expanded local fodder production, infusion of improved ram and ewe breeds into the farmers stocks—the first auctions of improved rams and ewes took place last month and this program will be scaled-up significantly during the coming fiscal year.

Mr Speaker, a culling and exchange program in which one improved ram is exchanged for four healthy small stock is being implemented and will be scaled up during the fiscal year. Under this program, 87 Lesotho-bred rams have been introduced in exchange for over 340 animals removed from the rangeland. Mr Speaker, Government has legislated the localisation of the sale of wool and mohair in Lesotho to international markets. The first historic cycle, the 2018/19 season of wool and mohair localisation, has been completed. This noble action has not gone

without challenges. It has been received with mixed reactions from the stakeholders, some of which called for some amendments to be made in the wool and mohair regulations to enable a smooth business environment in this sub-sector. About 49,000 wool and mohair farmers’ fibre was handled and auctioned, yielding M410 million, which represented half of the national clip. It is worth mentioning that the localisation of the sale of wool and mohair has resulted in generation of 110 permanent jobs.

Mr Speaker, you will recall that in the previous years, there used to be only one licensed wool and mohair broker and auctioneer. However, under the revised legislation, more brokers and auctioneers have been licensed, resulting in more market channels and more auctions taking place. There has been a great support from mohair buyers in South Africa who have been in Lesotho to evaluate and buy Lesotho’s mohair. More brokers are now investing in the sector to increase capacities.

Mr, Speaker, I am pleased to announce that Government on 18th February 2020 decided to take responsibility to pay about 1,000 farmers that Maseru Dawning had failed to pay on time. Payment of farmers will begin tomorrow, Thursday. Government also decided to undertake a special study to understand the policy, technical, implementation and financial challenges that beset the localisation policy. Following this study and consultation with all stakeholders, Government will modify the localisation policy to cater for the smooth running of the industry and to ensure that farmers get the large of the efforts.

Mining

The discovery and the quantification of mineral resources define and drive the country’s mining potential. Minerals exploration is therefore an essential prerequisite to the development of mineral industry. However, lack of geological and geospatial information is a major constraint on Lesotho’s ability to maximise its potential for exploration of mineral resources. During the 2019/20 fiscal year, the Ministry of Mining managed to collect 125 samples for anomaly area number 7 in the Mohale’s Hoek district for verification of previous results.

Mr Speaker, the mining revenue target for the 2019/20 budget year was estimated at M529.5 million, well below the 2018/19 collection of M627 million. Surprisingly, for the first nine months of the fiscal year, only M269.9 million (43 percent) had been collected. This is a result of several unavoidable factors, which negatively impacted on global market prices for diamonds. The total diamond production for January to December 2019 was at 1,104,215 carats, compared to 1,300,000 carats in 2018. This 15 percent decrease is mainly due to a two-month power disruption at the Liqhobong mine.

Tourism and creative industries

Mr Speaker, since February 2019, the Ministry of Tourism, Environment and Culture has been reorganising internally and re-organising its budget priorities to deliver on its primary economic mandate. The 2020/21 budget will see completion of the new National Museum and Semonkong Tourist Information Centre. In the upcoming 3-year medium term budget framework, emphasis will be moved away from large capital investments and begin to focus on greater marketing of the country to stimulate tourist numbers, particularly from South Africa and the SADC region as well as micro interventions in the 1 Million to 5 Million Maloti range. This is intended to stimulate participation, visibility and the economic viability of music, film and television, fashion, theatre as well as arts and crafts.

The Sehlabathebe National Park and its full integration into the Trans-frontier Conservation Area will receive priority as well as the enactment of legislation to reduce the use of plastics and protect biodiversity. The Ministry is committed to a comprehensive and sustained programme of enforcement of new and existing environmental legislation. The deployment of young people under the Graduate Programme will be utilized to create an inspectorate and compliance unit. Revised revenue estimates for 2020/21 include substantial increases in fines for companies and individual that break environmental laws. Our commitment to cleaning up Lesotho is a serious one.

Mr Speaker, in order to promote and protect authors and artists, the Copyright Society has been established and was launched this month. Respect for copyrights encourages dissemination of knowledge and rewards creators and their publishers.

The review and updating of the tourism policy have been completed and the tourism masterplan has also been developed to facilitate investment within the tourism and hospitality sector. As part of implementation of the tourism policy, the Government has undertaken detailed feasibility studies for investment in the tourism and hospitality sector in key locations, including, inter alia: Sani Top Equestrian and Ski Resort; Semonkong Waterfalls Resort; Lets’a -la –Letsie Adventure Resort; Katse Tourism Village; and Maseru City Tour Route.

The next step is to organise an investment forum for presentation of the findings of various feasibility studies and value chain analysis studies. To increase private sector participation in the economy, the Ministry is about to complete competitive procurement process to concession out three existing tourism facilities to private operators. The three facilities are Liphofung, Bokong and Sani Pass.

Agriculture, food production, and climate change

Mr Speaker, Agriculture is generally viewed as the mainstay of economic growth and development, more especially due to its potential in creating employment to more than 70 percent of the rural poor women and youth as indicated in the NSDP II. Unfortunately, the sector is also highly prone to adverse climatic conditions that we have experienced in recent years. Food production declined by an alarming 76 percent between 2018 and 2019 as a result of unfavourable weather conditions, particularly drought. Maize production declined from 110,000 tonnes in 2018 to 35,000 tonnes in 2019.    Similarly, sorghum production declined from 40,000 tonnes in 2018 to 1,000 tonnes in 2019. Planting of the 2020 cereal crops to be harvested from April 2020 started in October 2019. However, at the start of the cropping season, rainfall amounts were below average and temperatures higher than normal. Weather forecasts for the period December 2019 to March2020 indicate a higher likelihood of below-average rainfall, which further creases the likelihood of reduced harvest in 2020. Consequently, the 2019/20 total cereal imports are estimated at 272,000 tonnes, of which maize imports are 150,000 tonnes and 90,000 are wheat imports. As part of the policy to commercialise agriculture and insulate against climate change, Government is implementing Smallholder Agricultural Development Program, which aims to support farm production, marketing of produce and insulating farmers against climate change events through financial grants. 121 More grants amounting to M37 million were recently awarded to deserving farmers, while a study on irrigation masterplan and investment framework has been commissioned.

The Ministry is aware of the vulnerability of farmers to extreme climate change shocks and efforts are under way to promote Climate Smart Agricultural Practices such as irrigated crop production, protected agriculture, Conservation Agriculture and encouraging smallholder farmers to diversify into short cycled livestock production such as poultry and piggery. At the national level, Government is undertaking studies to design an irrigation masterplan and investment framework and the results will be published in the coming months.

Mr Speaker, on marketing and off-take arrangements, the Ministry of Small Business Development, Cooperatives and Marketing in its efforts to facilitate marketing of the Kingdom’s produce focuses on agricultural products, particularly vegetables, poultry and piggery, which represent a niche market for Lesotho. Agriculture employs the greater part of the population, yet the sector is faced with a myriad of challenges that include limited access to market infrastructure as well as collection and storage facilities, resulting in post-harvest losses. As a result, the Ministry is in the process of constructing a Northern Region Fruits and Vegetables Fresh Produce Market Centre at Tsikoane in Leribe. The construction of this centre should be completed by the end of the current Fiscal Year. The market centre will serve at least 400 commercial farmers in the Northern Region of the country that is, Mokhotlong, Butha-Buthe, and Leribe. The Ministry is currently in the process of engaging private operators with requisite expertise to run and maintain this market centre. Plans are underway for construction of Southern Regional Fruits and Vegetables Fresh Produce Market Centre in Litšoeneng, Mohale’s Hoek and to build Piggery and Poultry slaughterhouses at Ha Foso in Maseru.

Information and communication

Mr Speaker, to implement phase II of the e-Government infrastructure project, the Government will increase broadband coverage in rural and unserved areas through construction of 48 mobile sites to improve 4G coverage and support the completion of a 96 km Optical Ground Wire (OPGW) fibre network from Roma to Thaba-Tseka to improve the quality of services delivered to mobile data end-users in the Thaba-Tseka district.

Government has expanded access for private radio stations such that they can connect to LNBS transmitters countrywide. Currently, Leribe and Thaba-Tseka have been switched on from the Lancer’s Gap transmitter. More stations will be switched on during the coming Fiscal Year.

Mr Speaker, the road to a paperless parliament has begun. All members of the National Assembly and Senate will receive their tablets to which future House documentation will be directed. In future all information related to House business will be ported from these devices. The Ministry of Communication will soon configure the devices and install required applications. It is hoped that each member of parliament will receive their device at the end of March 2020.

Infrastructure services

Mr Speaker, provision of infrastructure, notably, roads, bridges, electricity, and water are critical for both addressing human development needs (good health and education) as well as catalysing much needed productive investments.

As mentioned in the previous Budget Speeches, infrastructure is still critical to enable investment and must therefore be carefully thought out. To achieve this, Government will, starting in 2020/21, prioritise provision of infrastructure that has the highest potential to increase productivity in key economic sectors in order to drive transformation. M100 million has been set aside to develop advanced infrastructure projects identified through the April 2019 investment laboratory. Arrangements are underway to set up a national Delivery Unit, and to re-engage PEMANDU to support the investment process and train that the Unit’s staff.

Roads and bridges

Mr Speaker, Government is facing a painful challenge regarding road construction. Given that resources are limited, there is never enough funding for new roads and maintenance at the same time. A program of building new roads comes at the expense of maintenance of the existing road network. Maintenance of the existing network comes at the expense of building new roads. To date, Government’s policy has been to build new roads and consequently to underfund road maintenance. The result has been severely damaged roads that will not live up to their designed

lifespan and will cost, it is estimated, no less than M12 billion to rehabilitate the current network. Government is now facing the difficult question of the trade-off between maintenance and new investments in road construction.

While mulling this conundrum, Government is assessing bundling of new road tenders with maintenance plans for whoever wins the tenders. This will ensure that construction companies consider the risks of poor workmanship during construction. For gravel roads, Government is considering introducing the use of perma-zyme bonding materials in the construction of unpaved roads in order to increase their durability and maintenance.

The Ministry of Public Works has introduced the concept of a national orbit, which entails a paved road network around the country across all the 10 districts to promote easier road communication with the attendant human development benefits as well as tourism and agriculture promotion. The missing link in this idea is the Bokong-Katse-Thaba Tseka-Mokhotlong and Thaba Tseka-Matebeng- Sehlabathebe. These roads are at different stages of feasibility and designs. During the financial year, the Ministry of Finance and of Public Works will look at how these orbit concept can be financed.

The construction of Marakabei-Monontša and Mpiti-Sehlabathebe roads is progressing satisfactorily and with more than 200 people presently employed under both projects. More than 35 footbridges were constructed with the assistance of World Bank in Maseru, Leribe, Berea, Mokhotlong, Quthing, Thaba-Tseka and Mafeteng. More and more bridges will be built in the coming fiscal year to ease movement of people across our rivers.

The Ministry of Local Government and Chieftainship is currently rehabilitating and upgrading 46.7 kilometres of roads in Maputsoe, Mohalalitoe and Tšosane- Sekamaneng, which will be completed in the coming Fiscal Year. The current program; whilst construction of rural roads in all districts is ongoing. The Ministry has assessed the status of its road construction equipment and concludes that the machinery is still in good working condition and that shortages of fuel in the past has hampered progress. This budget addresses this limitation.

As part of the need to raise adequate funding for road maintenance, Cabinet approved in 2018 that toll rates shall be reviewed regularly to keep up with the cost of road maintenance. New Class 1 (Light Motor Vehicles) rates will rise from M40 to M45; Class 2 (Medium Heavy Vehicles) rates from M80 to M85; Class 3 (Large Heavy Vehicles) from M120 to M125; and Class 4 (Extra-Large Heavy Vehicles) from M280 to M295.