For many investors, Africa is regarded to as the last frontier or the next big thing in global economy. While some part of the region has been devastated by war and regime changes, others have seen sturdy governance supported by open business and governmental practices which are conducive for investors. According to Oversees Private Investment Corporation (OPIC), Africa offers the highest return on foreign direct investment in the world. This however comes with risks, most of which can be mitigated through due diligence and political risk guarantees or risk insurance to maximize on risk adjusted returns.
According to World Bank, six of the fastest growing economies in the world are in Africa (Ghana, Ethiopia, Côte d’Ivoire, Djibouti, Senegal and Tanzania) so, you are probably now wondering why you should you be looking to invest in Lesotho? Well, here is why-
The Kingdom of Lesotho
The GDP growth rate in 2017 was 4.6% and this year the GDP is expected to experience similar levels of growth. In addition to being politically and economically stable, it offers great tax incentives for investors and an unprecedented market access (read more below). Textile, apparel and footwear manufacturing industry is Lesotho’s largest formal private sector employer. It has a long-established track record with Levi’s Straus, Gap, Calvin Klein, Ralph Lauren and Timberland. In 2014 Lesotho exported US $290.3m worth of garments to United States.
Lesotho is located at the southern tip of Africa completely outside the tropics which allows it to enjoy cool temperate climate and is often referred to the “Switzerland of Africa” great for sheep rearing and farming. It is rich in diamonds and other minerals; there are about 40 known kimberlite pipes in the country, 24 of which are diamondiferous.
Logistically, it is well served by air, rail and road to all its major centers. The capital, Maseru is 600km away from South Africa busiest harbor and 45 minutes by air or 4 by road to Johannesburg. It is home to Africa’s most ambitious civil engineering dam projects. The Lesotho Highlands Water projects (LHWP) is an ongoing water supply project with several dams and tunnels throughout Lesotho that delivers water to South Africa.
A large market access; Lesotho enjoys duty free and quota free access to several regions.
- It can export all products to the European Union duty free as provided by under the EPA and SACU agreements. This opens a market of about 500 – million consumers.
- Under the American Growth and Opportunity Act (AGOA), Lesotho has access to the American market of about 300 – million consumers.
- It is part of the Southern African Customs Union (SACU) whose member countries comprise of about 55 million consumers. Lesotho products as a member of SACU, also enjoy a preferential trade with MERCOSUR (Argentina, Brazil, Paraguay, Uruguay and Venezuela) which is another 385 – million consumers.
- Lesotho It is part of Southern Africa Development Community (SADC) which comprises of 14 countries and about 260 – million consumers.
- It enjoys duty free access for a long list of it’s products to the Canadian market granted under the GSP system.
- 10% corporate income tax on manufacturing profit
- 0% tax on income generated from exporting goods outside of SACU
- No withholding tax on dividends distributed by manufacturing firms to local or foreign shareholders
- No advanced corporation taxes are paid by companies on the distribution of manufacturing profits
- Training costs are allowable at 125% for tax purposes
- Payments made in respect of external management skills and royalties related to manufacturing operations are subject to withholding tax of 10%
- Easy repatriation of manufacturing profits
- Lesotho Revenue Authority has introduced flexible VAT payment systems, to help tax compliant firms ease cash flows
Signatory to the convention on settlement of investment disputes
Lesotho is a signatory to the Convention on the settlement of Investment disputes between states and nationals of other states. It is also a member of the Multilateral Investment Guarantee Agency (MIGA) which promotes the flow of foreign direct investments to developing countries by providing investment guarantees to investors to mitigate against risks associated with a project such as political, transfer restrictions, expropriation, breach of contract and war.
Availability of loan guarantees and equity participation
The Lesotho National Development Corporation (LNDC) provides loans for up to 10 years to projects that can demonstrate long term financial viability. Upon request, LNDC can take equity investments in projects in which case board membership proportionate to its share of the project is required.
Inbound tourism visitor growth
There is a steady increase in the number of inbound tourists in Lesotho and the numbers are projected to increase. The government had pledged its support to develop travel and tourism in the country and sees private sector as a key player in driving the industry’s growth. There are several measures currently in place to encourage active private sector participation in the development of travel and tourism. The government of Lesotho is divesting its interests in several tourist destination points such as Liphofung Chalets to investors who can help improve
Download the priority areas for investment in Lesotho
To find out more about business opportunities in Lesotho contact us at firstname.lastname@example.org