Economy of Lesotho
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The economy of Lesotho is based on agriculture, livestock, manufacturing, mining, and depends heavily on inflows of workers’
remittance A remittance is a non-commercial transfer of money by a foreign worker, a member of a diaspora community, or a citizen with familial ties abroad, for household income in their home country or homeland. Money sent home by migrants competes wit ...
s and receipts from the Southern African Customs Union (SACU).
Lesotho Lesotho ( ), officially the Kingdom of Lesotho, is a country landlocked country, landlocked as an Enclave and exclave, enclave in South Africa. It is situated in the Maloti Mountains and contains the Thabana Ntlenyana, highest mountains in Sou ...
is geographically surrounded by
South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
and is economically integrated with it as well. The majority of households subsist on farming. The formal sector employment consist of mainly female workers in the apparel sector. While male migrant laborers work primarily as miners in South Africa for 3 to 9 months and employment in the Government of Lesotho (GOL). Half of the country's population work in informal crop cultivation or animal husbandry. Lesotho, is a member of the
Southern African Customs Union The Southern African Customs Union (SACU) is a customs union among five countries of Southern Africa: Botswana, Eswatini, Lesotho, Namibia and South Africa. Its headquarters are in the Namibian capital, Windhoek. It was established in 1910. His ...
(SACU) in which
tariffs A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and polic ...
have been eliminated on the trade of goods between other member countries, which also include
Botswana Botswana (, ), officially the Republic of Botswana ( tn, Lefatshe la Botswana, label=Setswana, ), is a landlocked country in Southern Africa. Botswana is topographically flat, with approximately 70 percent of its territory being the Kalahar ...
,
Namibia Namibia (, ), officially the Republic of Namibia, is a country in Southern Africa. Its western border is the Atlantic Ocean. It shares land borders with Zambia and Angola to the north, Botswana to the east and South Africa to the south and ea ...
,
South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
, and
Eswatini Eswatini ( ; ss, eSwatini ), officially the Kingdom of Eswatini and formerly named Swaziland ( ; officially renamed in 2018), is a landlocked country in Southern Africa. It is bordered by Mozambique to its northeast and South Africa to its no ...
. Lesotho, Eswatini, Namibia, and South Africa also form a common currency and exchange control area known as the Rand Monetary Area that uses the
South African rand The South African rand, or simply the rand, ( sign: R; code: ZAR) is the official currency of the Southern African Common Monetary Area: South Africa, Namibia (alongside the Namibian dollar), Lesotho (alongside the Lesotho loti) and Eswatini ...
as the common currency. In 1980, Lesotho introduced its own currency, the loti (plural: maloti). One hundred lisente equal one loti. The Loti is at par with the rand.


Economic history

Until the political insecurity in September 1998, Lesotho's economy had grown steadily since 1992. The riots, however, destroyed nearly 80% of commercial
infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...
in
Maseru Maseru is the capital and largest city of Lesotho. It is also the capital of the Maseru District. Located on the Caledon River, Maseru lies directly on the Lesotho–South Africa border. Maseru had a population of 330,760 in the 2016 census. The ...
and two other major towns in the country, having a disastrous effect on the country's economy. Nonetheless, the country has completed several IMF
Structural Adjustment Program Structural adjustment programs (SAPs) consist of loans (structural adjustment loans; SALs) provided by the International Monetary Fund (IMF) and the World Bank (WB) to countries that experience economic crises. Their purpose is to adjust the coun ...
s, and
inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
declined substantially over the course of the 1990s. Lesotho's
trade deficit The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...
, however, is quite large, with
exports An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...
representing only a small fraction of
imports An import is the receiving country in an export from the sending country. Importation and exportation are the defining financial transactions of international trade. In international trade, the importation and exportation of goods are limited ...
. The global economic crisis hit the Lesotho economy hard through loss of textile exports and jobs in the sector due largely to the economic slowdown in the United States which is a major export destination, reduced diamond mining and exports, including weak prices for diamonds; drop in SACU revenues due to the economic slowdown in the South African economy, and reduction in worker remittances due to weakening of the South African economy and contraction of the mining sector and related job losses in South Africa. In 2009, GDP growth slowed to 0.9 percent.


Economic progress

Lesotho's progress in moving from a predominantly subsistence-oriented economy to a lower middle income, diversified economy exporting natural resources and manufacturing goods has brought higher, more secure incomes to a significant portion of the population. The percentage of the population living below USD PPP US$1.25/day fell from 48 percent to 44 percent between 1995 and 2003. The unemployment rate in 2008 was 25.29% and rose to 27.2% in 2012. However, the unemployment rate fell to 23.06% in 2017. The percentage of the population living below the poverty line fell from 58% in 2002 to 49.2% in 2017. The country is still among the "Low Human Development" countries (rank 155 of 192) as classified by the UNDP, with 42.3 years of life expectancy at birth. However, adult literacy is very high - 82% and children under weight aged under 5 is only 20%. Lesotho has received
economic aid In international relations, aid (also known as international aid, overseas aid, foreign aid, economic aid or foreign assistance) is – from the perspective of governments – a voluntary transfer of resources from one country to another. Ai ...
from a variety of sources, including the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
, the
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
, the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
, the
European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
, and
Germany Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
. Lesotho has nearly 6,000 kilometers of unpaved and modern all-weather roads. There is a short rail line (freight) linking Lesotho with South Africa that is totally owned and operated by South Africa.


Sectors


Apparel

Lesotho has taken advantage of the
African Growth and Opportunity Act The African Growth and Opportunity Act, or AGOA (Title I, Trade and Development Act of 2000; P.L. 106–200) is a piece of legislation that was approved by the U.S. Congress in May 2000. The stated purpose of this legislation is to assist the ...
(AGOA) to become the largest exporter of garments to the US from sub-Saharan Africa. American Brands and retailers sourcing from Lesotho include: Foot Locker, Gap, Gloria Vanderbilt, JCPenny, Levi Strauss, Saks, Sears, Timberland and Wal-Mart. In mid-2004 its employment reached over 50,000 mainly female workers, marking the first time that manufacturing sector workers outnumbered government employees. In 2008 it exported 487 million dollars mainly to the United States. Since 2004 employment in the sector was somehow reduced to about 45,000, in mid-2011, due to intense international competition in the garment sector. It was the largest formal sector employer in Lesotho in 2011. The sector initiated a major program to fight HIV/AIDS, called Apparel Lesotho Alliance to Fight AIDS (ALAFA). It is an industry-wide program providing prevention and treatment for the workers.


Husbandry

The western lowlands form the main agricultural zone. Almost 50% of the population earn income through informal crop cultivation or animal husbandry with nearly two-thirds of the country's income coming from the agricultural sector. About 70% of the population lives in rural areas and works in agriculture.


Women in the economy

Women make up 51% of Lesotho's population. While women are more subject to access to secondary schooling than men, men make 1.5 times more income than women. Prior to the 1950s, Basotho women migrated to South Africa for work due to an agricultural decline. Of those who migrated, many of them were unwed and many stayed in South Africa. Married couples also traveled to South Africa together for work. In 1923, the pass law Natives (Urban Areas) Act was passed in South Africa which required black men to carry passports with them at all times when in white areas for work. Women were included in an amendment to the law in 1952. The amendment caused a decline in migration of female labor, and by the 1970s, only 36.1% of women over age 39 in Lesotho had worked in South Africa. Lesotho women did not work in mines. In the 1980s, Lesotho received aid to help with the manufacturing industry. The main workers employed in the industry were young women. In 1990, 92% of employees in the textile industry were women. About 86% of the female population in Lesotho works in the textile industry.


Natural resources

Water and diamonds are Lesotho's only significant
natural resources Natural resources are resources that are drawn from nature and used with few modifications. This includes the sources of valued characteristics such as commercial and industrial use, aesthetic value, scientific interest and cultural value. O ...
. Water is being extracted through the 30-year, multibillion-dollar
Lesotho Highlands Water Project The Lesotho Highlands Water Project (LHWP) is an ongoing water supply project with a hydropower component, developed in partnership between the governments of Lesotho and South Africa. It comprises a system of several large dams and tunnels thr ...
(LHWP), which was initiated in 1986. The LHWP is designed to capture, store, and transfer water from the
Orange River The Orange River (from Afrikaans/Dutch: ''Oranjerivier'') is a river in Southern Africa. It is the longest river in South Africa. With a total length of , the Orange River Basin extends from Lesotho into South Africa and Namibia to the north ...
system and send it to
South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
's Free State and greater
Johannesburg Johannesburg ( , , ; Zulu and xh, eGoli ), colloquially known as Jozi, Joburg, or "The City of Gold", is the largest city in South Africa, classified as a megacity, and is one of the 100 largest urban areas in the world. According to Demo ...
area, which features a large concentration of South African
industry Industry may refer to: Economics * Industry (economics), a generally categorized branch of economic activity * Industry (manufacturing), a specific branch of economic activity, typically in factories with machinery * The wider industrial sector ...
, population and agriculture. At the completion of the project, Lesotho should be almost completely self-sufficient in the production of
electricity Electricity is the set of physical phenomena associated with the presence and motion of matter that has a property of electric charge. Electricity is related to magnetism, both being part of the phenomenon of electromagnetism, as described ...
and also gain income from the sale of electricity to South Africa. The
World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...
,
African Development Bank The African Development Bank Group (AfDB) or (BAD) is a multilateral development finance institution headquartered in Abidjan, Ivory Coast, since September 2014. The AfDB is a financial provider to African governments and private companies i ...
,
European Investment Bank The European Investment Bank (EIB) is the European Union's investment bank and is owned by the EU Member States. It is one of the largest supranational lenders in the world. The EIB finances and invests both through equity and debt solutions ...
, and many other
bilateral Bilateral may refer to any concept including two sides, in particular: * Bilateria, bilateral animals *Bilateralism, the political and cultural relations between two states *Bilateral, occurring on both sides of an organism ( Anatomical terms of ...
donors are financing the project. Diamonds are produced in Letšeng, Mothae, Liqhobong and Kao mines. The sector suffered a setback in 2008 as the result of the world recession but rebounded in 2010 and 2011. It is a major contributor to the exports of Lesotho.


Other statistics

The following table shows the main economic indicators in 1980–2017. Household income or consumption by percentage share:
''lowest 10%:'' 0.9%
''highest 10%:'' 43.4% (1986–87) Industrial production growth rate: 3% (2010) Electricity - consumption: 626 GWh (2010/11) Agriculture - products:
maize Maize ( ; ''Zea mays'' subsp. ''mays'', from es, maíz after tnq, mahiz), also known as corn (North American and Australian English), is a cereal grain first domesticated by indigenous peoples in southern Mexico about 10,000 years ago. Th ...
,
wheat Wheat is a grass widely cultivated for its seed, a cereal grain that is a worldwide staple food. The many species of wheat together make up the genus ''Triticum'' ; the most widely grown is common wheat (''T. aestivum''). The archaeologi ...
,
pulses In medicine, a pulse represents the tactile arterial palpation of the cardiac cycle (heartbeat) by trained fingertips. The pulse may be palpated in any place that allows an artery to be compressed near the surface of the body, such as at the nec ...
,
sorghum ''Sorghum'' () is a genus of about 25 species of flowering plants in the grass family (Poaceae). Some of these species are grown as cereals for human consumption and some in pastures for animals. One species is grown for grain, while many othe ...
,
barley Barley (''Hordeum vulgare''), a member of the grass family, is a major cereal grain grown in temperate climates globally. It was one of the first cultivated grains, particularly in Eurasia as early as 10,000 years ago. Globally 70% of barley pr ...
; livestock Currency: 1 loti (L) = 100 lisente; note - maloti (M) is the plural form of loti Exchange rates: maloti (M) per US$1 – 7.32 (2010), 6.10948 (1999), 3.62709 (1995); note - the Basotho loti is at par with the South African
rand The RAND Corporation (from the phrase "research and development") is an American nonprofit global policy think tank created in 1948 by Douglas Aircraft Company to offer research and analysis to the United States Armed Forces. It is financed ...


See also

*
Economy of Africa The economy of Africa consists of the trade, industry, agriculture, and human resources of the continent. , approximately 1.3 billion people were living in 54 countries in Africa. Africa is a resource-rich continent. Recent growth has been d ...
*
Lesotho Lesotho ( ), officially the Kingdom of Lesotho, is a country landlocked country, landlocked as an Enclave and exclave, enclave in South Africa. It is situated in the Maloti Mountains and contains the Thabana Ntlenyana, highest mountains in Sou ...
* List of Basotho companies *
Child labour in Lesotho Significant levels of child labour exist in Lesotho. The 1997 Lesotho Labour Force Survey found that 4.6% of males who were working full-time, 14.1% of males who were working part-time and 1.3% of male job seekers in Lesotho were aged between 10 a ...
*
United Nations Economic Commission for Africa The United Nations Economic Commission for Africa (UNECA or ECA; french: link=no, Commission économique pour l'Afrique, CEA) was established in 1958 by the United Nations Economic and Social Council to encourage economic cooperation among its ...


References


External links

*
MBendi Lesotho overviewLesotho latest trade data on ITC Trade Map
{{Lesotho topics
Lesotho Lesotho ( ), officially the Kingdom of Lesotho, is a country landlocked country, landlocked as an Enclave and exclave, enclave in South Africa. It is situated in the Maloti Mountains and contains the Thabana Ntlenyana, highest mountains in Sou ...
Lesotho Lesotho ( ), officially the Kingdom of Lesotho, is a country landlocked country, landlocked as an Enclave and exclave, enclave in South Africa. It is situated in the Maloti Mountains and contains the Thabana Ntlenyana, highest mountains in Sou ...