Identifier
Created
Classification
Origin
07MASERU549
2007-10-01 12:13:00
UNCLASSIFIED
Embassy Maseru
Cable title:  

LESOTHO SEPTEMBER 2007 ECONOMIC ROUNDUP: ARRESTS, ANALYSIS,

Tags:  ECON EINV EMIN EFIN PGOV CH LT 
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RR RUEHBZ RUEHDU RUEHJO RUEHRN
DE RUEHMR #0549/01 2741213
ZNR UUUUU ZZH
R 011213Z OCT 07
FM AMEMBASSY MASERU
TO RUEHC/SECSTATE WASHDC 3361
INFO RUCNSAD/SADC COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0020
RUEHMR/AMEMBASSY MASERU 3760
UNCLAS SECTION 01 OF 03 MASERU 000549 

SIPDIS

SIPDIS

DEPT ALSO FOR AF/S, AF/EPS;
PASS TO MILLENNIUM CHALLENGE CORPORATION

E.O. 12958: N/A
TAGS: ECON EINV EMIN EFIN PGOV CH LT
SUBJECT: LESOTHO SEPTEMBER 2007 ECONOMIC ROUNDUP: ARRESTS, ANALYSIS,
AND ANOTHER BIG DIAMOND

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UNCLAS SECTION 01 OF 03 MASERU 000549

SIPDIS

SIPDIS

DEPT ALSO FOR AF/S, AF/EPS;
PASS TO MILLENNIUM CHALLENGE CORPORATION

E.O. 12958: N/A
TAGS: ECON EINV EMIN EFIN PGOV CH LT
SUBJECT: LESOTHO SEPTEMBER 2007 ECONOMIC ROUNDUP: ARRESTS, ANALYSIS,
AND ANOTHER BIG DIAMOND

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1. SUMMARY:



- Fitch Puts Lesotho's Economy Under Microscope

- Article IV Consultations: Good Numbers, No Poverty Impact

- Principal Secretary of Justice Arrested

- High-level Chinese Trade Delegation Visits Lesotho

- "One Stop Shop" to Simplify Trade

- Promise in the Mining Sector



END SUMMARY.



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Fitch Puts Lesotho's Economy Under Microscope

--------------




2. In its recently released ratings of Lesotho, Fitch Ratings
maintained the nation's sovereign credit scores: the nation's
long-term foreign currency rating remained at "BB-", while the
short-term foreign currency rating stayed unchanged at "B". The
local current long-term rating is at "BB" -- also unchanged.
The long-term rating of "BB-" implies the possibility of a
credit risk developing. Fitch observed that Lesotho is
vulnerable to near-term changes in financial and economic
conditions.




3. Lesotho's credit rating falls in the same bracket as
Georgia, Nigeria, Turkey, Sri Lanka, and Ukraine. The country
owes its credit strength to strong public finances due to SACU
revenue windfalls. In addition, Finch viewed the structural and
institutional reforms to be funded by the Millennium Challenge
Corporation (MCC) as a strength. Also, the doubling of mining
output spurred a GDP growth rate of 6.2% in 2006 -- the highest
level in ten years. Finch cited Lesotho's low level of
development and weak business environment compared with its
peers as a source of fundamental credit weakness. Lesotho's per
capita income in 2006 was US$925, compared a median of US$2,500
among its "BB" peer group.



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Article IV Consultations: Good Numbers, No Poverty Impact

-------------- --------------




4. On August 31, an IMF/World Bank joint mission met with

Lesotho's development partners as part of its Article IV
Consultations in Lesotho. The mission informed the group that
Lesotho's macroeconomic performance has improved over the last
two years. They attributed this sound macroeconomic performance
and strong external position to SACU revenue sharing, the
recovery of the textile industry from its 2005 downturn, and
increased output in the mining sector. Lesotho maintained a
fiscal surplus of 15% of GDP, while the current balance
registered a surplus of 3.7% of GDP.




5. The delegation's greatest concern was that Lesotho had not
been able to translate this good fiscal situation into
broad-based sustainable economic growth reaching the population.
Good macro-level numbers have not led to poverty reduction.
The development partners, including the U.S. Embassy, noted that
the country does have robust access to donor resources, but must
tackle a number of domestic problems including a lack of data to
inform policy decisions, the GOL's low absorptive capacity of
donor funds, and various human resources gaps. The IMF/World
Bank mission concluded that the GOL must develop sound policies

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to facilitate broad-based sustainable growth and meet the goals
outlined in Lesotho's Poverty Reduction Strategy (PRS). They
also noted the necessity of the GOL's development of a strategy
to address the anticipated decline in SACU revenues in the
medium to long-term.



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Principal Secretary of Justice Arrested

--------------




6. Principal Secretary of Justice, Human Rights, Correctional
Services, Law, and Constitutional Affairs Ponts'o Lebotsa
appeared before the Maseru Magistrate Court on September 2007
charged with two counts of abusing her position. She is alleged
to have misused public funds between December 2006 and June 2007
in connection with an information technology procurement from
Lesotho Telecom. Magistrate Mojela Mothebe ordered her released
on bail.




7. In an interview on the case, Director of Public Education
and Corruption Prevention for the Directorate on Corruption of
Economic Offences (DCEO) Mr. Litelu Ramokhoro stated that
individuals suspected by his Directorate of crimes are generally
arrested before trial only if they are not cooperative.



-------------- --------------

High-level Chinese Trade Delegation Visits Lesotho

-------------- --------------




8. As a follow on to the 2006 Beijing Summit of the
China-Africa Cooperation Forum, a high-level delegation from the
People's Republic of China (PRC) led by the Assistant Minister
of Trade (the Ministry responsible for Chinese overseas
development assistance) visited Lesotho from September 20-22.
The stated purpose of Assistant Minister Fu Ziying's visit was
to sign three agreements between the Government of Lesotho and
the PRC regarding: 1) a grant of 19 million maluti (US$2.8
million); 2) forgiveness of 44 million maluti ($6.4 million) in
debt incurred by Lesotho during the PRC's construction of the
National Convention Center in Maseru; and 3) the construction of
two rural schools funded by a M10 million PRC grant ($1.4
million) signed in 2006.




9. During the signing ceremony, Lesotho's Minister of Finance
and Development Planning, Timothy Thahane, lauded the expanding
relationship between the two countries and noted that the PRC
has provided 255 million maluti ($36.4 million) to the GOL
through grants and loans. Major projects supported by China in
Lesotho include an industrial park in Butha Buthe District,
Lesotho's National Library, the expansion of state television
and radio coverage (to be completed October 2007),on going
assistance for a new Parliament building, food aid, office
equipment, and farm supplies including tractors.



--------------

"One Stop Shop" to Simplify Trade

--------------




10. In recognition of the importance of private sector
development and the growth of the export sector due to the
African Growth and Opportunity Act (AGOA),the Ministry of Trade
and Industry and the Lesotho Revenue Authority (LRA) launched a
"one stop shop" facility on September 18 to cut down on the red
tape necessary to trade across Lesotho's borders. In his
remarks during the launch ceremony, Minister for Trade and
Industry Popane Lebesa said the new organization will improve

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the country's international ranking on the ease and cost of
doing business. [COMMENT: According to the International
Finance Corporation, Lesotho is number 114 out of 175 countries
in terms of the cost and ease of doing business. It takes
roughly 92 days to complete the 11 procedures necessary to start
a business in Lesotho, and it takes an average of 285 days to
complete the 49 steps necessary to enforce a contract. END
COMMENT.] The facility will provide integrated services to
businesses including export and import coordination and a new
simplified and computerized licensing regime.



--------------

Promise in the Mining Sector

--------------




11. A 494-carat stone, believed to be the world's 18th largest
uncut diamond, was unearthed at Letseng Diamond mine in August.
The diamond will be sold at auction in Europe in the coming
months. Recent developments in the mining sector, particularly
at Letseng mine, show a great deal of promise -- promise which
is greatly needed in light of the nation's minimal industrial
diversity. In the last financial year, diamonds from Letseng
generated revenues of 750 million maluti ($107 million),of
which Letseng mines paid 57 million maluti ($8.1 million) as
royalties to the GOL and 80 million maluti ($11.4 million) as
income tax to the Lesotho Revenue Authority. [COMMENT: The
Letseng mine is 30% owned by the GOL and 70% owned by South
Africa-based private corporation Gem Diamonds. END COMMENT.]
NOLAN