LESOTHO JANUARY 2008 ECONOMIC ROUNDUP: TOURISM, NUTRITION,

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SIPDIS

SIPDIS

DEPT ALSO FOR AF/S, AF/EPS, AF/EX

E.O. 12958: N/A
TAGS: ECON EFIN EIND EINV EAID EAGR PGOV LT
SUBJECT: LESOTHO JANUARY 2008 ECONOMIC ROUNDUP: TOURISM, NUTRITION,
AND INFLATION


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1. In this edition (January 2008):

-- Lesotho's First Annual Tourism Conference
-- Nutrition Survey Indicates No Major Malnutrition
-- GOL Promotes Improves Farming Techniques
-- 2007 Quarter Four in Review (annual inflation tops 10%)

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Lesotho's First Annual Tourism Conference
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2. The parastatal Lesotho Tourist Development Corporation
(LTDC) held its first annual conference from January 23-24 to
explore branding Lesotho as a tourist destination. In his
opening remarks, LTDC CEO Mthwalo Mthwalo said the conference
should focus on new methods to exploit Lesotho's tourism
potential in order make meaningful contributions to economic
growth. According to recent figures, Lesotho receives about
350,000 visitors annually (Note: This figure that likely
includes a substantial number of commuters, migrant workers, and
commercial border crossings, leaving few actual tourists. End
Note). Lesotho generates approximately $12 million annually
through tourism related activities.


3. Various speakers pointed to a number of areas that need
improvement to increase tourism, including road infrastructure,
cross-border tourism connections between Lesotho and South
Africa, community-based tourism destination branding, and a
focus on opportunities presented by the 2010 FIFA World Cup
scheduled to take place in neighboring South Africa. Addressing
roads, Mr. Ernest Mokganedi of South Africa's Department of
Environment and Tourism said that no investor would put funding
into tourists sites such as Sethlabathebe National Park or
Semonkong Falls because of poor transportation infrastructure
leading to the sites.

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Nutrition Survey Indicates No Major Malnutrition
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4. The Government of Lesotho's Disaster Management Authority,
with financial support from donors including the United States
(via OFDA disaster funds),conducted a National Nutrition Survey
from November 19 to December 8, 2007. Preliminary results
indicate that Lesotho, despite a devastating 2006-2007 drought,
is not currently experiencing generalized acute malnutrition.
When comparing the 2007 survey with a similar one conducted in
2002, the results showed 18% fewer underweight women and
children, as well as 26% fewer persons showing signs of wasting.
In remote Mafeteng and Mokhotlong districts, however, wasting
increased by 32% and 6% over the same period and there were
reports of nutrition-related deaths. Stunting rates still
remain quite high throughout the country, a sign of poor
nutrition, but the survey concluded that Lesotho's failed 06/07
harvest had not led to generalized malnutrition. This survey
will serve as the baseline of an ongoing new nutrition
monitoring system in Lesotho.

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GOL Promotes Improves Farming Techniques
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5. As a method of addressing food insecurity, the Government of
Lesotho has started to promote "block farming" techniques across
the commercial, community-led, and subsistence farming sectors.
The program, implemented in Lesotho's lowland districts, was
launched in the wake of the severe drought which destroyed the
2006/2007 harvest. The commercial and community-led initiatives
will assist approximately 3,000 hectares per district, while the
subsistence farming initiative will cover an average of 2,500
hectors per district. Standard Bank will finance the commercial
farm initiative, while the GOL will support the community-led
and subsistence farming initiatives.

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2007 Quarter Four in Review: Rising Inflation
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6. Lesotho's economy exhibited mixed indicators during the last
quarter of 2007. The mining sector continued to display sound
growth due to the continued expansion of diamond mining.
Electricity consumption rose by 13.4% during the last quarter,
but water consumption showed a steep decline of 54.8%, even
after seasonality adjustments. This decline is likely due to
the closure of three firms in the textile sector as a result of
declining overseas orders. Strong consumer demand led to a 21%
increase in the total value of retail sales. The
telecommunications sector, measured by number of calls, rose by
2% on quarterly basis.


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7. Employment in the manufacturing sector declined by 1.4%
during the last quarter due to the closure of three firms. The
closure of these firms however did not, however, immediately
affect overall textile exports, which remained constant (an
increase in garment purchases from Europe and South Africa
mitigated a decline in U.S.-based orders). Employment in the
civil service and for migrant mineworkers increased by 1.2% and
0.2% respectively during the quarter.


8. The inflation rate accelerated to 9% in the last quarter,
bringing the year-to-year inflation rate to 10.5% according to a
Standard Bank analysis--an increase influenced by rapid price
hikes in food, non-alcoholic beverages, and transportation. The
price of maize meal, a staple in Lesotho, increased by 7.7%. In
the financial sector, the money supply grew by 1.1% on a
quarterly basis and by 37.8% on an annual basis. Domestic
credit increased by 9.6% from the previous quarter. Credit
extended to the private sector rose by 8.45%, while credit to
statutory bodies rose by 40.9%. Net foreign assets of the
banking system rose by 14% (compared with a 2.7% decline in the
previous quarter). The Central Bank's net foreign assets were
driven upward by the GOL's receipt of customs revenue back
payments, while the foreign holdings of commercial banks rose
largely due to private sector foreign currency earnings.


9. The Government of Lesotho registered a surplus in the last
quarter of 2007 equal to 21.7% of GDP (mainly as a result of
customs revenue back payments and a decline in foreign interest
payments). Lesotho's Balance of Payments (BOP) registered a
surplus of $124.2 million, which compares very well to the $20.1
million deficit registered in the previous quarter.
NOLAN