By Thoboloko Ntšonyane
MASERU – Minister of Trade, Industry, and Business Development, Hon Mokhethi Shelile, says amended Business Licensing and Registration Regulations of 2019 are being gradually phased in by the Ministry, starting with the Maseru district.
He said this phased approach is designed to ensure a smooth transition and effective implementation of the law, which reserves key business sectors for Basotho entrepreneurs.
The implemented portion of these regulations pertain to agents of foreign firms or sales representatives. These individuals are responsible for marketing, promoting, merchandising, and collecting orders on behalf of manufacturers or wholesalers and are mostly South Africans who do this work.
“All the stakeholders in this sector: producers, wholesalers, retailers, Revenue Services Lesotho (RSL) and Association of Agents converged at Mojalefa Lephole [Convention Centre] on the 30th May, 2024 where it was agreed to abide by the law and afford this service to Basotho only.
“From the 1st September 2024 this initiative will be piloted across the country. The plan is to apply this gradually to avoid economic disruptions,” he said before the National Assembly.
This move is expected to enhance local ownership, stimulate job creation, and empower Basotho entrepreneurs to thrive in their businesses.
This also comes in the wake of swelling calls for the implementation of these regulations. It also comes into effect following a motion in Parliament, the Ministry of Trade is now piloting the implementation of this law to ensure its full effect.
This law after it was passed was followed by the Business Licensing and Registration Regulations of 2020 and a national sensitization roadshow was conducted by the Ministry of Trade in collaboration with the Lesotho Chamber of Commerce and Industry (LCCI) to raise awareness.
The Regulations reserve approximately 47 business sectors exclusively for Basotho entrepreneurs, including international road freight transport logistics, motor dealerships, clearing agents, warehousing, retail sales of household fuel, bottled gas, coal, fast food services, hairdressing, beauty treatments, and vehicle maintenance, among others.
Shelile said the Ministry embarked on an inspections of foreign enterprises in the reserved list from June 10 to 28th this year in line with the approved implementation plan formulated by the task team in October 2023 which comprises the private sector and the government ministries and agencies.
He continued: “It was prudent therefore, to undertake an inspection to investigate three major effects of this policy initiative: the current proportion of foreign owned businesses in the reserved category, their contribution to GDP [Gross Domestic Product] and employment as well as their legitimacy, devise mitigation measures and transition plan.”
The Minister showed that the preliminary findings are for the Maseru district where they visited Bus stop area, Seputana, Industrial Area and Borokhoaneng. He said the investigations are ongoing and a similar survey is to be conducted in the districts of Leribe and Mafeteng in the current quarter , July to September.
“The key findings of this inspections (sic) are consistent with the hypothesis that Lesotho’s commercial space is dominated by foreign owned businesses. A total of 106 businesses were inspected [and] 80 of [those] businesses are owned by foreigners. The foreign owned business[es] account for 90% of the jobs in this sector for the locals.
“Foreign owned businesses also account for the largest proportion of the migrant [labourers] in this sector [retail]. There were 123 foreign businesses for the inspected businesses and the foreign owned businesses employed 119 expatriates while Basotho owned businesses employed only 4 foreigners,” he stated.
Shelile pointed out that “traditionally” foreign owned businesses belonged to the Chinese and Indians. He added that lately Basotho are entering this sector.
According to the audit, 61% of the inspected businesses were in the reserved category, and 81.54% of those businesses were foreign owned while Basotho businesses accounted for a meager 18.4% of the reserved businesses.
According to the Minister, South African companies employ sales representatives and appoint independent agents who are all based in SA to perform these services and those SA sales representatives and agents work and earn income in Lesotho without the registered businesses that pay taxes to Lesotho. He said shelf-packers at big retail stores like Shoprite and Pick n Pay have Basotho who are employed and paid by the third party contracted agents in SA.
“Shelf-packers in Lesotho are paid very little (below taxable threshold) and are almost neglected and have no access to transport as they shuttle between retail outlets as required [and] sales commissions that are paid to these sales representatives and foreign agents attract tax in SA not in Lesotho.”
Annually, Shelile said Lesotho loses in pay as you earn (PAYE) in the north of R117 million (M117 million) emitted by these agents and representatives operating in Lesotho to the South African Revenue Service (SARS).
He stated that once this legislation is implemented, the country will reap several benefits, including the signing of contracts between 800 suppliers and Basotho agency companies. Additionally, all merchandisers in the retail sector will have registered employers in Lesotho, employed by local agency companies. Further, 80% of the $2.1 billion USD (M31.9 billion) worth of imported goods will be managed by Basotho. Commissions amounting to 3% of M31.9 billion, approximately M957 million, which are currently paid to South African manufacturers, will be deposited into the Lesotho bank accounts of local agency companies. The 15% VAT (Value Added Tax) on commission invoices, totaling M143.64 million, will be paid to the RSL annually.