By: Mpho Shelile
MASERU
In order to support the growth and development of Micro, Small, and Medium Enterprises (MSMEs), the Ministry of Trade, Industry, and Business Development hosted a validation meeting to discuss and refine the Lesotho National Policy on MSMEs for the period 2024–2029. The event, supported by the Competitiveness and Financial Inclusion (CAFI) initiative, aimed to ensure the policy is well-suited to the unique needs of MSMEs in Lesotho.
Lesotho’s informal sector is largely dominated by MSMEs, yet accurate statistical data on the sector is scarce. According to the FinScope 2024 survey, there are approximately 107,753 MSMEs in the country of which 81,892 are in the informal sector and 25,861 in the formal sector.
The government estimates that MSMEs make up 76% of all firms in Lesotho, employing about 255,420 people. This figure excludes the hundreds of thousands of individuals engaged in informal survivalist activities, who are believed to represent 83% of the MSME sector.
In his opening remarks, CAFI Project Managing Director, Chaba Mokuku emphasised the importance of the workshop, underscoring the need to review the MSME policy initially drafted in 2021. “The review aims to incorporate significant developments since the policy’s formulation, ensuring it remains relevant and responsive to the current economic landscape,” Mokuku stated.
Mokuku stated that the MSME sector in Lesotho faces challenges such as limited access to finance (especially for women and youth-owned businesses), lack of entrepreneurial skills, limited support services, and weak market linkages, with only a small percentage exporting to South Africa or doing business with the government.
“Despite the efforts of BEDCO, the Entrepreneurship Hub and Seed Financing Facility, and the Lesotho Enterprise Assistance Programme, an unfavourable business environment, regulatory complexities, inadequate infrastructure, and unpredictable conditions hinder the competitiveness of MSMEs,” said Mokuku
However, the implementation of Business Licensing and Registration Regulations aims to improve this environment by reducing the cost and time of doing business in Lesotho.
He further noted that updated data, such as the 2023 FinScope Survey, should guide the policy revisions. Mokuku explained, “The original MSME policy was never presented to the Cabinet for approval. This timely review offers an opportunity to refine its strategic direction before seeking Cabinet approval.”
He also highlighted that finalising the revised policy is a top priority within the Government’s Investment Climate Action Plan for 2024, which is part of the broader Public-Private Dialogue Agenda.
The new policy seeks to address the challenges MSMEs face and create a supportive environment to enhance their growth and contribution to Lesotho’s economy. “MSMEs are the backbone of Lesotho’s economy,” Mokuku affirmed. “They contribute significantly to the country’s GDP, stimulate demand, and promote economic modification. A supportive policy environment will strengthen their growth, resulting in overall economic development.”
Mokuku also shared that, approximately, the monthly turnover of Lesotho’s MSMEs reached US$52.4 million in 2023, or an estimated 1 billion Maloti per month. Moreover, the size of the MSME sector grew from 85,000 to 138,700 enterprises between 2016 and 2023, according to the 2023 FinScope Survey.
Despite this growth, Lesotho’s business environment remains a concern. The country ranks poorly in key indicators, including property registration, construction permits, electricity access, finance access, investor protection, corruption, infrastructure, policy consistency, skills, and tax rates. Compared to its neighbours Botswana, Namibia, South Africa, and Swaziland and Lesotho lags behind in several areas from 2010 to 2020.
To address these challenges, the Government of Lesotho (GOL) has implemented several measures to improve the business environment, such as the creation of a One-Stop Business Facilitation Centre (OBFC) for integrated investor services, the automation of the Company Registry at the OBFC, and the launch of the Lesotho Trade Portal to facilitate trade information.
The policy also acknowledges that limited access to affordable finance remains a significant barrier for MSMEs, particularly for small business startups. Moving forward, the GOL is committed to prioritising financial inclusion and expanding access to finance for MSMEs.
In her closing remarks, the Deputy Principal Secretary of the Ministry of Trade, Tšireletso Mojela, thanked all stakeholders for their contributions to refining the policy, stressing that addressing the challenges faced by MSMEs is a complex task that requires collaboration to ensure success.
Thabo Qhesi, CEO of the Private Sector Foundation Lesotho, also underscored the importance of improving access to finance for MSMEs. He suggested that establishing a development bank specifically tailored to meet the needs of MSMEs could be highly beneficial for Lesotho’s economic growth.