Project Consultancy, Reports & Profiles

Lesotho is a small landlocked kingdom, surrounded by South Africa and consisting of eleven administrative regions and five climate zones. The economy is highly concentrated in a few areas, such as clothing and textiles, mining of diamonds, export of water through the Lesotho Highlands Water Project (LHWP), remittances and some emerging services and tourism. The latest global events highlighted the country’s vulnerabilities, as well as multiple opportunities for diversification into industrialization and value addition through climate-resistant agribusiness.

Reasons to Start Industry in Lesotho

There are five key sociopolitical and geographical reasons for opening new manufacturing companies in Lesotho: 

1. Strategic location and trade linkages- Lesotho is a mountain kingdom separated from the sea by several hundred kilometers. The country’s customs, currency linkages, and trade are deeply integrated with South Africa through the Southern African Customs Union and regional value chains. Thus, Lesotho provides reliable access to a large regional market and logistics networks. 

2. Reliable water and hydropower resources - The Lesotho Highlands Water Project is one of Africa’s largest water-transfer and hydropower schemes. The project is a unique long-term project that creates direct revenues for the state, electricity, and seatholder. As the scheme is expanding by new phases, construction, operation, and power services will be a solid bet for the future. 

3. Established manufacturing base and workforce- The garment sector has been the most extensive private-sector employer in Lesotho. Many factories always have more workers than necessary because many of them are explicitly for export markets. The country has an industrial base as a workforce and managed people, which can be used by new manufacturing companies for leather goods, light engineering, consumer industries, etc. 

4. Natural resources and niche agriculture- Apart from diamonds, which are more or less limited to Lesotho and thus can be more than 4% of total exports, the country also has fertile valleys and high-altitude lands suitable for herbs, wool, high-value horticulture, organic farming, etc. Lesotho has abundant freshwater sources, which can favor agro-processing, production of bottled water, and the creation of niche export markets. 

5. Political stability and government support- Lesotho is politically stable and has passed its most dangerous infancy in the sense that business environment and success are heavily supported by tax, license, and investment facilitation reform. In addition to that, the investment promotion authority helps Western companies or Indians or whoever to essentially obtain the land, an industrial estate, which provides new opportunities, and then national development corporation incentives for foreign or big domestic investors.

Availability of Raw Materials and Supporting Factors

• Mining resources – Lesotho is home to high-value diamond producers such as Letšeng and Kao. The country has opportunities in jewelry manufacturing, diamond polishing, and gemstone export service.
   
• Agriculture and livestock – given the cold weather in the country, Lesotho has potential in maize, sorghum, beans, and horticulture production; wool production, mohair, dairy farming, and meat processing, selling these products to  South Africa  and beyond.
   
• Hydropower and water – Lesotho boasts large volumes of mountain water, making it one of the major suppliers of South Africa; the country has potential in hydropower generation, irrigation, and water bottling industries.

Why Select Industry for Startup in Lesotho

• Agro-processing and food industry, driven by the desire to enhance food security and import substitution. To this end, the government has been promoting diversification into food and beverage processing, including dairy, fruit canning, juice processing, and slaughterhouses for meat packaging.
   
• Other sectors worth mentioning; textile and apparel manufacturing with the development of textiles, leather as well as fashion-based production for regional and export markets leveraging AGOA.
   
• Renewable energy and green industry, which come in line with the expanding regional demand for sustainable energy. Opportunities include solar farms, small hydropower plants, energy storage, and manufacturing of renewable energy equipment.
   
• Construction and infrastructure, on the back of cement demand, building materials, prefabricated housing as well as road construction arising from ongoing government and donor-funded projects.
   
• Finally ICT and digital services fueled by broadband and e-governance investments, portraying Lesotho’s commitment to developing its digital economy. Additionally Lesotho has in place the requirements to develop software, enhance digital education and expand fintech and other IT-enabled services start-up’s.

Market Demand

The market in Lesotho is transforming, with industrial diversification gaining momentum. The main factors of demand for products will be: 

1. Increase in consumption of processed foods, construction materials and consumer goods, 

2. The desire of the population for renewable energy and environmentally friendly goods, 

3. Development of trade, logistics and industrial services associated with the growth of the region, 

4. Active use of digital and online services by young people and small and medium-sized businesses.

Government Support and Incentives

Based on the approved projects, the LNDC and the Lesotho Investment and Trade Promotion Centre offer the following incentives for investors: 

• Tax holidays and duty exemptions on imported equipment and raw materials, repatriation of profits and dividends for foreign investors, access to industrial land and serviced plots within SEZs, one-stop investment facilitation services for business registration and licensing, and public-private partnership  opportunities in infrastructure and energy.

To conclude, the set of distinct opportunities formed by Lesotho’s abundant clean energy resources, region-wide market coverage, high productivity and training potential, and its favorable business environment due to “sunny” reforms is at the core of Lesotho’s potential continuous industrialization. Based on the aggressive implementation of industry-adjacent agroprocessing, renewable energy, textiles, tourism, and light manufacturing production complexes, these unique innovation complexes can deliver extremely high indigenous returns as well as help ensure the long-term sustainability of Lesotho’s industrial and environmental rebirth endeavors. In this regard, Lesotho should feel a high degree of certainty regarding the acquisition of newly industrialized country status and the emergence as an attractive, profitable, and sustainable investment site in Southern Africa.