Lesotho - Openness to and Restriction on Foreign InvestmentLesotho - Foreign Investment

Attitude toward Foreign Direct Investment

The GOL maintains a strong commitment to private investment and is generally open to FDI, with the exception of limited restrictions on foreign ownership of small businesses. The GOL welcomes foreign investments that:

• Create jobs and open new markets and industries in accordance with the national objective of diversifying Lesotho’s industrial base;
• Improve skills and productivity of the workforce and nurture local business suppliers and partners;
• Support knowledge and technology transfer and diffusion;
• Improve the quality and accessibility of infrastructure.

Foreign investors enjoy the same rights and protections as Basotho investors. The government is aware of the challenges it faces as a small, landlocked, and least developed country in facilitating investment and is committed to improving the climate for investment.

The GOL has undertaken several policy reforms in recent years to improve the investment climate in Lesotho. The Land Act of 2010 allows foreign investors to hold land titles so long as the local investors own at least 20% of the enterprise. The GOL also enacted the Companies Act of 2011, which strengthened investor protections by increasing the disclosure requirements for related-party transactions and improving the liability regime for company directors in cases of abuse of power related-party transactions. In 2013, the government launched the Consumer Protection Policy.

Other Investment Policy Reviews

Lesotho’s investment policy was approved by Cabinet and became law in early 2016. The policy was developed with assistance from the United Nations Conference on Trade and Development (UNCTAD).

Business Registration

To make it easier to do business and facilitate FDI, the government established a "One Stop Business Facilitation Centre" (OBFC), placing all services required for the issuance of licenses, permits, and imports and exports clearances under one roof. OBFC services, coupled with the implementation of the Companies Act of 2011, have reduced the number of days it takes to start a business from forty days to five days. The OBFC also hosts the Lesotho Trade Information Portal, a single online authoritative source of all laws, regulations, and procedures for importing and exporting. The portal provides transparency and predictability to trade transactions and reduces the time and cost of trading across borders. The OBFC web site is http://www.obfc.org.ls/business/default.php.

The Lesotho National Development Corporation is the government’s investment promotion agency. For more information, please visit: http://www.lndc.org.ls.

Industrial Promotion

Through the Lesotho National Development Corporation (LNDC), the government actively encourages investment in the following sectors: Chemicals, Petrochemicals, Plastics and Composites; Energy and Mining; Environmental Technologies; Health Technologies; Textile, Apparel & Sporting Goods; and Travel. LNDC implements the country’s industrial development policies. LNDC also provides assistance through supportive services to foreign investors and publishes information on investment opportunities and the services it offers to foreign investors. It also offers incentives such as long-term loans, tax incentives, and factory space at discounted rental rates, assistance with work permits and licenses, and logistical support for relocation. For more information, please visit: http://www.lndc.org.ls.

Limits on Foreign Control and Right to Private Ownership and Establishment

Lesotho is open to foreign investment without case-by-case approval or a requirement for partial national ownership, with the exception of a defined number of small-scale businesses in certain sectors that are reserved exclusively for Lesotho citizens to encourage local entrepreneurship. The activities reserved for local ownership under the Trading Enterprises Regulations 2011 include: agent of a foreign firm; barber; butcher; snack-bar; domestic fuel dealer; dairy shop; general café or dealer; greengrocer; broker; mini supermarket (floor area < 250m2); and hair and beauty salon. Foreigners are not permitted to own or sit on the boards of these businesses. Foreign firms must have at least 20% local ownership to title land. Despite the Trading Enterprises Regulations 2011, there appear to be a significant number of foreign owned shops in reserved industries.

The Mines and Minerals Act No.4 of 2005 restricts mineral permits for small-scale mining operations on less than 100m2 to local ownership. Diamond mining, regardless of the size of the operation, is subject to the large-scale mines licensing regime, which has no restrictions on foreign ownership. However, the Government reserves the right to acquire at least 20% ownership in any large-scale mine.

The judicial system is generally independent and procedurally and substantively fair, although Freedom House Southern Africa noted politicization, chronic underfunding and structural problems in its 2012 report “Politics of Judicial Independence in Lesotho.” The judicial system upholds the sanctity of contracts and enforces them in accordance with their terms and on a non-discriminatory basis. The government enforces judicial decisions through officers of the court, and, if necessary, through criminal proceedings. A Commercial Court was established in 2010 under a U.S. government-funded Millennium Challenge Corporation grant in an effort to improve the country’s capacity in resolving commercial cases.
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Privatization Program

There is no ongoing privatization program in Lesotho.

Screening of FDI

The Ministry of Trade and Industry screens foreign investments in a routine, non-discriminatory manner to ensure consistency with national interests. The lack of local entrepreneurs has meant the government is under no pressure to exclude foreign investment to the advantage of local investment, though some foreign companies have reported difficulties in obtaining work permits for expatriate staff. No government approval is required, and there are almost no restrictions on the form or extent of foreign investment, except investment in small-scale retail and services businesses (see above).

Lesotho does not currently have a specific and overarching FDI policy. FDI policy instruments include the Companies Act of 2011 and the Financial Institutions Act of 2012, as well as legislation covering mining, tourism, and manufacturing—particularly the textile industry. The Companies Act and the Financial Institutions Act of 2012 are the principal laws that regulate incoming foreign investment through acquisitions, mergers, takeovers, purchases of securities and other financial contracts and greenfield investments. There is no investment law per se. Instead, a licensing regime and established practice, supplemented by investment treaties, govern conduct towards the entry of foreign investment.

Competition Law

The government has a draft competition bill focused on improving the regulation of investments. Its goal is to “provide the legal basis for undistorted competition and thus contribute to transparency and predictability in domestic markets.” It is uncertain when the bill will be passed into law.