DPMN Bulletin: Volume X, Number 2, April 2003

Introduction 

This paper examines the major features of development policy in Lesotho and how it has evolved over time. The economic, social and political environment forms the background against which successive policy initiatives are discussed. This context reflects the challenges which development policy needs to overcome in order to be effective, or constraints that need to be taken into account in formulating policy.

Economic, Social and Political Context

Economic Factors

With a population of about 2 million people and a land area of 30,350 square kilometres, Lesotho occupies the unique geographical position of being completely surrounded by one country, South Africa, and is heavily dependent on that country economically. The country’s rugged terrain is prone to the hazards of soil erosion, and this constitutes a threat to the continued availability of the limited amount of arable land – about 13 % of the land is arable. In spite of the recent acceleration in rural-urban migration, 80% of the population still live in the rural areas (Hassan 2002, 1).

Between 1990 and 1999 the agricultural sector accounted for 20% of the gross domestic product (GDP). The secondary sector (manufacturing and construction) accounted for 38% while the tertiary sector accounted for 42% of the GDP. Citing World Bank sources, SGTS and Associates note that the share of agriculture had declined from 31% in 1979, while that of the secondary sector had increased from 23% in the same year (SGTS & Associates 2000, 5). Lesotho’s economic dependence on South Africa is reflected by a number of factors. For example, the country gets 90% of its imports from South Africa while 65% of its exports go there. In addition, a significant proportion of its labour force still finds employment in South Africa, especially in the mines, although this number is declining because of layoffs in the mining industry (Hassan 2002, 3).

During the 1990s, but before the political disturbances of 1998, Lesotho experienced a relatively rapid economic growth of 5.2% a year on average (Gay and Hall 2000, VIII). This was mainly as a result of the construction work associated with the Lesotho Highlands Water Project as well as the expansion of textile industries owned by Chinese and South African entrepreneurs. Nevertheless, unemployment was still estimated to affect 40% of the labour force. Yet, prospects for economic growth are expected to remain bleak due to: (a) an uncertain outlook for foreign investment emanating from perceived political instability following the political disturbances of 1998; (b) continuing decline in mineworkers’ remittances; (c) the expected drop in revenue accruing from the Southern African Customs Union (SACU) with the establishment of a free trade area between the European Union and South Africa; and (d) decline in investment associated with Lesotho Highlands Water Project (Hassan 2002, 4).

Social Conditions

Notwithstanding the impressive rate of growth of the economy during most of the 1990s, poverty remained endemic in Lesotho. A study published by Sechaba Consultants shows that using a destitution level of M40 (approximately 4 US dollars) per household member per month, and a poverty level of M80 per month per person, 49% of households fell into the destitute category and another 19% in the poor category (Gay and Hall 2000, XIV). This means that, overall, 68% of households in Lesotho were poor during the 1990s on the basis of income levels. The UNDP (1998, 2) also notes that using the Human Development Index (HDI), Lesotho was ranked among the low HDI countries during the period of high economic growth. The levels of inequality in Lesotho are among the highest in the world. However, in 2000, the country’s GNP per head stood at $540, slightly above the average of $500 for Sub-Saharan Africa.