REPORTS that the government is considering a new policy that makes it mandatory for foreign investors to sell at least 51 percent of their companies has caused concern in the business community.
Banks and other companies are worried.
It turns out that the panic was based on a headline in Business Day, a week ago.
The story said Lesotho was considering a 51:49 business ownership structure akin to the controversial indigenisation policy in Zimbabwe.
The mere mention of the Zimbabwe-style “business grab” is enough to scare anyone who has invested even a cent in any country.
Little wonder executives and shareholders of the few foreign-owned businesses in Lesotho are losing sleep.
But we believe the anxiety is based on limited, if not incorrect information.
The policy under discussion has nothing to do with the wholesale change of the ownership structures of foreign businesses in Lesotho. It relates only to the mining industry as Prime Minister Tom Thabane said in yesterday’s edition of Business Day.
He said Lesotho was interested in following the Botswana “formula” rather than the Zimbabwean one.
So there we have it: Other businesses need not panic because there is no nationalisation on the agenda.
It is also important to remember that this localisation discussion is not an entirely new thing. The Lesotho Congress for Democracy government discussed the issue some years ago but the policy did not see the light of day due to lack of consensus.
But when the discussion does gather momentum, as we suspect it will soon, we believe it would be in the interest of the mining sector to participate fully in the debate on the policy.
The business community has a tendency to mourn and throw stones from a distance. They need to engage the policy makers.
The mining sector in this country, young as it is, must not miss the opportunity to contribute to this localisation discussion.
To allow this discussion and policy to be driven by politicians would be suicidal.
If at all the discussion does result in a policy, it is important to note that it will not lead to something that is completely new.
The Lesotho government already has a 30 percent stake in Letseng Mine which is owned by the London-listed Gem Diamonds.
It also holds 34 percent of Kao mine whose majority shareholder is Namakwa Diamonds, another London-listed firm.
Assuming that the government does want to increase its shareholding in those companies to 51 percent, it will have to pay the market value.
The danger lies in how the government seeks to use that majority stake to influence the running of the mining companies.
If it is just to be a silent shareholder who waits for a dividend and contributes capital when it’s needed then it will be fine.
The management of the mining companies must be left to those who are competent to do so — mining companies.
We are encouraged that Thabane says he wants to study the Botswana model where the government takes a stake in mining companies but does not interfere with their management.
The government should not confuse ownership and wealth creation. Mining is not for the faint-hearted. It’s a long-term investment that requires serious capital.
If the government does want to be the major shareholder in the mining sector then it must be prepared to dig deep into its pocket to make the investment needed and wait for a long time before it starts getting the dividend.
But then again, perhaps the debate should not be about how much more shares the government needs to take in the companies but how much of its current stake it needs to sell to Basotho. That will be a much more direct form of empowerment than the government increasing its shareholding in the mining companies.
It would be brilliant if the government helps Basotho buy some of its shares in Letseng and Kao Mines.
While at that, it may be helpful if the debate about ownership also includes issues of who really benefits from the dividend the government gets from mining companies.
We should talk about how that money is used to benefit communities in which these companies operate.
Empowerment doesn’t mean having a share of something only.
Roads, schools, clinics and jobs are also forms of empowerment.