IN 2007, the government of Lesotho signed a Millennium Challenge Corporation compact known as Millennium Challenge Account (MCA). This compact or agreement is a developmental assistance programme based on the liberal economic policies that the United States so espouses, which brought with it millions of dollars for financing of selected projects; namely the water sector, health and private sector development. This was a great opportunity for development and economic growth given the kind of projects that were to be financed. During her 2016/17 budget presentation the Minister of Finance even attributed the recent period of growth in Lesotho’s economy to large projects which included those of the MCA.
What drives the MCA Model?
The MCA was mulled in the wake of the 11 September 2001 terrorist attacks in the United States. It was part of the then administration of George W Bush’s grand strategy as encapsulated in his national security strategy which emphasized on the need for developmental aid to be part of the more traditional foreign policy objectives, namely, defense and diplomacy. Therefore, the MCA was to be based on liberal economic principles, that is, free market and free trade. The aim was to grant developmental aid or assistance to those developing countries that would commit or pursue political and economic reforms in pre-identified areas; in what the administration defined as ruling justly, investing in people and fostering economic freedom. The MCA developmental model was lauded by analysts and commentators of foreign policy as a paradigm shift in foreign aid business in a century and in Lesotho it proved to be a success and it arguably delivered without much controversy which would have warranted its failure.
The funded projects
The government of Lesotho entered into a compact which was derived from the proposal that the government submitted and from the proposal the decision was made to finance three projects, the water sector project, health sector and private sector development project. This first compact was the most successful in its achievement of the set timeframe for completion of projects and also what was noteworthy was the government commitment of its own funds for completion of the outstanding works which resulted in MCA-Lesotho being given an accolade for a job well done in Washington.
The health sector
The impact that MCA projects have had on Lesotho’s economic landscape cannot be overemphasized. First, the health sector project entailed a number of projects, namely the (a) the health strengthening project, (b) national reference Laboratory project, (c) Blood transfusion centre project (d) students dormitories and staff housing at National Health Training Centre and (d) health centers. The health sector project was very instrumental in the renovation and expansion of the 14 hospitals as well as construction of 138 health centres across the country. The project was segmented into a lot of activities ranging from renovation/construction of health centres to medical waste management activity which undoubtedly created a high number of jobs especially in the construction sector. Those few years of activity in the sector were a required boost for Lesotho’s fledgling economy particularly in the aftermath of the 2008 financial crisis.
The water sector project
There was also a hype of activity in the water sector. This included, but was not limited to construction of a conveyance system from the Metolong Dam and rehabilitation of existing infrastructure, rural water supply and sanitation activity as well as wetlands restoration and conservation activity. The benefits that accrued from this are not farfetched for one discern given the fact that towns such as Teyateyaneng, Roma and Mazenod are currently benefiting from uninterrupted daily fresh water supply from Metolong Dam especially during this hard times of severe drought.
The most notable segment of the water sector project was the one related to sanitation in rural areas which enabled the construction of ventilated pit latrines or “VIP” toilets. This was another hallmark of MCA in the rural areas of Lesotho by increasing access to improved sanitation facilities especially to those places where there has always been a greater need for such facilities. The net effect of the water sector was creation of employment opportunities for scores of Basotho with technical skills especially in construction. It was during this time that a host of local companies mushroomed and were able to competitively bid for designated steel works as in the case of construction of “VIP” toilets which were built in most parts of rural Lesotho.
Private sector development project
The private sector development project was the most significant in terms of its initially intended objectives and outcomes. The activities under the private sector development included (i) improving of land administration (ii) modernising of commercial legal system (iii) the establishment of a credit bureau (iv) assisting in the production and roll out of national identity document/card and (vi) strengthening payment of and settlement systems and provision of training and public outreach to support gender equality in economic rights. The project undoubtedly had a huge impact on Lesotho’s domestic policy makeup and texture which led to improved legislative framework and in the creation of some institution such as the Land Administration Authority.
Through the private sector development project, there was facilitation for the enactment of new law named Land Act of 2010 which repealed the Land Act of 1979, the Land Administration Authority Act, Sectional Title Act and other pertinent regulations which were a needed legal foundation for the creation of Land Administration Authority thus replacing the now defunct Land Survey and Physical Planning.
The new land Act was not immune from criticism and it went through a rigorous parliamentary process but it nevertheless went through. The discernable impact of this law has been a total overhaul of the land tenure system in Lesotho. The recent ostensible upsurge in the housing and real estate or property development especially in the district of Maseru and other towns is a direct impact of the new land tenure system. Notably, this has been the most pervasive liberalisation of the real estate or property market since Lesotho’s independence which was made possible by the MCA’s intervention, which in turn is a true reflection of liberal policies in action.
The most fascinating segment of the private sector development was the national identity document project which was mired by a lot of controversy which led to the government of Lesotho opting to finance the project from its coffers, the exercise which has in the long run proved to be costly without budgetary support of grant money. However, there has been a notable desire and will to implement the project thus far. The other component of the private sector development project was the civil legal reform which aimed at fast-tracking the resolution of commercial and other civil disputes which were taking a long time to resolve in the courts. The target was therefore to improve the institutional capacity of the judiciary.
The Lesotho Post Bank became another partner in the implementation of the private sector development project by managing of the debit/smart card project which according to the then MCA-Lesotho official documents was aimed at “expanding the financial services to the under-banked and un-banked population in the rural areas of Lesotho”.
The MCA developmental assistance model is arguably one of the best governed foreign aid schemes that had entered the fray of foreign aid business in the past 15 years. There are a lot of lessons that can be picked from the way it is designed, the formulation of project objectives, implementation as well as monitoring and evaluation of the projects. However, one should remember that there is nothing as free riding in politics of foreign aid, hence the requirement for MCA eligible countries to meet the criteria set by the Millennium Challenge Corporation for selection into the pool of countries that can be given aid.
The other notable element of the MCA model is the rewarding of countries which actually don’t have any bearing on the traditional United States geo strategic concerns of security by only awarding countries with development aid only if they are eager to undergo economic and political reforms, which is actually in line with what former president Bush outlined when he said: “The United States will use this moment of opportunity to extend the benefits of freedom across the globe. We will actually work to bring the hope of democracy, development, free markets and free trade to every corner of the globe”.
It is without a doubt that Lesotho has benefited and reaped tremendously from these “benefits of freedom” and the proper implementation of compact 1 of MCA made it qualify for selection into the second round of funding thus making it eligible for the second compact. It remains to be seen if the second compact will see the light of the day.