Lesotho’s economy under siege

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Utloang Kajeno

HEADLINES such as “Budget delay subdues economic activity” and “Govt pays off MPs loans” (Lesotho Times, November 12 2015) make for disturbing reading.  This is more so because Lesotho has a very fragile economy that needs to be managed with a great deal of circumspection and expertise.

As time goes and the El Nino phenomenon takes its toll on the country, the economy is bound to be wrecked and brought to its knees. El Nino is an irregularly occurring and complex series of climate changes that is now afflicting Sub-Saharan Africa including Lesotho. It is characterized by unusually warm weather patterns that are accompanied by semi-arid weather patterns, severe drought, and persistent dust-bowl like weather with stifling heat.

These acute climate conditions are forecast by climatologists to prevail in Lesotho for the next six to eight months that is until after March, 2016.

Naturally, one would expect all the major role players in the economy particularly the government as the vanguard institution in all spheres of the nation’s life and welfare, to make hay while the sun still shines, so to speak. However, if recent decisions taken by the government are anything to go by, then the government is trashing the fragile economy and ominously, it is not doing anything to articulate and implement sustainable economic policies. Sadly, this is to the long-term detriment of this impoverished nation.

In its Quarterly Review of the monetary and financial activity for the period March to June, 2015, the Central Bank of Lesotho (CBL) reports that: “The budget speech was only read in May while the Appropriation Bill was released in June 2015.  Similarly, the receipts from SACU (Southern African Customs Union) review pool declined by 5.2 percent in June, 2015 as per the approved budget for the fiscal year 2016/2015”.

SACU is a revenue pool that Lesotho, Swaziland, Botswana and Namibia are entitled to from the South African economy at the beginning of every fiscal year.

The review also stated that all components of revenue for the government – tax revenue, grants, other revenue sources and SACU receipts-declined in the quarter by under review. Despite this gloomy economic picture being painted by the CBL, the government is disbursing the dwindling revenue as if there is no tomorrow.

This is evident in the report that the state paid a certain commercial bank a whopping M32 million being a measure to write-off the individual loans of M500 000 each legislator in the previous parliament plus interest on the loans.

This decision is as unfortunate as it does not make economic sense for the following reasons. Ostensibly, the government repaid the loans plus the interest arguing that the dissolution of the previous parliament was not of the making of the legislators but due to incessant squabbling by the coalition partners in the previous government. However, everything, including the survival of that government was within their powers. It definitely was through no fault of the electors.

The other important argument raised by those paying-off the loans is that of legitimate expectation.  Briefly they argue that the legislators expected that the Eighth Parliament would last its full five-year term and therefore within that time would have fully serviced the loans. Legitimate expectation is a principle of English law based on the principles of natural justice and fairness to prevent abuse of power.

However, this argument fails dismally because this principle cannot be successfully raised where the other party has been negligent or acted unreasonably. Negligence may be defined as absence of that degree of diligence which the law expects to be observed by everyone in the ordinary relations of life, and it consists of commission or omission by the other party.  The argument therefore fails dismally.

 

It is even more disheartening to learn that actually it is only the legislators who benefitted from the loans yet they are made to pay for the indiscretions of politicians. It is even more hurting when considering that some Members of Parliament (MP’s) have their loans paid-off even though they returned to the Ninth Parliament and critically are still gainfully employed meaning they have accessed the some benefits twice.

Furthermore, the government has, by its own admission publicly, paid more than M15 million to fired senior civil servants whom the government considered to be appointees of the previous government.  This was done well before their contracts of employment had expired meaning that government pays for two principal secretaries (PS) for including benefits.  The same treatment has been extended to about 10 of Lesotho’s diplomats based abroad.

As if that were not enough, the judiciary by its own admission paid or is in the process of paying the former Court of Appeal President Michael Ramodibedi over M700 000 for work that he never did while he was suspended and finally resigned his position.

This payment is disturbing because the argument goes that judges of appeal are paid depending on the number of cases they hear, that is, on commission and not like other judges who are paid a fixed monthly salary.

Furthermore, this payment the judiciary argued, was based on the basis of a legal advice that they solicited as legal basis for the payment.

We need to draw a distinction between legal advice and legal opinion.  The former on the one hand is solicited when the requestor is unsure of what action to take but is not binding. Further, if you feel uncomfortable with a legal advice, you can opt not to follow it.

Legal opinion, on the other hand, is popularly called judgment or ruling and because it is binding until rescinded or amended by a court of a superior standing/rank is binding and is also called legal precedent.  The distinct advantage of legal opinion is that it is has the advantage over legal advice, in that it has undergone the rigours of natural justice which forms the cornerstone of our law.  These are firstly, that both opposing sides to different views will have been heard by an independent neutral arbiter.  Secondly, the person who receives the legal opinion will not be the final arbiter, that is, judge in his own case.  It is therefore flawed to have authorized the said payment to the former president.

The government again made a very strange decision in recent months when it awarded a vehicle supply and maintenance contract controversially to a South African company. Naturally, one would expect the government to give preferential treatment to Basotho so that they can be economically empowered but lo and behold, it deemed it prudent to decide otherwise meaning vehicles that are taxed in South Africa are utilising our road infrastructure and their rentals are being paid to South Africa.  Clearly this is flight of finance to South Africa.

The government is failing to make hay while the sun still shines.  This is because social upliftment programmes such as tertiary education, health services, social development and assistance to the vulnerable infirm and disabled and agriculture are running low on government funding.  For instance, just last week virtually all the villages in most of Berea district were hit by severe storms leaving the affected families in need of government aid.

One wonders what the government will do to alleviate the impending drought brought about the El Nino of which government has been duly warned about. In addition to the sluggish economy no employment opportunities are being created at all, leading to the inescapable conclusion that the government is running the economy to ground. Instead of alleviating the problem, government is compounding it.

Surely we need leaders with foresight who can foresee that this fragile economy cannot sustain these short-sighted policies and that we will forever run around the world with a begging bowl for assistance.  Government has to change this approach else the consequences are too ghastly to contemplate, to borrow the over-used cliché. Proponents might argue that these are but small amounts, but my counter-argument is that these are just the tip of the iceberg that afflicts our fragile economy.

 

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