FINANCE Minister, Moeketsi Majoro, has raised a red flag over the 19-year-long failure of the country’s largest milling company, Lesotho Flour Mills (LFM), to pay dividends to the Lesotho government, its 49 percent shareholder.
Last year the MNN Centre for Investigative Journalism quoted a former LFM board member, Ramahoana Matlosa, claiming that the company’s inability to generate sufficient profits to pay dividends had been a “deliberate strategy”.
Mr Matlosa complained that the joint venture between the government and the Seaboard Overseas and Trading Group, which holds a majority stake in LFM, did not serve the interests Lesotho.
“Seaboard indulges in extensive manipulation of financial statements and transfer pricing to paint a negative financial picture which negates the payment of dividends,” Mr Matlosa alleged.
And at a joint sitting of Lesotho’s Senate and National Assembly during the 2018/2019 budgetary estimates last week, Mr Majoro mentioned LFM as one of the government’s corporate partners that “have not consistently declared profits or dividends”.
“Basotho are very concerned about this and have openly called for a review of thee government’s shareholding in these companies.
“It is also notable that companies that have struggled with profits happen to extensively use management contracts and buy services from their holding or sister companies,” Mr Majoro said.
Established in 1979, LFM was privatised in 1998, when Seaboard bought a controlling stake for US$10 million.
Seaboard is headquartered in Kansas and operates in South America, the Caribbean and Africa.
Insiders said that after Seaboard bought into LFM, its Bahamas-based subsidiary — Seaboard Overseas Management Company – took over procurement for the Lesotho operation.
The offshore operation is said to provide management and technical advice in the operation of the flour mill, maize mill, feed mill, sugar packaging plant and silo storage complex in Maseru.
Seaboard’s sister company, Saxonvale Investment, which holds the remaining one percent of the company, is registered in the British Virgin Islands- a tax haven.
Under the management agreement, Seaboard provides a managing director, director of finance and administration, a technical director “and such other staff as may be agreed with the (company) for a yearly US$300 000 (about R3.99-million) management fee adjusted in line with inflationary charges.”
The management contract provides that for all trips to LFM beyond the annual inspection and consultation visits, the Lesotho company must reimburse Seaboard to the tune of US$500 (about M6 659) per day per employee.
The sources said Seaboard had failed to make the profits needed to declare dividends for 19 years.
In response, Seaboard said the allegations were “misplaced and inaccurate”.
It said LFM occupies an important position in the agricultural life of Lesotho, as it purchases “the entire crop of Basotho farmers for a market-related price which protects them from having to compete with larger milling operations.
“Flour Mills also provides stability in the Lesotho agricultural sector for flour, maize and sugar – a clear reflection of how [it]serves both the government’s interests and those of the Lesotho community.”
The company also said the dividends had been used “to develop the industry and move the business and its operation forward without relying on government’s capital input”.