M2 million capital to set up business in Lesotho

MASERU-FOREIGN investors who intend to set up businesses in Lesotho must put forward a whopping M2 million capital upfront. That is according to the 2020 Business Licencing and Registration Regulations which were issued in a government gazette in August. The controversial regulations, which are likely to spook potential investors, redefine what it means to be an investor in Lesotho. Besides the massive capital injection, investors will also be required to provide a skills transfer plan to Basotho and indicate the number of jobs that will be created. The proof of capital must be deposited and invested in a local financial institution prior to registration. Investors will also be required to provide a business plan indicating how the enterprise will be of benefit to Lesotho’s economy. Yet in spite of the massive capital requirement, Lesotho’s MPs this week said the M2 million threshold was too low and want it revised upwards. Kimetso Mathaba, an MP who leads a small political party, the National Independent Party (NIP), told Parliament on Monday that the M2 million capital was too small. He said section 21 (b) of the 2020 Business Licencing and Registration Regulations must therefore be set aside and revamped. “It would be alright . . . if it was two million British pounds or US dollars,” Mathaba said. £2 million would translate to almost M42.2 million. If the capital is calculated in US dollars, a foreign investor would have to fork out capital of M34.2 million. “The Minister of Trade should revisit the issue and find if it has justice in it,” he said. The regulations stipulate that “the Registrar shall not issue a business identification card to a foreign enterprise unless the application is accompanied by…the required capital resources of M2 000 000 (which will be) deposited in (a) financial institution”. Supporting Mathaba’s suggestion, the Mechechane MP Nyapane Kaya said “in Lesotho there are Asian businessmen who deposit about half a million into the bank and then the same money is withdrawn in Asia within five minutes”. “Will the laws help us on (such matters) as Lesotho loses about M800 million monthly,” Kaya said. The initiator of the regulations, the Movement for Economic Change (MEC) deputy leader, Tšepang Tšita-Mosena, said the regulations will help as businesses are bound to open bank accounts in Lesotho. She said failure to force companies to have operational bank accounts in the country leaves room for corruption, money laundering and the financing of terrorism. “The regulations will help solve the issue of capital flight and the economy would be saved under such circumstances,” Tšita-Mosena said. Ntaote Seboka, Chairman of Lesotho Chamber of Commerce and Industry (LCCI), said that M2 million is not a lot of money for foreign investors. “We expect foreign investors to have more money so that they do not come here and start businesses reserved for Basotho,” Seboka said. “When we say Basotho, we mean indigenous Basotho,” he said, adding that naturalised Basotho will still put the indigenous ones out of business. The Alliance of Democrats (AD) secretary general, Dr Mahali Phamotse, said that they support the motion raised by Mathaba. Dr Phamotse said M2 million capital expected from foreign investors is too little. “We would be bringing in foreigners to start small businesses like running a spaza shop, something that Basotho can do,” Dr Phamotse said. “The intention of foreign investment is to attract investors with money that Basotho do not have, so that they can engage in projects that are out of reach for Basotho not bring in people to compete with Basotho,” she said. She said that €2 million or USD 2 million would make sense as some Basotho entrepreneurs have M2 million and can start businesses without any help from outside the country. Tšepang Tšita-Mosena said she also agrees that the M2 million capital for foreign investors is too little. She however said that when it is raised from M2 million it should be a reasonable amount because at the end of the day the country needs investors to come in. “What one can achieve with M2 million is not a lot in terms of operations capacity and as a result, foreign investors will get into businesses reserved for Basotho,” Tšita-Mosena said. “We need to get investors who can come in and bring change, not people who will come in and compete with Basotho’s small businesses.” Staff Reporter