Unlocking Lesotho’s economic development

By Motlatsi Motaketsane and Phomolo Senoko

What does it take to transform an economy?  Is entrepreneurship an answer? Is funding the real problem, or the problem is the skill?  Does the structure of the economy matter? Is it the failure of universities to deliver the kind of education that meet the market demand?

While all these questions remain fundamental issues among policy makers, one of the most important goals of contemporary economics is determining the factors that cause economic growth.

Traditional neoclassical theory holds that the economic growth of a country is determined by the supplies of both labour and capital the country possesses and the level of technology present in that country. Some neoclassical economists have suggested that both knowledge and pro-market government policies also have a significant influence on economic growth. However, these theories ignore any direct effect that entrepreneurship may have on economic growth, thus entrepreneurship forms a basis of our argument given the unique features of the economy of Lesotho.

There have been many theories which suggest that entrepreneurship is indeed influenced by factors beyond those traditionally thought to influence economic growth. One of these theories can be found in the ideas of Joseph Schumpeter.

In his work, ‘The Theory of Economic Development’, Schumpeter says that entrepreneurship causes economic growth by allowing the means of production in a society to be used in newer and more efficient combinations.

Thus this claims that it is entrepreneurship (not merely knowledge) which causes technological innovation – which is something lacking in Lesotho. Thus, rational economic behavior would simply cause people to adapt to any changes in the levels of these traditional factors in whatever way had proven to be most efficient in other countries in the past, ignoring the disparities in the structure of economies. Entrepreneurship, requiring innovation, cannot be a natural result of just the traditional factors of economic growth. It takes intensive years of training.

If entreprenuership is so fundamental in the growth of economies, what then can the government do to promote entrepremership in Lesotho?

The Government of Lesotho through the Ministry of Gender and Youth, Sports and Recreation collaborated with United Nations Development Programme (UNDP), United Nations (UN) agencies such as the ILO, the United Nations Children’s Fund (UNICEF) and other partners such as the Commonwealth Youth Foundation (CYF) to implement the Youth Employment Project (YEP) aimed at promoting youth employment for poverty reduction. The YEP was piloted in 2006 with the aim of giving young people in urban and rural areas the entrepreneurial training and resources to develop small businesses.

In 2007, the UNDP engaged the support of youth organizations, business and community groups, the United Nations (UN) and agencies such as the Mineworkers Development Agency (MDA). This partnership gave birth to the Lesotho Youth Credit Initiative (LYCI), which provides micro financing for the YEP’s trainees.

LYCI was formed with the hope of fostering an environment where the youth can access credit to implement their business ideas. Three years down the line, in 2009, the Government of Lesotho launched the National Volunteer Corps Project (NVCP) as part of its strategy to respond to the issue of youth unemployment in partnership with the UNDP.

The NVCP was designed to serve as a mechanism for young graduates from tertiary institutions to gain practical hands-on working experience by accessing volunteer opportunities in various work spaces in the public and private sectors. Measures were being taken to facilitate access to finance by business enterprises.

Furthermore, the Government signed a Memorandum of Understanding (MoU) with commercial banks on the establishment of a M50 million Partial Credit Guarantee Fund (PCGF) in May 2012.

The Lesotho National Development Corporation (LNDC) also established a Partial Credit Guarantee Scheme towards the end of 2012. The main objective of these facilities is to support investors who wish to start or expand Small to Medium Enterprises (SMEs) as well as large businesses but are not able to access loans from the banks due to lack of collateral. The partial credit guarantee scheme ensures that the banks will be able to recover a portion of their money in the event of a default. Consequently, the domestic commercial banks have recently begun to introduce easily accessible loan instruments for the business sector, especially the SMEs.

But are these government initiatives what Lesotho really needs? What is missing in the equation? How many business proposal are labelled “Not-Fundable Proposal”.

Afterall, engaging in SMEs have proven to have failed to transform Lesotho, but we continue using the same methods yet expecting different results. What have Lesotho tertiary schools been doing to promote intensive innovative entreprenueral skills; skills to utilize our abundant natural resources?

Why is it that, for instance, there is no stone engineering courses offered in Lesotho institutions yet Lesotho is a mountainous country?  Stone is our natural resource, why can’t we find the best use for it?

Now does this become the problem of the government or higher education system? If it’s the problem of the government, then where is higher education, and similarly if it’s the problem of higher education, then where is the government?

Is there any direct link between higher learning institutions and the private sector?  Can this be a call that innovative business studies should be taught across all desciplines and faculties at all tertiary institutions?

Is this the call that Lesotho needs to restructure the education system and cut down all courses that are not thought of as “key courses in transformation” and shift the focus on innovative studies that also include Applied Science and Technology; Engeneering that meet the demands of Lesotho; Applied Economics, Applied Health Sciences and Medicine?

It is important to note that the curriculum in universities is designed such that it produces a job seeker and not job provider. Universities need to differentiate between their related business and entrepreneurial courses.

Entrepreneurship is the need of the hour and educational institutions play a vital role to fuel entrepreneurship in the youth. Lesotho needs to shift its focus and start to really invest in innovative education.

• Motlatsi Motaketsane and Phomolo Senoko are third year Economics students at the National University of Lesotho.