Botswana Lesotho

Home , Botswana Congress Party, Cabinet of Lesotho, Ntlhoi Motsamai, Quett Masire

COUNTRY REPORT

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1st quarter 2000

The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group.

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ISSN 1356-4021

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Contents

2 Summary

Botswana

5 Political structure 6 Economic structure 7 Outlook for 2000–01 11 The political scene 15 Economic policy 17 The domestic economy 18 Mining 19 Agriculture 19 Infrastructure 20 Financial services 21 Foreign trade and payments

Lesotho

22 Political structure 23 Economic structure 24 Outlook for 2000-01 26 The political scene 29 Economic policy 30 The domestic economy

33 Quarterly indicators and trade data

List of tables

7 Botswana: forecast summary 11 Botswana: distribution of seats in parliament 13 Botswana: summary of the October 1999 cabinet reshuffle 15 Botswana: Transparency International corruption rankings,1999 16 Botswana: money supply 17 Botswana: diamond results 30 Lesotho: consumer prices 31 Lesotho: the incidence of AIDS in Southern Africa 31 Lesotho: gross domestic product by type of activity 33 Botswana: quarterly indicators of economic activity 33 Lesotho: quarterly indicators of economic activity 34 Botswana: structure of trade

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34 Botswana: direction of trade 35 Lesotho: structure of exports, fob 35 Lesotho: direction of trade 35 Botswana and Lesotho: UK trade

List of figures

10 Botswana: gross domestic product 10 Botswana: regional real exchange rates 11 Botswana: distribution of seats in parliament 17 Botswana: world diamond sales 18 Botswana: inflation 20 Botswana: share index 29 Lesotho: Basotho migrant mine workers in South Africa 31 Lesotho: gross domestic product and gross national product

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December 20th 1999 Summary

1st quarter 2000

Botswana

Outlook for 2000-01 Following the BDP’s election victory in October 1999, political stability will be maintained, with factional tensions in the ruling party subsiding and President Mogae’s position in the BDP continuing to strengthen. Guided by political expediency, the government will move slowly with the privatisation programme. Fiscal policy will remain prudent, with higher diamond sales enabling a return to budget surpluses. Real GDP growth is expected to ease off to 6.2% in 2000 and to 5.4% in 2001, following reduced growth in the minerals sector and a slowdown in construction activity. Inflation will gradually decline, with the pula remaining stable. Export earnings will rise in line with growing world demand for diamonds, and the current-account surplus will widen to $680m in 2000 and to $700m in 2001.

The political scene In the October 1999 national election a split opposition and widespread voter apathy assisted Mr Mogae to retain his presidency and for the BDP to increase its parliamentary majority. In a cabinet reshuffle following the election Mr Mogae’s strengthened his core support within the party and shifted the power base away from factional politics. Disputes over water rights will continue with Namibia.

Economic policy Botswana has been ranked as the least corrupt country in Sub-Saharan Africa by Transparency International and has recently concluded its Article IV consultation with the IMF. The government appears to have agreed to an increase in the minimum wage.

The domestic economy • Year-on-year inflation rose to 7.6% in September, in reaction to rising private-sector wages and increased domestic fuel prices and water rates.

• Drought in much of the country has hurt the agricultural sector and most districts have reported cereals deficits.

• Diamond exports are rising in line with a recovery in demand. The Orapa diamond mine expansion is now complete. This will boost Botswana’s diamond production by an estimated 30%.

Foreign trade and There have been new initiatives towards export diversification, primarily in the payments textiles and garments sector. At the same time, the government is making moves to arrest capital flight and encourage the development of Botswana’s capital markets, with the possibility of introducing new regulations in the pensions and insurance industries.

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Lesotho

Outlook for 2000-01 The delayed signing of the election agreement has finally taken place in December 1999, calling for an election to be held by June 2000. The growth in the number of parliamentary seats will slow down the legislative process. Major investment initiatives will await a peaceful outcome to the election. The election is likely to go ahead relatively smoothly, with a victory for the ruling LCD almost certain, albeit with a reduced majority. Decisive economic policy initiatives will be required to boost the economy, particularly as government revenue is under threat from the free-trade agreement concluded between the EU and South Africa and alterations to the Southern African Customs Union agreement.

The political scene The reformed electoral model to be used in 2000 has been agreed, with 80 seats awarded on a first-past-the-post basis and 50 seats awarded according to proportional representation. However, official agreement on the exact timetable for the electoral process has been delayed. The Interim Political Authority is hoping to conduct a country-wide voter education campaign. A new parliamentary speaker has been appointed and the country’s Director of Public Prosecution has resigned.

Economic policy Major shifts in economic policy are unlikely until after the election. Although there has been some recovery in the economy since the political unrest of 1998, few investment projects have been initiated, and the tapering off of the LHWDP project and the fall in migrant employment in South African mines has held back growth. Free standard one primary education is to be introduced from January 2000.

Economic trends Domestic inflation is falling in tandem with South African rates. New data show that real GDP fell by 8.6% between 1997 and 1998. The Letsend diamond mine will resume production in 2000. The sale of Lesotho Bank has been completed.

Editor: Tim Ruffer All queries: Tel: (44.20) 7830 1007 Fax: (44.20) 7830 1023 Next report: Our next Country Report will be published in April

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Botswana

Political structure

Official name Republic of Botswana

Form of state Unitary republic

Legal system Roman-Dutch law; cases in rural areas are heard by customary courts

National legislature National Assembly consisting of 40 members elected by universal suffrage, the president, the attorney-general and four members appointed by the president. A 15-member House of Chiefs advises on tribal matters

National elections October 1999 (legislative); next election due by October 2004 (legislative)

Head of state President, chosen by the National Assembly

National government The president, his appointed vice-president and cabinet

Main political parties Botswana Democratic Party (BDP), the ruling party; Botswana Congress Party (BCP); Botswana National Front (BNF); Botswana Workers Front (BWF); Botswana People’s Party (BPP); United Action Party (UAP). The BPP and UAP, together with several smaller parties, have formed the Botswana Alliance Movement (BAM) which contested the 1999 election as a single unit.

The government President Festus Mogae

Vice-president, minister of presidential affairs & public administration Ian Khama

Key ministers Agriculture Jonnie Swartz Commerce & industry Daniel Kwelagobe Education Pontashego Kedikilwe Finance & development planning Baledzi Gaolathe Foreign affairs Mompati Merafhe Health Joy Phumaphi Labour & home affairs Thebe Mogami Lands & housing Jacob Nkate Local government Margaret Nasha Mineral resources, energy & water affairs Boometswe Mokgothu Works, transport & communications David Magang

Central bank governor Linah Mohohlo

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Economic structure

Latest available figures Economic indicators 1995 1996 1997 1998a 1999a GDP at market pricesb (P m) 12,530 14,631 18,015 20,428 21,640 GDPb ($ m) 4,520 4,401 4,935 4,834 4,677 Real GDP growthb (%) 7.0 6.9 8.7 4.6 9.0 Consumer price inflation (av; %) 10.5 10.1 8.6 6.7c 7.2 Population (m) 1.46 1.50 1.53 1.57 1.61 Merchandise exports fob ($ m) 2,160 2,218 2,820 2,061 2,651 Merchandise imports ($ m) 1,605 1,468 1,925 1,983 2,015 Current-account balance ($ m) 300 495 721 170 544 Reserves excl gold ($ bn) 4.8 5.1 5.7 6.0 6.5 Total external debt ($ m) 703 614 562 549d 531 Debt-service ratio (%) 3.2 5.3 2.8 3.9 2.8 Diamond production (m carats) 16.8 17.7 20.2 19.7 21.7 Cattle slaughteringsd (’000) 177 142 140 146 130 Exchange rate (av; P:$) 2.772 3.324 3.651 4.226d 4.627

December 20th 1999 P4.62:$1

Origins of gross domestic product 1998be % of total Components of gross domestic product 1998be % of total Agriculture 3.0 Private consumption 28.3 Mining & quarrying 36.2 Public consumption 28.7 Manufacturing 4.9 Gross fixed capital formation 24.7 Construction 6.0 Change in stocks 3.4 Trade, hotels & restaurants 18.0 Exports of goods & services 56.2 General government 14.5 Imports of goods & services –41.3 Financial & business services 10.1 GDP at market prices 100.0 GDP at current market prices incl others 100.0

Principal exports fob 1998e $ m Principal imports cif 1998e $ m Diamonds 1,483 Vehicles & transport equipment 452 Vehicles 319 Machinery & electrical goods 398 Copper-nickel 74 Food, beverages & tobacco 283 Beef 74 Metal & metal products 241 Soda ash 42 Chemical & rubber products 205

Main destinations of exports 1996f % of total Main origins of imports 1996f % of total EU 74 SACU 78 SACU 21 EU 8 Zimbabwe 3 Zimbabwe 6 a EIU estimates. b Statistical year beginning July 1st. c Actual. d Years ending September 30th. e Official estimate. f January-June.

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Outlook for 2000–01

Botswana: forecast summary ($ m unless otherwise indicated) 1998a 1999b 2000c 2001c Real GDP growthd (%) 4.6 9.0 6.2 5.4 Consumer price inflation year-end 6.4 7.6 6.7 6.4 average 6.7 7.2 6.7 6.6 Merchandise exports fob 2,061 2,651 2,911 3,048 of which: diamonds 1,433 1,950 2,150 2,200 vehicles 227e 310 340 370 beef 74 80 70 75 Merchandise imports fob 1,983 2,015 2,050 2,150 Current-account balance 170 544 680 700 Exchange rate (av; P:$) 4.23 4.63 4.76 4.91

a Actual. b EIU estimates. c EIU forecasts. d Statistical year beginning July 1st. e Official estimate.

Political stability seems Following October’s legislative election, the political outlook for Botswana assured— remains one of stability. The ruling Botswana Democratic Party (BDP) had no trouble in increasing its parliamentary majority and its leader, Festus Mogae, has remained president and will continue to run the country in the same democratic manner as that pursued by the BDP since independence in 1966. Given its overwhelming majority in parliament, the party will easily be able to push through its programme of legislation throughout its five-year term.

—despite election blunders The legal challenges to the election, centring on the declaration of a state of emergency prior to the poll, will probably come to nothing. Not only was the state of emergency lifted as soon as parliament had reconvened to allow missing names to be added to the voters roll, but the opposition Botswana Congress Party (BCP), which had issued the challenge, is now reeling from a humiliating defeat at the polls and is probably too distracted to pursue the matter further. Another potential source of embarrassment to the BDP, the ombudsman’s investigation into the use of state resources by the vice- president, Ian Khama, while on the election trail, will also probably be a non- event. Although some penalty may be imposed on Mr Khama, as it seems he did use an army helicopter during campaigning, it will probably be kept very low key. Mr Khama must, however, learn a lesson from this. His reaction to the initial accusation was very strong, as befits a former army commander, and he will have to learn to play the political game fast if he is to have a chance of one day leading the country.

Mr Mogae will strengthen The president’s position within the BDP will continue to strengthen. Mr Mogae his position within was brought in by the former president, Quett Masire, largely because he was the BDP— outside the party factions, and he has handled this position well. While the two main BDP factions, Kwelagobe/Kedikilwe and Merafhe, remain very powerful, Mr Mogae has managed to pull in many newer faces without factional loyalties (see The political scene), without isolating key factional

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players. The new cabinet is evidence of this. Although a backlash against Mr Mogae cannot be ruled out, he seems set to lead a unified BDP with little difficulty.

—and the opposition will The future of the opposition has been changed somewhat by the election take some time to results. The BNF’s success has re-established it as the focal point of opposition realign itself politics in Botswana, and it will now have to be included in any meaningful opposition alliance. However, the BNF has been emboldened by the election, and Kenneth Koma seems set to stay on as leader at least until the next party congress in 2001. This does not bode well for future alliances, given that Mr Koma’s leadership style has been attacked as dictatorial and led to the split in the party last year. Those who left to form the Botswana Congress Party (BCP) will not return while Mr Koma is at the helm. A reconfiguration of the opposition is thus only likely after 2001, although some regrouping of the smaller opposition parties cannot be ruled out in the near future.

Regional relations will Although Botswana’s relations with its neighbours are expected to remain continue to pose problems relatively cordial, the continued difficulties over transport links and water resources point to the problems which Botswana faces in an unstable geo- graphical region. While the disputes with Zimbabwe and Namibia are relatively minor and are expected to remain so, other disputes may appear in the future, posing a threat to Botswana’s domestic stability.

Fiscal policy will remain Mr Mogae’s inaugural address to parliament in November gave an insight into prudent— the future of economic policy and contained no surprises. Prudent economic policies will continue, with an emphasis on private-sector growth. The BDP has delivered this in the past and will continue to do so. However, some sticking points remain. The president’s promise to speed up the privatisation programme is welcome, but even with the best will in the world there will be political obstacles to prevent the government from adhering to its timetable. The president has also promised to shake up the civil service and improve productivity. This is another welcome move, but political expediency again suggests that there will be no rapid movement on this. In fact, the impetus for fiscal reform, which was heightened in 1998/99 by a slowdown in diamond revenue, has been weakened by the recovery in international diamond demand.

—with budget surpluses The recovery in diamond revenue will lead to a smaller 1999/2000 budget forecast— deficit than the P400m ($90m) forecast. Under the direction of the new finance minister, Baledzi Gaolathe, there will be a return to a budget surplus in 2000/01 on the back of strong diamond earnings. The surplus should continue in 2001/02, assuming that diamond revenue remains robust, although revenue from the Southern African Customs Union (SACU) will start to dwindle.

—and greater financial Little change is expected on the monetary policy front, as the authorities focus supervision on curbing private credit extension by maintaining positive real interest rates. Although some small increases in interest rates are possible at the end of 1999 in line with rising inflation, private credit extension will remain high as long as the economy is booming. This could pose problems for the bank, as bad debt provisions are increased. Meanwhile, Botswana’s exchange-rate policy of targeting a basket of currencies, focused on the South Africa rand, will remain

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unchanged. However, a shake-up of financial supervision is expected. The recent liberalisation of exchange controls and country’s attempts to establish itself as an international finance services centre all demand a radical improvement in financial regulation. The Bank of Botswana (BoB, the central bank) has called for such changes, in particular the creation of an independent capital markets authority—at present this function is performed by the Ministry of Finance—and a strengthening of the BoB’s regulation of deposit takers. Such an improvement has also been called for by the IMF and is vital if Botswana’s financial system is to grow in the way which the government hopes.

GDP growth will rise in The completion of the Orapa 2000 mining project, which will increase 1999/2000— Botswana’s diamond production by an estimated 30%, combined with an upturn in global diamond demand, means that diamond production should increase to nearly 25m carats next year, from just under 20m carats in 1998. Botswana’s troubled BCL copper nickel mine should also benefit from rising global prices, suggesting that growth in the minerals sector will be strongly positive. The current construction boom will continue, and manufacturing growth is expected in textiles and vehicles—the assembly of Volvo cars should start next year—as they benefit from rising demand in South Africa, the main export market. Although agricultural production is expected to remain relatively flat, overall real GDP should record growth of 9% in 1999/2000.

—before slowing slightly In 2000/01 growth in the minerals sector will decline slightly but remain rapid. The services sector is expected to benefit from some interest in Botswana’s status as an international financial services centre (IFSC; see box in The domestic economy). Although this is unlikely to be an overnight success, even a small amount of interest from the targeted South African firms would boost the services sector substantially. Growth in the construction sector is forecast to decline, as many construction projects in Gabarone reach completion and plans for the building of the Botswana Financial Centre (BFC) are delayed. The manufacturing sector should post modest growth, although growth in vehicle production will not match the rise in 1999/2000. Agricultural production may benefit from improved rainfall, but growth will still remain low. Overall real GDP growth is forecast at 6.2%. In 2001/02 growth in the minerals sector will slow after several years of rapid expansion. Some growth in manufacturing can be expected to continue, assuming robust economic development in South Africa, while the services sector should continue to see high growth from interest in the IFSC project. However, a slowdown in construction activity is expected, and overall real GDP growth is forecast to slow slightly to 5.4%.

Inflationary pressures Year-on-year inflation rose to 7.6% in September 1999, its highest level in over should ease in 2000— a year. Increases in domestic fuel prices, water rates and rising private-sector wages were responsible. The continued high growth rate of consumer credit means that inflation will maintain an upward trend into early 2000. However, with inflation in South Africa (the principal determinant of consumer prices in Botswana) falling fast, a reduction in inflationary pressure is anticipated in 2000 and 2001, leaving an annual average rate of inflation of 6.7% in 2000 and 6.6% in 2001. This is based on the assumptions of tight fiscal and economic policy and stability of the rand, and thus the pula, against major currencies.

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—as the pula remains stable The authorities will have no difficulty in maintaining the current policy of tying the exchange rate to a basket of currencies with emphasis on the South African rand, the destination of most of Botswana’s non-diamond exports. The stability enjoyed by the pula over the past 12 months is expected to continue, with a slight depreciation against the dollar in line with projected movements in the value of the rand, and inflation differentials between Botswana and the US. We therefore expect an annual average of P4.76:$1 in 2000 and an average of P4.91:$1 in 2001. The possibility of deviations from this forecast will be in reaction to unexpected fluctuations in the dollar value of the rand.

Export earnings will rise Export growth is assured on the back of rising international demand for thanks to diamonds— diamonds. Diamond export revenue is set to rise sharply to nearly $2bn in 1999 and are likely to remain at just over $2bn in 2000-01. Manufacturing exports are also set to rise, notably vehicles and textiles/garments. Three new garment factories are currently being established and Volvo cars seem ready to come into production in 2000. There is however, a danger that vehicle production will not fulfil expectations, after the Johannesburg base of the chief executive officer of Botswana’s car assembly plant was raided for the third time in November 1999 by South Africa’s directorate for serious economic offences, probing into tax fraud. This makes it possible, although unlikely, that the Gaborone plant may yet be forced to close down.

—and import spending will Imports are also forecast to rise on the back of growing demand from also increase consumers, financed by bank credit, as well as demand for inputs into construction projects. Import demand may be further boosted by Air Botswana if it chooses to purchase three replacement aircraft for the planes destroyed in late 1999 (see Infrastructure). The current EIU forecast assumes these are not all imported in one go, but if they are, it may adversely affect the overall current- account outlook for 2000.

The current-account With revenue from Botswana’s massive international reserves set to remain surplus will widen high and stable and tourism earnings rising, the current-account surplus is forecast to widen to $680m in 2000 and to $700m in 2001.

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The political scene

The BDP scores an election Despite a string of blunders (see box) in the run-up to the national election on success— October 16th, including the declaration of state of emergency (4th quarter 1999, page 11), the polls were peaceful, efficient and fair. This was no surprise and fits the pattern of all of Botswana’s democratic elections since independence in 1966. However, despite last-minute attempts to increase the number of registered voters, a low turnout and sense of apathy characterised the election, with just 52% of the 900,000 eligible voters registering and only 40% actually casting their ballot. As in all previous elections, the ruling Botswana Democratic Party (BDP) secured a majority in parliament, and its current leader, Festus Mogae, remains president.

The results are an undoubted success for the BDP. Not only did it increase its majority from 27 to 33 of the 40 seats, gaining 57% of the vote, but the party, whose stronghold is in the rural areas, was able to diversify its support base to urban areas. Importantly, it won one of the four Gaborone seats—all of which had been monopolised by the Botswana National Front (BNF)/Botswana Congress Party (BCP) for the past 15 years—as well as Francis Town West and Selbi Phikwe. However, the BDP’s success remains much more a function of divisions within the opposition than of an improvement in its own standing among these groups.

Botswana: distribution of seats in parliament (no.) Pre-election Post-election Botswana Democratic Party (BDP) 27 33 Botswana National Front (BNF) 26 Botswana Congress Party (BCP) 11 1 Source: Local press.

—with the opposition in The opposition vote produced something of a surprise. In the 1994 election the shambles— main opposition party at the time, the BNF, won 13 seats. However, divisions in the party caused a split, with 11 of the BNF parliamentary members walking

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out to create a new party, the BCP, in June 1998. In the October 1999 election the BCP lost all but one of its 11 seats, and the Botswana Alliance Movement (BAM, a coalition of smaller parties) failed to gain any seats at all. The BNF was the main beneficiary, gaining six seats, but is estimated to have lost eight seats to the BDP because of the split vote, and as a result the BDP gained less than 50% of the vote in several key constituencies, including Selbi Phikwe, Gaborone Central and Francistown West.

1999 Election blunders

Although the international media were rightly full of praise for the eighth round of peaceful and smooth democratic elections in this Southern African country, two incidents, in particular, caused a furore within Botswana.

The declaration of a state of emergency by the president Having named the election day before the electoral role had been completed, the president, Festus Mogae, was forced to call a state of emergency to enable a recall of parliament to ensure that the remaining 60,000 names were added to the electoral role. The state of emergency was lifted the following week, after parliament had reconvened.

The vice-president’s behaviour The local press had a field day criticising the vice-president, Ian Khama, as allegations flowed that the former army commander had used military helicopters to get around the country for BDP electioneering purposes. This incident prompted the ombudsman to investigate Mr Khama, the first cabinet minister to have been subjected to this procedure. In addition Mr Khama, who is also a paramount chief, was accused of taking traditional leaders with him on the campaign trail. Politics and traditional leaders are supposed to remain separate in Botswana.

—although the BNF has Although the split in the opposition clearly worked to the advantage of the re-established itself— BDP, the BNF was probably more successful than it could realistically have hoped for prior to the election. Its success over its own splinter group, the BCP, is indicative of several issues in Botswanan politics. First, the initial split by BNF MPs to form the BCP last year was a unilateral move by politicians that was not supported by their constituents. Second, it demonstrates the strength of party loyalty in Botswana. This has been lauded in the Botswanan media as a triumph of the electorate choosing policy over individualism. It is actually probably more a function of entrenched loyalties dying hard, and regardless of the media furore over party splits, many people, even in the politically more aware segments of the population in urban areas, are simply voting for the party they have always voted for. Nevertheless, the BNF is now firmly entrenched as the major opposition force and voice of the poor.

—and Kenneth Koma In the wake of the election the opposition parties have had to review their stays on position. The disastrous performance of the BCP effectively ended the career of some veteran politicians. The BCP met at the beginning of November to map out a new strategy in the wake of its heavy defeat. The BCP leader, Michael Dingake, offered to resign, reportedly under pressure from young people

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within the party who wanted to see an immediate change. His resignation was apparently rejected by the party, but a new leader may still be elected at the party’s next congress in 2001. In fact, no clear strategy seems to have emerged from the meeting, but the next few months are likely to see a shift in the power base and the emergence of a leadership challenger. Meanwhile the leader of the BNF, the veteran politician Kenneth Koma, who is often accused of running the party as a one-man show, seems certain to break his pre- election promise to stand down after the election and looks set to stay on until at least 2001. Although this will only strengthen criticism of his autocratic tendencies, the absence of many former critics—who left last year to join the BCP—and the BNF’s recent election success mean that Mr Koma should have little difficulty in keeping control over the party as long as his health lasts. However, should Mr Koma not stand down voluntarily in 2001, he may be forced out as he remains the biggest barrier to an effective opposition merger.

A new cabinet is On the October 23rd President Mogae appointed his new cabinet. There were appointed— few surprises, although seven new faces, including deputies, were introduced, and the cabinet now contains seven women. The most important and most welcome appointment was that of Baledzi Gaolathe, who was nominated by Mr Mogae as one of parliament’s four specially elected MPs and who becomes the minister of finance. Mr Gaolathe, who left his post as governor of the central bank to take up the position, is widely respected both within and outside Botswana. Mr Gaolathe was previously the managing director of Debswana, and before that served as the principal secretary in the Ministry of Finance under Mr Mogae. Mr Gaolathe was replaced by Linah Mohohlo, a deputy at the central bank and Southern Africa’s first female central bank governor. She is not expected to face any difficulties in taking control of the institution, and no change in policy is anticipated. She will be ably supported by a new deputy governor, Keith Jeffries, a respected local economist. In terms of policy, the relationship between the new minister of finance and his former deputy will be close, with a more technocratic approach to financial management.

Botswana: summary of the October 1999 cabinet reshuffle Former ministers New ministers Agriculture Ronald Sebago Jonnie Swartz Commerce & industry George Kgoroba Daniel Kwelagobe Education Gaositwe Chiepe Pontashego Kedikilwe Finance & development planning Pontashego Kedikilwe Baledzi Gaolathe Health Chapson Butale Joy Phumaphi Labour & home affairs Bahiti Temane Thebe Mogami Lands & housinga Daniel Kwelagobe Jacob Nkate Local governmenta Daniel Kwelagobe Margaret Nasha Mineral resources, energy & water affairs Margaret Nasha Boometswe Mokgothu Central bank governor Baledzi Gaolathe Linah Mohohlo a Prior to the 1999 election, these ministries were combined as the Ministry of Local Government, Lands and Housing.

Sources: Press reports; EIU.

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—as senior BDP members Mr Gaolathe replaced Pontashego Kedikilwe, who has moved to the Ministry are reshuffled of Education. This takes him away from the centre of economic policy-making and is perhaps a sign that Mr Mogae is shoring up his core support within the party. However, Mr Kedikilwe is known to have a personal attachment to pushing through education reforms and may have requested the position himself. Daniel Kwelagobe, a partner with Mr Kedikilwe in one of the BDP’s main factions, has taken on the post of minister of commerce and industry. His appointment has been widely criticised within Botswana as it is feared that Mr Kwelagobe does not have the diplomatic skills or the drive to act as Botswana’s commercial ambassador abroad, particularly as he is reported to have a fear of flying. Mr Kwelagobe’s strength is thought to lie in a more grass-roots role.

The two main factions within the BDP remain centred around Mr Kedikilwe and Mr Kwelagobe, on the one hand, and Mr Merafhe, who kept his post at foreign affairs, on the other. Mr Mogae has done well in taking another step in shifting the power base away from factional politics without alienating its key players.

Some appointments come Mr Mogae’s appointment of Jacob Nkate as minister of lands and housing came as a surprise as a surprise. There is no question as to Mr Nkate’s capability, but the fact that he had to resign earlier this year (3rd quarter 1999, page 11) as assistant minister of finance following allegations of corruption has caused some eyebrows to be raised at his rapid reappearance in cabinet. His appointment probably also relates to Mr Mogae’s attempts to build up party support around himself. Mr Nkate is an ally of Mr Khama, Mr Mogae’s right-hand man.

Another surprise, though less welcome, was the appointment of Boometswe Mokgothu as minister of minerals, energy and water affairs. This appointment was roundly criticised in the local press, as Mr Mokgothu is thought to be past his prime and will be unable to deal with the pressing demands of looking after Botswana’s two most precious natural resources, diamonds, which the country has in abundance, and water, which it lacks.

The troubles with Difficulties between Botswana and Zimbabwe have continued over Botswana’s Zimbabwe continue— rail link, despite high-level discussions. In July Zimbabwe placed an embargo on rail traffic through Botswana in a bid to ensure that all goods heading north went through Zimbabwe’s newly built rail link (4th quarter 1999, page 13). In a bid to head off a potential trade war Mr Mogae and Zimbabwe’s president, Robert Mugabe, talked in September, and Zimbabwe agreed to start handling goods coming by rail through Botswana. However, most rail traffic is continuing to use the Zimbabwe route, reportedly under duress from Zimbabwe Railways; as a result, Botswana Railways will lose an estimated P14m ($3m) in 1999/2000. The matter has now been referred to the transport sector of the Southern African Development Community (SADC), which is investigating the issue.

—while judgment on a The long-awaited judgment by the International Court of Justice in The Hague dispute with Namibia is over the disputed ownership of the Kaskili island between Namibia and postponed Botswana was finally made on December 14th in Botswana’s favour. The court

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 1999 Botswana 15

ruled that the island forms part of the territory of Botswana. Although the judgment is supposedly final, disputes are likely to continue, not least over water rights in the area. Indeed this year, as both Namibia and Botswana struggle with drought, communities in both countries have been looking at ways to pump water from the Okavango Delta. So far both governments have resisted pressure from local groups to allow the pumping of water, but if one of them starts to pump, relations can be expected to deteriorate.

Meanwhile, problems remain over the Trans-Kalahari highway, as Namibia maintains that Botswanan officials are impeding its citizens’ use of the road. A transport committee from the Southern African Customs Union (SACU) is currently investigating Namibia’s claims.

Economic policy

Botswana is ranked the Botswana has been ranked the least corrupt country in Sub-Saharan Africa by least corrupt country the Berlin-based watchdog Transparency International. The organisation in Sub-Saharan Africa— produces its list of rankings every year and measures the degree of corruption in a country’s civil service and business community by combining a number of surveys from different sources, including the EIU. Botswana is ranked in 24th position, above Japan, Italy and South Africa. However, this high ranking should be treated with a certain amount of scepticism. Botswana’s transparency is partly a function of its small size, and given the relatively high standard deviation between the few surveys done there is by no means a consensus as to the exact degree of corruption within the system. We accept that Botswana has a deservedly good reputation on corruption but cannot ignore the high levels of corruption within the senior ranks of parastatals and in some financial initiatives schemes which temper this view.

Botswana: Transparency International corruption rankings,1999

Surveys used Country Ranking Score (no.) Denmark 1 10.0 9 Canada 5 9.2 10 Austria 17 7.6 11 US 18 7.5 10 Botswana 24 6.1 4 Japan 25 6.0 12 Namibia 29 5.3 3 South Africa 34 5.0 12 Italy 38 4.7 10 Mozambique 56 3.5 3 Egypt 63 3.3 5 Kenya 90 2.0 4 Nigeria 98 1.6 5 Cameroon 99 1.5 4 Source: Transparency International.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 1999 16 Botswana

—and gets a clean bill of In early October the IMF successfully concluded its annual Article IV health from the IMF consultation with Botswana. In general, the report was positive about recent economic developments, specifically the high rate of economic growth and prudent economic policies. However, some issues stood out which the IMF board stressed to the Botswanan authorities.

• Diamond dependence. While Botswana’s economic performance and economic policies were praised, the degree to which the economy remains dependent on diamonds was a point of concern. The impact on government revenue—diamond revenue accounts for some 50% of total revenue—was noted as a concern, but the need to diversify employment opportunities and cut the 40% or so of the population estimated by the government to be living in poverty was deemed to be the greatest challenge. As part of this issue Botswana was asked to improve its data collection on unemployment and poverty drastically. In addition, the need to raise labour productivity (though training and education) was stressed.

• Monetary growth. The rapid growth of credit to the private sector was noted with concern, and the authorities were requested to act on this by enforcing tighter regulations on the banks and by maintaining positive real interest rates.

Botswana: money supply (% change, year on year) 1996 1997 1998 1999 M2 18.1 25.0 33.7 35.6 Source: IMF.

• Exchange controls. The recent removal of exchange controls was welcomed, but the authorities were urged to strengthen the financial system. It seems that the IMF shares the concern of a number of commentators (2nd quarter 1999, page 16) that the removal of exchange controls without a drastic increase in the supervisory capabilities of the Bank of Botswana is a cause for concern. However, the IMF welcomed recent initiatives by the central bank to strengthen capital adequacy and foreign-exchange exposure rules.

• Privatisation. The Botswana authorities were urged to press ahead with the privatisation process. This was really a friendly nudge to remind the government that it cannot dither over this issue forever.

Privatisation and public- In early November parliament reconvened and Ray Molomo, a former sector reform will be key education minister, was elected as the speaker of the National Assembly. His election was unopposed and was followed by President Mogae’s inaugural address to parliament. President Mogae’s speech was based on the theme of “sustainable economic growth with equity” and contained no surprises. He emphasised that the government’s priority was to tackle unemployment and poverty as well as the AIDS pandemic. As in the past, Mr Mogae assured the house that this would be best achieved by creating an enabling environment for the private sector. Mr Mogae confirmed that the central tenets of government policy would revolve around reforming the public sector and speeding up the privatisation process. The president promised that the draft

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privatisation policy would be passed in 1999/2000 and would be implemented the following year. In order to transform the public sector, the emphasis will be on productivity and to this end a performance management system is being introduced to the civil service, whereby ministries will be assessed according to their ability to meet given targets.

The government agrees to Following years of disagreement, the government appears to have reached a minimum wage of P600 pay agreement with the National Amalgamated Local and Central Government per month and Parastatal Manual Workers Union. Since 1991, when a study recom- mended a 154% increase, or a monthly minimum of P600, for manual workers, the government and the union have been locked in dispute as to how to structure such a pay increase. During the years of their dispute wages have risen anyway, and the 154% increase has thus become redundant, although the union continued to pursue it regardless, leading to confusion. It now seems that an settlement has been reached and a P600 minimum wage has been agreed. However, no official confirmation has been issued, so the problem may yet lead to difficulties and industrial action.

The domestic economy

World diamond demand Global demand for diamonds appears to be rising fast on the back of economic picks up growth in Asia and the US along with a millennium-related buying spree. Thus news that De Beers’ seventh sale (or sight) this year will be its largest ever is good news for Botswana. De Beers Central Selling Organisation holds ten sights of diamonds produced in Southern Africa per year. The first five sights this year produced $2.4bn, compared with $1.7bn last year. The August sight produced $700m, which compares favourably with the next largest site of $550m in 1995. Although sights have fallen off since—the ninth sight brought around $420m—they remain high. The news has been greeted with glee at Botswana’s Ministry of Minerals, Energy and Water Affairs, which foresees an end to stockpiling. At the start of the year Botswana was stockpiling about 25% of production because of slow world demand, but it now seems that the country will be able to sell almost the entire production this year and next. This will give a significant boost to diamond exports, which look set to climb to $1.95bn this year from $1.43bn in 1998, easing fiscal constraints (see Outlook). The impact on real GDP growth will be less significant, as this is determined more by diamond production than sales.

Botswana: diamond results

1998 Production carats (m) 19.7 value ($ m) 1,900 Average price/carat ($) 97 Export earnings ($ m) 1,433 % of total export earnings 69.0 Sources: De Beers; Bank of Botswana; IMF.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 1999 18 Botswana

According to Botswana’s Central Statistics Office, 14,803 jobs were created New jobs are created between September 1997 and September 1998, an increase of 6.5%, which is significant in a country where unemployment is probably the most pressing political issue. This rise came largely from the private and parastatal sectors as opposed to the civil service. The most important source of jobs was the construction industry, which is unsurprising, given the boom in construction which Gaborone has witnessed over the last two years. Unfortunately jobs in construction are insecure, as they depend on the continuation of the boom in construction projects, and the government will be looking to transform these jobs into more permanent employment in manufacturing or services.

Inflation rises As widely anticipated, the impact of sharp jumps in private credit, the government’s pre-election spending and rising fuel prices have been felt in Botswana’s consumer price index. Inflation jumped to 7.6% in September from 7% in August and 5.9% in July. Other factors which have influenced the upward trend are an increase in domestic workers’ wages and a rise in water rates.

Inflation in Botswana normally follows trends in South Africa, but headline inflation there is heavily influenced by mortgage repayments. These have been falling in line with falling interest rates in recent months, so it is no surprise that Botswana has not followed the drop in South Africa’s inflation rate to 3.9% in August. The rise in Botswana’s consumer prices is expected to be followed by short-term increases in interest rates.

Mining

Botswana’s Orapa mine expansion, which will increase the mine’s production from 6m to 12m carats, finished in November 1999 after three-and-a-half years and an investment of P1.6bn ($347m). The new facility will provide a massive boost to Botswana’s diamond production of some 30%. This should feed into total production this year and next and means that production in 2000 is forecast to increase to 25m carats from 20m carats in 1998. Meanwhile, construction of the completely automated recovery and sorting plant, the Aquarium, has been completed and will be fully operational in March 2000. The Aquarium will minimise the theft of diamonds while cutting costs for recovery. Costs have already fallen some 37% per tonne over the past five years in Botswana, and further cuts are now anticipated.

Botswana will not be hurt Following calls by the international pressure group Global Witness for by diamond boycott consumers to boycott diamonds that come from countries at war, there were fears that global diamond sales might fall as consumers failed to differentiate between diamonds from different countries. The chairman of De Beers, Nicky Oppenheimer, attacked the group, saying that it would lead to job losses in all diamond-producing countries, including Botswana. However, since then De Beers has publicly stated that it will stop sourcing diamonds from war-stricken countries, with the exception of one state-owned mine in Angola. This may improve De Beers’ chances of establishing its own brandname diamonds (the De Beers name is to be etched onto its diamonds) and may even boost sales of diamonds from Botswana.

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Agriculture

Food production is hit Botswana’s Food Security Unit has reported that by mid–1999 drought was by drought hitting vast areas of the country hard. Most districts, except three in the Francistown area, have reported cereals deficits. It is thought that maize imports were roughly on target and that widespread malnutrition can therefore be avoided. However, with most dams having dried up, livestock was watering mainly from boreholes while grazing was extremely poor, and many animals are thought to have died. In early November President Mogae hinted that a change in emphasis in agricultural policy may be on the cards. Local farmers are heavily subsidised by the government, and the president suggested that policy may shift towards increasing productivity and possibly bringing in foreign farmers to work the land. The economic benefits from such a policy would be unlikely to outweigh the political costs, suggesting that while policy may change, practice will not.

BMC is struggling The Botswana Meat Commission (BMC) is operating below capacity because farmers are apparently unwilling to sell cattle despite the drought currently hitting the country. BMC has blamed this on poor cattle management in rural areas and the myth that older cattle fetch a higher price, when in fact the reverse tends to be true. Meanwhile, although China is not a major market for Botswana beef, sales may also be affected by the imposition of a Chinese ban on livestock exports from a number of Southern African countries, including Zimbabwe and Botswana, amidst fears of an outbreak of disease.

Infrastructure

Air Botswana’s fleet is Almost all of Air Botswana’s (AB) fleet of aircraft was wiped out when one of its wiped out employees took his own life by crash-landing one plane into two others that were on the runway. Ironically, it was the safety manager at AB who stole a plane and then tried to get hold of the president in order to force AB’s management to allow him to return to flying—his licence had been suspended some months earlier. However, after an hour the safety manager switched off his radio and crashed the plane. He was the only casualty. It took a month for Air Botswana to start operating normal services again, using leased aircraft from France. The accident is covered under Air Botswana’s insurance policy, minimising the financial implications, but the impact on the current account when the airline decides to buy in three new aircraft could be significant.

Botswana’s largest The P25m ($5.5m) Nzanzo shopping centre opened in Francistown in early shopping centre opens November. The shopping centre, Botswana’s largest, covers 35,000 sq miles and will house 30 shops. The centre has managed to attract several large South African operators to Botswana for the first time. Up to 600 permanent jobs will be provided by the centre, giving a much needed boost for Botswana’s northern areas. The centre is targeting not only the local market but shoppers from Zambia and Zimbabwe as well.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 1999 20 Botswana

Financial services

The stockmarket falls and Although Botswana’s stockmarket was buoyed by the election results and the FNB increases loan subsequent cabinet reshuffle, these developments had been widely foreseen. default provisions Since the election the market has actually fallen on the back of profit-taking in blue-chip companies. The Botswana Stock Exchange (BSE) share index fell to 1,365 on November 19th, from 1,405 in mid-October, but was still well up on the August level of 1,180, and investors continue to enjoy overall gains of some 50% for the year. Despite recent minor market corrections, the BSE’s second listing in recent months, RPC Data, was well received. The information technology company was twice oversubscribed and shot up by 50% on its first day of trading in early November. A total of 600,000 shares were traded in RPC’s first week on the stock exchange, giving the company a market capitalisation of P40m ($8.5m).

Although there is concern about the growing levels of consumer credit in the economy, when First National Bank (FNB) unveiled its results for 1998/99 (July-June), which showed an increase in the provision for bad debts to P22m ($4.7m) compared with P3.6m in the previous 12 months, fears that this was linked to consumer credit were misguided. In fact, the increase in these provisions was mainly due to particular problems with the financing of Hyundai’s operations in the country. FNB’s loan portfolio has an unusually large interest in Botswana’s manufacturing sector. Nevertheless, the rapid rise in consumer credit is a cause for concern, and it is likely that in the next 12-18 months banks’ bad debt provisions will rise further to allow for increasing defaults in line with this expansion.

Botswana’s financial centre dreams

The government and many involved in Botswana’s financial If the IFSC legislation is to bring results, there is a need for a sector have dreams of Botswana becoming a regional combined effort from both the public and private sectors. financial centre. This is one area where the government With commercial leases in Botswana currently limited to believes there is potential for the economy to diversify away between two and five years, long-term physical investment in from its dependence on diamond mining. The realisation of such a project is unlikely to come from the private sector this dream was instigated by the government through a without the offer of special concessions. With most previous package of investor-friendly legislation which comes under developments being public-sector dominated, the government the name of the International Financial Services Centre (IFSC). is not used to working hand-in-hand with private investors. But In a separate but linked project there are plans for the if the new government is to base future development strategies construction of a privately funded P856m ($185m) Botswana on the private sector, there will still be a need for support by Financial Centre (BFC), which would be the biggest building ensuring investor-friendly legislation and providing infrastructural development in Botswana’s history, enjoying a selection of foundations. Perhaps this is why the Ministry of Local special privileges, including specific tax breaks. This would no Government, Lands and Housing has been split, and Jacob Nkate doubt enhance economic activity and create jobs, but the has been chosen as the minister of lands and housing, giving project is currently on hold pending official support from him the responsibility for developing the availability of the government, including assurance that there will be commercial property, of which there is a shortage. The limited assistance in the provision of infrastructural support. As a timeframe for leases currently prevailing in Botswana has been result, the originally scheduled starting date for the con- highlighted as one of the major constraints for the private struction of the centre of July 2000 will not be met. sector in Botswana.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 1999 Botswana 21

Foreign trade and payments

Efforts are made towards While the outlook for diamond exports has improved in line with a recovery in export diversification— global demand, Botswana has continued its push to develop other sources of export revenue. The Botswana Export Development and Investment Agency (BEDIA) has been operating for about one year, and its attempts to encourage investment into export-oriented industry is beginning to bear fruit. According to the third-quarter 1999 economic briefing of the Botswana Institute for Development Policy Analysis (BIDPA), three projects will be operational by the end of 1999 as a result of the BEDIA’s efforts. The projects are a fabric factory in Francistown targeting the EU market; a knitwear factory in Gaborone; and a blanket factory near Selbi-Phikwe, which will sell to the Southern African Development Community (SADC) and US markets. The projects will create employment for 2,000 people, or 10% of the manufacturing workforce.

—and regulations are While the government’s economic policy will continue to focus on increasing introduced to support export earnings, moves to stop capital flight, notably in the pension and domestic financial markets insurance industries, will remain a priority. With about $480m under management, these funds are an important source of capital. After the lifting of exchange controls last year, fund managers were instructed that they could only invest 70% outside Botswana for prudential reasons, which they promptly did. The fund managers are pushing for this limit to be relaxed, but it is rumoured that the government wants to limit the amount offshore to 50% in a bid to encourage Botswana’s capital markets. If the rumours are true and the government increases the limit, it may encourage more new listings on the Botswana Stock Exchange. However, it may also damage returns on pensions, while undermining the credibility of Botswana as a liberal investment environment.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 1999 22 Lesotho

Lesotho

Political structure

Official name Kingdom of Lesotho

Form of state Monarchy

Legal system Based on Roman-Dutch law

National legislature Bicameral National Assembly elected according to the terms of the 1993 constitution; 80 elected members in the lower house; 33 non-elected members in the upper house (Senate), 11 of whom are nominated by the king on the advice of the prime minister, plus the 22 principal chiefs of Lesotho. The Interim Political Authority (IPA), established in November 1998 to oversee preparations for the next election, consists of 24 members, representing 12 political parties. Agreement has been reached for a revision to the framework of the lower house following the 2000 election, with 80 members elected on a first-past-the-post basis, and 50 members elected on the basis of proportional representation. Subsequent elections will have a 50:50 split between members elected on the basis of first-past-the-post and proportional representation (see The political scene)

National elections May 1998 (legislative); a recent political agreement calls for a new poll to be held by April 2000, although delays are likely Head of state Monarch; the succession is governed by custom; King Letsie III was sworn in on February 7th 1996 and crowned on October 31st 1997

National government Prime minister and a 16-member cabinet, last reshuffled in August 1999 Main political parties Party political organisation was legalised in May 1991. The main parties include: Lesotho Congress for Democracy (LCD, the ruling party); Basotholand Congress Party (BCP); Basotho National Party (BNP); Marematlou Freedom Party (MFP); Kopanang Basotho Party (KBP); Popular Front for Democracy (PFD); Progressive National Party (PNP); Lesotho Labour Party (LLP); Communist Party of Lesotho (CPL)

The government Prime minister, defence & public services Pakalitha Mosisili Deputy prime minister, minister of finance & development planning Kelebone Maope

Key ministers Agriculture, co-operatives & land reclamation Vova Bulane Communications Nyane Mphafi Education Lesao Lehohla Employment & labour Notsi Molopo Environment, gender & youth Mathabiso Lepono Foreign affairs Tom Thabane Health & social welfare Tefo Mabote Industry, trade & marketing Mpho Malie Justice, human rights, law, constitutional affairs & rehabilitation Shakhane Mokhehle Local government & home affairs Mopshatla Mabitle Natural resources Monyane Moleleki Prime minister’s office Sephiri Motanyane Tourism, sports & culture Hlalele Motaung Works & transport Mofelehetsi Moerane

Central Bank governor Stephen Swaray

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 1999 Lesotho 23

Economic structure

Latest available figures Economic indicators 1995 1996 1997 1998a 1999a GDP at market pricesb (M m) 3,384 4,040 4,715 4,849 5,528 Real GDP growthb (%) 6.1 9.7 4.1 –8.6c 4.5 Consumer price inflation (av; %) 9.2 9.3 8.5 7.8c 9.1 Population (m; mid-year) 2.03 2.08 2.13 2.20 2.25 Exports fob ($ m) 160 187 196 193d 200 Imports fob ($ m) 985 999 1,024 866d 910 Current-account balanceb ($ m) –323 –303 –269 –280d –315 Reserves excl gold (year-end; $ m) 457 461 572 575d 515 Total external debt ($ m) 659 654 660 675 683 External debt-service ratio, paid (%) 6.9 6.1 6.4 6.5 6.5 Migrant miners (‘000) 103.7 101.2 96.5 76.1c 65.0 Exchange rate (av; M:$) 3.627 4.299 4.608 5.528d 5.952

December 20th 1999 M6.14:$1

Origins of gross domestic product 1998b % of total Components of gross domestic product 1998be % of total Agriculture 16.6 Private consumption 111.9 Industry 37.3 Public consumption 19.4 Manufacturing 16.5 Gross domestic investment 47.9 Construction 19.1 Exports of goods & services 26.4 Services 46.1 Imports of goods & services –105.6 GDP at factor cost 100.0 GDP at market prices 100.0

Principal exports fob 1998c $ m Principal imports cif 1995c $ m Manufactures 144 Capital goods 368 Food & live animals 8 Food 328 Wool & mohair 4 Fuel & energy 216 Total incl others 193 Total incl others 1,168

Main destinations of exports 1998c % of total Main origins of imports 1997c % of total Southern African Customs Union 65.1 Southern African Customs Union 89.6 North America 33.8 Asia 7.4 EU 0.7 EU 1.5 a EIU estimates. b Fiscal years starting April 1st. c Official estimates. d Actual. e Revised IMF data show that both private consumption and imports were greater than GDP in 1998 owing to a combination of two factors: migrant workers’ remittances from South Africa used for private consumption domestically (largely on imports); and high levels of imports used for the Lesotho Highlands Water Development Project (LHWDP), which is primarily externally financed.

Outlook for 2000-01

Delays in the election Despite considerable confusion over the signing of the election agreement timetable will not between the government of Lesotho, the Commonwealth, the UN and various be serious— states of the Southern African Development Community (SADC), it was finally ratified by all the parties in early December 1999. While the delay means that the election will probably not be held until June, more serious setbacks are not anticipated. The postponements do not represent, as some critics of the Lesotho Congress for Democracy (LCD) have suggested, a deliberate strategy to stop the election going ahead in 2000. Instead, the government will be able to justify the alterations to the timeframe as necessary for the full clarification of a range of technical issues outlined in the agreement, such as the role of foreign troops in the process and the need to ensure proper voter registration and education. In particular, it will argue that running a comprehensive voter education campaign is essential if the problems of the last election are to be avoided, especially as the forthcoming poll will see the introduction of voting through proportional representation for 50 of the seats in the new parliament. But it will not be able to delay the process by more than a couple of months, given the strong international pressure that is now building to ensure that the election goes ahead.

—as the LCD will be Given its strong position, there is little reason for the government not to push confident of victory— ahead with the election. While the opposition will almost certainly win far more seats in the new parliament than previously, the LCD will still have no problem in winning an overall majority. Moreover, its position will be greatly enhanced by having gained victory in an election that is likely to be much more widely accepted by the electorate than the last one.

—but the new parliament The main problem facing the new parliament is that with 130 seats it will be a will be unwieldy large and unwieldy body hindered by internal divisions and obscure factions. In fact, the current parliament, which has 80 seats, is probably already too large for the size of the country. By comparison, parliament in Botswana has only 40 elected seats, and while Lesotho’s slightly larger population may justify 50-60 seats, it is difficult to put forward a case for having many more than this. One argument is that there will be a better chance that even small parties will be able to win a seat, especially through seats designated according to proportional representation. This will increase the chance that the election results are acceptable to all the various factions of the politically active elite in the kingdom. However, this argument does not in any way offset the problems and delays that will arise from the bloated nature of the lower house.

Much work remains in The dangers of the election producing a parliament in which no workable kick-starting the majority can be built to form an effective government cannot be overstated. economy— Although the current LCD government has produced a number of well thought-out policy initiatives since the political unrest of September 1988, these have not really produced any concrete results to date. Instead, potential investors have generally been content to sit back and wait until a new election has been conducted in a peaceful and orderly fashion before re-committing themselves to the kingdom. The only exception to this has been the on-going

privatisation of a number of parastatals and the progress made in restarting the diamond mining industry in the country. However, the inability to attract investment in a wider range of sectors, particularly the export-oriented manufacturing sector which had been so dynamic prior to the unrest, has left the country in a state of economic drift at a time of rapidly rising unemployment due to the on-going retrenchment of migrant mine workers in South Africa, declining construction activity associated with the Lesotho Highlands Water Development Project (LHWDP) and the general slowdown in the economy as a result of the political unrest. Whoever wins the elections will need to take early and decisive steps to build on the initiatives made by the current LCD government to attract foreign investors back into the kingdom. As such, it will not want to be dragged into protracted policy debates in parliament, especially as many of the reforms required, notably further privatisation and liberalisation of the economy, are likely to be unpopular with the electorate.

—and there is a need for The need for the government to act quickly and decisively on the economy decisive economic policy after the election is also being driven by other long-term factors, which could initiatives to be made–– eventually prove more important than those causing the current economic malaise. The most notable of these are the coming into effect of the EU-South Africa free-trade agreement in January 2000 and long-term changes to the current Southern African Customs Union (SACU) agreement. Although the two events are unrelated, they are both likely to affect the economy of Lesotho in a similar fashion. At present, around 50% of government revenue is derived from SACU customs payments, but this will be substantially reduced as a result of the South African-EU trade pact (via lower tariffs in general) and as a result of the renegotiation of the SACU agreement (via a reduction in the compensation element). Although the impact of both factors will not start to be felt until 2003-04 at the earliest, a government that wins the election in mid-2000 will still need to act quickly to develop alternative sources of income if it is to ensure that there is no sudden drop-off in its revenue in four to five years’ time.

—but the key for the In the short term, the key to turning the economy around is a successful economy is a successful election. If the vote can be carried out in an orderly fashion with all parties election abiding by the results without any violence, then there is a good chance that investment into the country’s textile and electronic export-oriented manufacturing sector will re-start. Coupled with the impetus given to the economy by privatisation, a pick-up in activity in other small sectors such as mining and tourism and modest construction activity provided by the LHWDP, the outlook for the economy could improve dramatically.

A turmoil-free election Fortunately there are strong indications that the election will be successful and looks likely— peaceful. Despite the delays in the signing of the election agreement, the current LCD government has little choice but to push ahead and has nothing much to fear from pursuing such a strategy. Moreover, there is now enough external support for the process to ensure that it will not backslide. The strong external influence should also provide the opposition parties with confidence that the ballot will be as free and fair as possible. Other positive developments

are recent moves to create some broader cross-party alliances by the opposition (4th quarter 1999, page 26), which should enable them to mount a more effective campaign and ensure that the opposition vote will be less divided. This greater unity, coupled with the introduction of proportional representation for some of the seats in parliament, should enable them to obtain enough seats to feel included in the new political structure. While the EIU expects the LCD to win the election, what is not clear is the scale of its majority. If it is only narrow, then the size and composition of the new parliament is likely to pose a severe constraint on its ability to work effectively and push through difficult but urgently needed economic policy initiatives.

—although the army Although it is unlikely that the election will result in a new bout of violent should never be ruled political unrest, this is not an outcome that should be excluded altogether. out entirely With the mutiny trial of the 50 junior military officers allegedly involved in the unrest in September 1998 still ongoing, political tension within the army will remain high in the run-up to the election. It is not implausible that the country could descend into political chaos again if another group of junior officers felt that the trial of their colleagues was particularly unfair, prompting them either to stage their own coup or organise a strong show of protest against the court martial. This time, however, neighbouring SADC states would be far readier to intervene to restore order and much better prepared for the circumstances and conditions that they will face. Moreover, since the army is well aware that the SADC intervention force would return quickly in such circumstances, it will be extremely unwilling to act without a very pressing reason.

The political scene

The electoral model to be On October 15th the Interim Political Authority (IPA) voted in favour of an used is agreed— electoral model under which 80 seats are determined on a constituency basis with a first-past-the-post vote. In addition, 50 additional seats will be allocated to parties on the basis of their national vote, or via proportional representation—the outcome that was forecast by the EIU (4th quarter 1999, page 23). On 10th December a memorandum of agreement between the government and the IPA was signed, which officially recognised the model (see box) and outlined that following the 2000 election, subsequent elections would work on a parliamentary mix ratio of 50% of the seats decided on a first- past-the-post basis and 50% based on proportional representation. The memorandum also agreed to appoint a group to review the preparations for the forthcoming election to ensure a thorough and transparent electoral process and advise on a realistic timetable.

The IPA is now actively working with the EU representative in Lesotho, Richard Zink, to obtain funding to help in the voter registration process. In addition— and extremely importantly, given the changes to the voting methods—the EU will help fund a country-wide voter education programme.

Key features of the agreement between the government of Lesotho and the IPA

• The model for the 2000 election will work on the basis of 80 constituency seats awarded on the basis of first-past-the-post and 50 awarded on the basis of proportional representation. Subsequent elections will work on a 50:50 mix ratio.

• No timetable for the election will be set, but the provisional timetable previously outlined by the Interim Political Authority (IPA)––with elections to be held in April–– will be replaced. Instead, the Southern African Development Community (SADC) extended troika—Botswana, Mozambique, South Africa and Zimbabwe—and the Commonwealth will, in consultation with political parties in Lesotho, appoint an expert group to review the state of existing preparations and propose a realistic timetable based on these.

• A Joint Implementation Committee, consisting of both the government and the IPA, will ensure that all aspects of the agreement are implemented. There will also be a government-IPA contact group to allow the IPA to deal directly with the prime minister over issues arising from the implementation of the agreement.

• The existing members of the Independent Electoral Commission will be retired immediately and replaced with new members, including two international experts.

• A Security Liaison Committee will be established to ensure that the election can go ahead within the best possible security environment. It will have an SADC official attached to it who will help in bringing all the interested parties together.

• A Joint Committee on the Media will be established to ensure equitable access for all parties to the state-owned media and that there is no sensational or inaccurate reporting.

—and further delays will Now that the agreement has finally been signed, we do not anticipate a serious not be serious set-back to a smooth election in the first half of 2000. The moral guarantors of the agreement not only include the prime minister of Lesotho, Pakalitha Mosisili, but also the president of Mozambique and chairman of the SADC, Joaquim Chissano, as well as the Commonwealth Secretary General, the UN Resident Co-ordinator and the Secretary-General of the Organisation of African States (OAU). With such heavyweight support for the agreement, it is difficult to see the government of Lesotho backing away from its implementation. In addition, the ruling Lesotho Congress for Democracy (LCD) is well placed to win the election and can therefore only benefit from having a more legitimate mandate for its rule than it currently has.

A joint committee on the An interesting feature of the agreement is a plan to establish a Joint Committee media will regulate on the Media. This will perform two main tasks. It will seek to ensure that all the press— parties competing in the election have equitable airtime on the country’s radio stations and will also be mandated to ensure that the media avoid making inflammatory statements during the election campaign. This is a significant development, given that in many countries in Southern Africa a vibrant but

immature press frequently oversteps the mark when publishing stories without necessary factual evidence to support them. A good example of this are recent claims made in the local newspaper Mopheme (The Survivor), which reported that the LCD was pushing ahead with plans to establish a secret militia body, to be called ICE-Maluti, to quell opposition activities after the election. Moreover, in a completely inappropriate comparison it likened the new body to the notorious Fifth Brigade in Zimbabwe, which captured and tortured hundreds of Zimbabweans in Matebeleland in the late 1980s. Not only did the newspaper have very little evidence to support such a claim, bar one supposed “highly placed informer”, but releasing such stories and presenting them as a fact in the run-up to the election creates an environment of extreme tension in view of the recent political turmoil. This is especially the case in light of the past history of military rule in the kingdom, when the army actually used such hit squads to curtail opposition activities.

—and the government has There are a variety of other features in the agreement designed to ensure that commited itself to working the electoral process runs smoothly. These include a commitment by the with the IPA government to work in co-operation with the IPA to ensure that the timetable is implemented as agreed. Two Commonwealth officials will also sit on a new electoral commission to ensure that the elections are conducted in as free and fair manner as possible. The establishment of a security liaison committee has been proposed, which would include representatives of all the political parties contesting the elections, as well as the Lesotho army. There has also been a proposal for the establishment of a contact group, consisting of high-level members of all political parties, which will have immediate access to the prime minister should any serious bottlenecks arise in the election timetable.

A new parliamentary Not surprisingly, with all the wranglings in preparation for the election, most speaker is appointed other political issues in Lesotho have taken a back-seat. However, the incumbent deputy speaker in parliament, Ntlhoi Motsamai, was unanimously elected to the post of speaker to replace the Dr John Teboho, who died halfway through the year while on an official trip to Ghana. In addition, the country’s long-serving Director of Public Prosecution, Siphosihle Mdhluli, has resigned. Although there does not seem to be an obvious cause for his resignation, in recent years his relationship with the government had become increasingly difficult, especially over the conduct of the two major trials that are running in the kingdom: the court martial of 51 members of the Lesotho Defence Force (LDF) charged with mutiny following the political unrest in September 1998, and the trial 33 of members of the Lesotho Mounted Police Force charged with high treason and sedition in contravention of the Internal Security Act of 1984.

Mr Mdhluli’s resignation comes at a difficult time, not only with the above two cases still outstanding, but also with the government pushing ahead with the on-going prosecution of the former chief executive of the Lesotho Highlands Water Development Project (LHWDP), Masupha Sole, on 14 counts of fraud, which provided him with personal gains in the order of M12m (see Economic policy and the economy). Although the resignation will not affect the immediate progress of any of the cases, the loss of Mr Mdhluli will mean that the government is increasingly dependent on South African lawyers to push

ahead with the three cases and a new DPP is unlikely to be appointed until well into 2000. While there has been considerable progress in the government’s attempts to prosecute Mr Sole, the other two trials have become bogged down in recent months. However, this does not seem to be a deliberate attempt by the government to drag out the cases. Instead, it is simply the result of the large number of accused in each case, all of whom have presented substantial evidence in their own defence, as well as the reliance on South African lawyers, who have often had to return to the their homes for extended periods during the trials. While the last defence witness in the police high treason case has now presented his evidence and the trial may quickly head towards a verdict, the army mutiny trial will not end until well into 2000.

Economic policy

Major economic policy With all attention focused on political developments in the kingdom, and with shifts are unlikely until the government and most investors unwilling to make any major policy after the elections announcements or key decisions prior to the election, it has been an extremely quiet period for the economy. Moreover, this is a situation that unlikely to change substantially until the election has passed off quietly in 2000.

Investors will await the Although the economy has bounced back somewhat in 1999 as economic outcome of the election activity has begun to return to normal, the economy of Lesotho is still in a deep economic malaise, with very little new investment expected until after the election. Although the downturn was initiated by the political unrest, it has been compounded by the on-going fall in employment of Basotho working in the South African mining industry as well as the tapering off of construction activity at the Lesotho Highlands Water Development Project (LHWDP).

In addition, the long-term decline of the agricultural sector has had a negative impact. Already this year officials in South Africa are warning that the central plateau of South Africa, including an area which extends into the south and west of Lesotho, is in danger of being hit by a major drought, which may be as serious as the one that struck the region eight years ago. The drought would come at a bad time, with high levels of rain run-off already causing major erosion problems from the rivers which have their origins in the Lesotho highland. It will, however, help the government in its efforts to cut back the country’s livestock herds in an effort to reduce overgrazing in upland areas.

The World Bank assists in In a very unusual move the World Bank has said that it will provide financial LHDWP corruption support to the justice department of the Lesotho government so that it can investigations continue to pursue the case against the 12 international construction companies alleged to be linked to the LHWDP corruption scandal uncovered in July (4th quarter 1999, page 25). The World Bank, which has supported the LHWDP with loans of around $150m, also announced that it would be conducting an internal investigation into the project, including the question whether Bank staff was involved in the payment of bribes.

The Maluti Tourism Forum Given that Lesotho has no coastline and only limited wildlife, it is difficult to is established see the kingdom every really capturing a significant share of the tourism market in Southern Africa. However, tourism could develop as a viable and profitable niche sector in the economy and become an important source of income and employment. To help promote tourism, the Maluti Tourism Forum has been launched to promote tourism in not only Lesotho but also in the Free State and parts of the Northern Cape province. Both provinces have similar difficulties in attracting tourists, but a combined marketing initiative could encourage South African tourists and some from overseas.

There will be free standard In an attempt to raise education standards and encourage more children to go one primary education to school, the Ministry of Education announced that free education will be from January 2000 introduced for all standard one pupils from January 2000. This move marks a major change in the direction of government policy, which had previously been committed to charging user fees in order to help widen the government‘s revenue base and ensure that the electorate is aware of the cost associated with providing the service. However, the government has a pressing need to reverse declining enrolment rates if it wishes to promote Lesotho as an attractive location for investors with a literate and educated workforce.

A new telecommunications bill, presented to parliament in November, includes plans to restructure and redevelop Lesotho’s troubled telecommunications industry. The initiative will include the privatisation of the insolvent Lesotho Telecommunications Authority (LTC), which currently dominates the sector, into a regulatory public company in which citizens will be free to purchase shares. The initiative will aim to improve service and competitiveness and will inevitably include the retrenchment of a significant number of LTC’s 785 staff. At this stage Nyane Mphafi, the minister of communications, has not announced a timeframe for the initiative.

The domestic economy

Inflation is falling Latest data from the Central Bank of Lesotho show that the inflation rate has fallen yet again to 9.3% in the second quarter of 1999. This trend is not surprising, given the relatively depressed state of the economy and the fact that inflation in South Africa, the source of most of the country’s imports, is now below 5%. However, in the event of a serious drought the inflation rate may not fall as quickly towards the South African rate as might be expected under normal circumstances.

Lesotho: consumer prices (% change, year on year) 1998 1999 Jan Apr Jul Oct Jan Apr Jul Lesotho 7.9 7.3 6.7 9.1 9.8 8.9 n/a South Africa 5.6 5.0 6.6 9.0 8.6 7.7 4.9 Source: Central Bank of Lesotho.

AIDS is rapidly becoming Although Lesotho has a much lower incidence of AIDS than other countries in a problem Southern Africa, the number of reported cases is growing very rapidly. The high growth rate of AIDS cases can partly be blamed on the ongoing retrenchment of Basotho migrant mine workers, many of whom have contracted AIDS in South Africa and are now returning to Lesotho. Because of the relatively lower rates of infection the problem is only just beginning to be tackled by the government with a wide-scale publicity campaign, and the scale of the problem will therefore get much worse before it can improve.

Lesotho: the incidence of AIDS in Southern Africa

Adults Estimated Estimated adult & children living no. of Country prevalence (%) with AIDS (no.) orphans Botswana 25.1 190,000 25,000 Lesotho 8.4 85,000 8,500 Namibia 19.9 150,000 7,300 South Africa 12.9 2,900,000 180,000 Swaziland 18.5 84,000 7,200 Sources: UNAIDS and World Health Organisation.

GDP declined in 1998 New economic data recently published by the IMF in its staff country report for Lesotho and by the Central Bank of Lesotho in its 1998 Annual Report show that GDP in 1998 was virtually unchanged in nominal terms, but fell by an estimated 8.6% in real terms from 1997 to 1998.

Lesotho: gross domestic product by type of activity (M m) 1997 1998 Primary sector 702.5 752.9 Secondary sector 1,740.5 1,658.7 Manufacturing 693.9 741.4 Electricity & water 316.6 324.7 Building & construction 726.4 588.7 Mining 3.7 3.9 Tertiary sector 1,774.1 1,850.8 Wholesale & retailing 380.3 345.3 Catering 57.4 55.1 Transport 109.2 112.4 Finance & insurance 124.7 127.0 Real estate 276.1 296.7 Public administration 363.8 405.8 Education 373.6 409.2 Health 81.7 89.5 Other 7.3 9.8 GDP at factor cost 4,217.2 4,262.4

Source: IMF, Staff Country Report No. 99/84.

Looking more closely at the causes of this decline, it is apparent that the construction subsector (both the LHWDP and other projects) and the wholesale and retail subsectors contributed most heavily to the decline. The downturn is marginally lower than the 9.7% decline that was originally

predicted by a mission of World Bank and the UN Development Programme (UNDP), which tried to provide a provisional assessment of the impact of the political unrest. Moreover, it is likely that the fall may be even less steep when the Central Statistics Office produces its own final data for the year.

The sale of Lesotho Bank The government has now completed the sale of Lesotho Bank to Standard is completed Bank of South Africa, which trades under the name Stanbic. The old Lesotho Bank, which will now be officially called Lesotho Bank 99, will be 70% owned by the Standard Bank of South Africa and 30% by the government of Lesotho. At the ceremony to conclude the sale the governor of the Central Bank, Stephen Swaray, noted that as well as looking into ways to ensure that citizens could buy the government’s 30% shareholding, the government was also planning to establish an oversight committee to monitor the bank’s performance in the next few years. The government is now said to be working towards the privatisation of Lesotho Agricultural Development Bank, which was under liquidation shortly before last year’s political crisis. The kingdom’s agro-industries are also being considered for privatisation.

The Letseng diamond mine In November the prime minister, Pakalitha Mosisili, attended the official re- will resume production opening of the Letseng diamond mine. Mr Mosisili used the occasion to give in 2000 further impetus to the government’s campaign to promote the country as an attractive location for foreign investment. He asked the Basotho to develop a more positive attitude to foreign investors and the employment that such investment provides in the country.

Further details about the mine’s financial backing have now emerged. The Letseng mine is to be 24% government-owned, with the remaining 76% shared on 50-50 basis between Letseng Diamonds Limited and New Mining Corporation of South Africa, which is part of the JCI Group. The mine will initially be operated on a ten-year lease, which is renewable to 25 years depending on the output of the mine. The group is planning to invest $20m in the mine over the initial ten-year period. Work on rebuilding the mine’s infrastructure will begin by January 2000, but production will not actually start until late 2000. Mr Mosisili also stated that the government is actively considering proposals to open two other diamond mines at Kao and Liqhobong next year (2nd quarter 1999, page 30).

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 1999 Quarterly indicators and trade data 33

Quarterly indicators and trade data

Botswana: quarterly indicators of economic activity 1997 1998 1999 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr Prices Consumer price index (1995=100) 122.7 124.3 127.1 128.6 130.2 133.0 136.2 137.8 % change year on year 8.2 7.5 6.9 6.0 6.1 7.0 7.2 7.2 Financial indicators Exchange rate: P:$ (av) 3.763 3.856 3.965 4.661 4.423 4.613 4.653 4.623 P:$ (end-period) 3.810 3.905 4.329 4.484 4.458 4.673 4.628 4.533 M1 (end-period; P m) 1,038 1,282 1,415 1,547 1,513 1,646 1,783 n/a % change year on year 9.1 24.0 30.5 39.5 5.8 28.3 26.0 n/a Foreign trade and reserves Exports fob (qtrly totals:P m) 2,720 2,523 2,218 2,781 1,269 1,799 n/a n/a Imports cif (qtrly totals; Pm) 2,287 2,261 2,178 2,352 3,013 2,541 n/a n/a Reserves excl gold (end-period; $ m) 5,740 5,982 5,917 5,824 6,025 5,742 5,802 5,769

Note. Annual figures for most of the series shown above will be found in the Country Profile.

Source: IMF, International Financial Statistics.

Lesotho: quarterly indicators of economic activity 1997 1998 1999 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr Prices Consumer price index (1995=100) n/a n/a n/a 125.2 129.1 132.1 134.1 136.8 % change year on year n/a n/a n/a n/a n/a n/a n/a 9.3 Financial indicators Exchange rate: M:$ (av) 4.644 4.807 4.950 5.174 6.210 5.779 6.085 6.129 M:$ (end-period) 4.662 4.868 5.035 5.867 5.873 5.860 6.190 6.036 M1 (end-period; M m) 720.0 762.4 829.6 822.2 844.1 968.0 93.8 953.8 % change year on year 25.4 20.5 29.3 23.4 17.2 27.0 21.5 16.0 Foreign trade and reserves Exports fob (qtrly totals; M m) 247 239 202 280 286 304 205 n/a Imports cif (qtrly totals; M m) 1,157 1,285 1,151 1,399 1,007 1.142 1,062 n/a Reserves excl gold ( end-period; $ m) 574.7 571.7 604.6 559.6 586.4 575.1 410.1 520.0

Note. Annual figures for most of the series shown above will be found in the Country Profile.

Source: IMF, International Financial Statistics.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 1999 34 Quarterly indicators and trade data

Botswana: structure of trade (P m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Imports cif 1996 1997 1998 Exports fob 1996 1997 1998 Food, beverages & tobacco 968 1,033 1,293 Beef 280 248 313 Mineral fuels 366 465 528 Diamonds 5,272 7,675 6,243 Chemicals, incl rubber prods 587 749 892 Copper-nickel 412 343 307 Wood & paper products 420 512 609 Vehicles 806 1,059 966 Textiles & footwear 427 533 634 Total incl othersa 8,142 10,391 10,287 Metals & products 506 881 1,052 Machinery 919 1,453 1,733 Transport equipment 807 1,648 1,965 Total incl others 5,729 8,255 9,829 a Source: IMF.

Source: Bank of Botswana.

Botswana: direction of trade (P m) Imports cif Export fob Jan-Dec Jan-Dec Jan-Dec Jan-Deca Jan-Dec Jan-Dec Jan-Dec Jan-Deca 1995 1996 1997 1998 1995 1996 1997 1998 SACU 3,925 4,474 5,982 6,972 1,277 1,490 1,485 1,333 Zimbabwe 293 329 368 418 182 251 383 343 Other Africa 18 23 38 61 49 51 114 102 UK 135 147 163 161 2,223 4,424 5,840 5,240 Other Europe 319 241 580 915 2,147 1,827 2,444 2,193 South Korea 378 250 785 699 n/a n/a n/a n/a US 107 74 89 152 52 78 102 91 Total incl others 5,307 5,735 8,256 9,839 5,942 8,142 10,391 9,324 a Estimate.

Source: IMF, Botswana, Selected issues and statistical appendix.

Lesotho: structure of exports, fob (M m) Jan-Dec Jan-Dec Jan-Dec 1996 1997 1998 Food, beverages & tobacco 35.4 46.1 45.2 of which: cereals 9.2 18.0 19.4 Wool 22.7 23.5 21.0 Clothing 368.8 403.4 472.2 Footwear 153.1 177.4 253.6 Other manufactures 220.3 246.4 202.7 Total incl others 812.1 903.8 998.5 Source: IMF, Lesotho, Recent economic developments and selected issues.

EIU Country Report 1st quarter 2000 © The Economist Intelligence Unit Limited 1999 Quarterly indicators and trade data 35

Lesotho: direction of trade (M m) Imports cifa Export fob Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec 1995 1996 1997 1998 1995 1996 1997 1998 SACU 3,621.3 4,417.7 4,687.1 4,408.0 299.6 562.6 580.0 652.9 Taiwan 114.8 154.5 192.1 183.5 n/a n/a n/a n/a EU 85.3 55.4 87.5 40.5 53.8 43.6 11.7 7.4 UK 15.2 14.5 43.1 23.1 n/a n/a n/a n/a US 15.1 14.2 18.6 34.7 218.3b 198.5b 308.4b 333.1b Total incl others 3,994.7 4,815.6 5,253.5 4,915.7 580.6 812.1 902.5 998.7 a Excluding donated food. b May include Canada.

Source: IMF, Lesotho, Recent economic developments and selected issues.

Botswana and Lesotho: UK trade (£ '000) Botswana Lesotho Jan-Sep Jan-Sep Jan-Sep Jan-Sep 1998 1999 1998 1999 UK exports fob Food, drink & tobacco 8 2 0 81 Chemicals 423 436 34 49 Textile yarn, fabrics & manufactures 824 17 0 39 Non-metallic mineral manufactures 2,655 1,580 1 0 Iron & steel 161 9 1 0 Metal manufactures 58 101 74 3 Machinery incl electric 3,180 8,234 370 137 Transport equipment 1,440 964 25 61 Clothing 214 90 173 90 Scientific instruments etc 484 888 14 35 Total incl others 14,990 16,169 735 607 UK imports cif Meat & preparations 15,460 14,086 0 0 Crude fertilisers & minerals 47,793 188 0 0 Non-metallic mineral manufactures 181 267 0 0 Machinery & transport equipment 1,215 1,459 1 0 Clothing 941 400 0 0 Total incl others 66,652 16,809 1 0 Source: UK HM Customs & Excise, Business Monitor, MM20.