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The presentations covered the current developments in the restructuring of the following enterprises:

 Lesotho Flour Mills
 Lesotho Brewing Company
 Lesotho Utilities Sector Reform Project
 Lesotho Unit Trust
 Lesotho Highlands Abattoir
 WASA Sanitation Services
 Marakabei Lodge
 Privatisation of 16 Agricultural Enterprises

The following is a list of questions that were posed by participants during the Workshops:

a) Why do the value of the investments decrease in South Africa?

Most big companies in South Africa have listed with the stack exchange. When the price of a share of company goes up, that is, when the perception of the performance of a company is positive and more investors buy the shares of that company, its price share price goes up. In the same way, when the perception of the company is negative, say, the managing director leaves or the company management is involved in dubious practices, investors lose confidence in the company and sell their shares. So the shares price goes down and shares lose their value. This results in investors still investing in the company end up losing all their investments. Hence the reason why in the case of LUT the investment is diversified, that is spreading the investments to minimize losses and thereby minimise risk.

b) Is the policy of M500 electricity connection fee still going on?

The policy has been suspended due to cash-flow problems of LEC. One has to pay cash upfront for immediate connection, otherwise it means opting for M500 deposit will result in delays for the customer. It is hoped that a strategic investor will be found soon who will have resources to finance more connections.

c) Is our electricity still being generated in Lesotho?

Yes. Our electricity is currently being generated in Lesotho at ‘Muela Hydropower Station. But in case the demand is more than ‘Muela can handle, ESKOM supplies Lesotho with the shortfall.

d) Among the companies being envisaged to take over the restructured LEC, will ESKOM be included as one of the bidders?

Eskom Enterprises was among the foreign companies that expressed interest as potential bidders for purchase of LEC, and there is likelihood that it will be included as a bidder with the revised scheme of Public Service Concession of LEC.

e) Are you aware of complaints concerning LEC?

LEC has a public relations office whose function is to attend to queries or complaints
by customers. One of the functions of the recently established Lesotho Electricity Authority is to address problems of service and tariffs that will be set by the Authority. So complaints by the customers can be directed to the Authority.

f) The Advisor who has recently been appointed, where does he come from and why was selected there are so many Basotho who are qualified for the job?

The recently appointed Advisor is a South African who was selected among 24 candidates who had applied for the vacancy. This position is being funded by the World Bank and one of the conditions was recruitment should be by international competitive bidding. The reason for selecting a foreigner in this case was to ensure that the best qualified candidates apply as the job entails advising the Authority on best world practices and also transferring the skills to Basotho.

g) Why were Basotho butchers not given assistance to take over the National Abattoir and the Feedlot?

Although the Government has the interests of Basotho at heart, it was important that potential investors show their financial commitment to invest in the enterprise as well as the ability to continue the operations of the Abattoir. That is one way of assessing the seriousness of the potential investor. Unfortunately several attempts were made to advertise the enterprise but the interest seemed to be lacking.

h) Is it possible for Monontsa village be included in the first phase of the pilot scheme for rural electrification?
Attempts were made to inquire from the Department of Energy as to whether Monontsa village could be included as one of the pilot sites for the first phase of the Rural Electrification Programme. DOE is aware that Monontsa village has a potential for business development through the rural electrification pilot scheme.

i) Can you elaborate on the privatization of Lesotho Bank and the Lesotho Agricultural Development Bank?

Lesotho Bank was privatised because it was incurring losses that required financial support of an estimated M20 million a month and the Government had to shoulder the burden of subsidising it. The status of the Bank at takeover included missing physical records or in state of disarray; inaccurate account information; low staff morale; lack of service ethic; and disregard of routine compliance. As far as the Lesotho Agricultural Development Bank was concerned, the loan portfolio was being contaminated as far back as 1990. The situation continued despite repeated warnings from the Central Bank to address the problem. By 1997, the Bank had become technically insolvent – its liabilities were far in excess of its assets. The situation of the Agricultural Bank had deteriorated to an extent that it was not in a position to honour claims on it by its creditors including depositors. By 1998, the Government was injecting funds into the bank to the tune of M2 million per month in order to enable it sustain its operations.

j) Privatisation brings poverty through high tariffs, retrenchments and foreign labour?

That is not accurate. The tariffs that were charged before the restructuring of enterprises were heavily subsidized by the Government of Lesotho to enable the enterprise to charge lower tariffs. But unfortunately this led to a dependency syndrome of the enterprises to expect annual subsidies from the Government. In other words, the tariffs were artificially kept low. But it has been found that this policy needs to be revised to charge cost reflective tariffs because even the cost of operating the enterprises keep going up, that is, staff salaries, vehicle petrol and so on.

Retrenchments are caused by the fact that the enterprise has reached a saturation point whereby it is unable to expand and so bring in revenue into the company to pay for the staff salaries. The previous policy of the Government to hire staff in these enterprises without due consideration of their value added to the company also led to the problem. This meant the companies were hiring 5 people for the job of one person and this was another source of overstaffing of the enterprises. What restructuring of enterprises is targeting is the capital investment that is brought by potential investors and the accompanying expertise. Unfortunately this is usually perceived by Basotho as foreign labour.

k) Is there any alternative to privatization of enterprises whereby improvements could be made before the restructuring of enterprises so that the enterprises remain in the control of the state?

This would be highly unlikely because the Government does not have the necessary capital investment resources and the expertise in some cases to inject into the company in order to turn it around. It is important to remember that one of the objectives of restructuring by privatization of the enterprises is to attract the much-needed capital investment and management into the companies that the Government lacks.

l) We have heard that for the wool sheds we all pool our resources as farmers to buy the enterprises at M34 million.

It would be advisable for farmers in Semonkong to pool their money together and approach the Ministry of Agriculture as an association to request advice on the processes to be followed to lease the Semonkong Woolshed.


m) What is happening with the privatization of WASA Sanitation Services?

The Government is still engaged in on-going discussions with the potential investor CEFAS Enterprises regarding the take-over of WASA Sanitation Services. The discussions are mainly focused on addressing challenges faced by the potential investor regarding the operating methods that would ensure the sustainability of the WASA Sanitation Services at an acceptable level.