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Lesotho Airways
Corporation (LAC) |
LAC was founded in terms of the Lesotho Airways Order No. 50 of 1970
and commenced operations in 1971. This 100% Government owned
Corporation provided nationally and internationally air transport.
The Government policy objectives for privatisation of LAC were to
eliminate the fiscal burden and to sell a controlling interest in
LAC to a strategic partner capable of providing adequate services.
LAC was sold to Rossair Contracts (Pty) Ltd in 1997, following
normal privatisation procedures stipulated in the Privatisation Act
of 1995 and its Regulations. A new company Air Lesotho was
registered to operate domestic and international routes of LAC in
accordance with the applicable laws and was designated Lesotho Flag
carrier.
Air Lesotho ceased its operations in February 1999. |
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International Freight
and Travel Services (IFTS) |
IFTS was 100 % owned by the Government through Lesotho Bank and
Government’s policy for its privatisation included improvement of
efficiency by introducing full private ownership, Basotho
participation and elimination of subsidies.
IFTS operated 3 distinctive businesses under the following trade
names: Avis Rent-A-Car; American Travel Express and Freight
Services.a)
Avis Rent-A-Car
Avis rent-a-Car was sold to Avis Southern Africa in 1998. A new
company was registered named Zeda Car Rentals Lesotho (Pty) Ltd
whose minority shareholding of 20 % is owned by a Mosotho while Avis
Southern Africa retained 80 % shareholding of the company.
b) American Express Travel
American Express Travel is under liquidation by Naledi Chambers.
c) Freight Services
Freight Services is under liquidation by Naledi Chambers. |
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Lesotho Flour Mills (LFM) |
 The Lesotho Flour Mills, which was 100 % owned by Government, was
established as a trading account under the Finance Act of 1975. The
policy objectives for privatisation of LFM were to improve
efficiency of LFM by introducing a technical partner, and to
introduce Basotho participation and LFM employees to own shares in
the enterprise.
A technical partner, Seaboard Overseas Limited and Saxonvale
Investments Limited, bought the 51 % majority shares of LFM in 1998.
Of the 49 % that is retained by Government, 39 % is reserved for
Basotho participation through either the Lesotho Unit Trust or any
other means, while the remaining 10 % is reserved for Employee Share
Ownership Scheme
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Lesotho Agricultural
Development Bank (LADB) |
The Bank was liquidated in 1998. The liquidation was necessitated by
the fact that LADB ceased to perform its key functions of
safekeeping depositors’ monies and extending credit to creditworthy
borrowers. By 1997, the Bank became technically insolvent, meaning
that its liabilities were far in excess of its assets. It was
beginning to experience liquidity problems in that it could not
honour all the claims on it by its creditors including depositors.
This distress financial situation forced Government to inject funds
into the Bank to the tune of M24.0 million per annum in order to
enable it to continue its operations until its liquidation.
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Minet Kingsway (Pty)
Ltd |
 Minet Kingsway was 51 %
owned by Government through Lesotho Bank and 49 % owned by AON Risk
Services. The divestiture of 31% of Government’s shareholding in
Minet Kingsway (Pty) Ltd was effected in May 2000. AON’s
shareholding in Minet Kingsway increased to 80 %.
Government has retained 20 % shareholding in Minet Kingsway (now
renamed AON Lesotho) for future Basotho participation possibly
through the Lesotho Unit Trust. It has also been agreed that AON
will set aside 10 % of its shareholding in AON Lesotho for an
Employee Share Participation Scheme.
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Plant and Vehicle
Pool Services (PVPS) |
PVPS was established under the technical control of the Ministry of
Works and the administrative control of Ministry of Finance. Its
responsibilities included purchasing and maintenance of all
Government plant and vehicles fleet; storage and provision of spare
parts; allocation of equipment and vehicles to all government
ministries and departments; and supply of fuel and lubricant
necessary to operate all government equipment and vehicles.
In December 1997, forensic investigation into the operations of the
service revealed serious fraud, abuse of public funds and
mismanagement, which forced the Government to accelerate the
privatisation of the entity. An interim management team with the
mandate to seek a buyer for the enterprise was engaged in 1998, and
the enterprise was eventually privatised through the sale of 80 % of
its shareholding to Imperial Fleet Services of South Africa in
January, 2000. The remaining 20 % will be availed to Basotho through
purchase of shares in the Lesotho Unit Trust.
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Plant Pool Workshop
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The sale of Plant Pool Workshop effected through a closed tender
which comprised machinery, equipment and other movables was sold to
a local businessman, Mr Ralebitso in May, 2000.
The Plant Pool Workshop was part of Maseru Headquarters, which was
one of the nine units that had been proposed in the Privatisation
Scheme of the Plant and Vehicle and Pool Services and approved by
Government in August, 1999.
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Lesotho Bank |
 The situation of Lesotho Bank had gradually deteriorated over the
years as a result of inadequate management and political
intervention. In 1995, the Bank was forced to recognise this
situation and for the first time in its history the Bank reported
losses amounting to some M58.3 million. The situation was made worse
by the collapse of the Bank’s management information system in 1997.
By 1999, the Government was injecting M20.0 million a month (or
M240.0 million a year) in the Bank in order to keep the Bank
operational and to safeguard depositor’s funds. The financial
restructuring of Bank has cost the Government some M612.0 million,
of which M15.0 million was used to secure the Government’s 30 %
shareholding in the new Lesotho Bank.
In February 1999, the Standard Bank of South Africa was identified
as a strategic partner, and the whole privatisation process
kicked-off. The actual privatisation of Lesotho Bank took effect in
August 1999 and Lesotho Bank 1999 Ltd. was created, a new bank that
was 70 % owned by Standard Bank (Lesotho) Ltd. and 30 % owned by
Government.
Fifteen (15%) percent of the 30 % shareholding that was kept in
trust by Government for Basotho was sold to the Lesotho Unit Trust.
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WASA and Ministry of
Local Government Sanitation Services |
Subsequent to advertisements that were placed in newspapers locally
and regionally, one bid was eventually received from Sani Tech, a
South African company whose proposed tariffs proved to be too high.
Although efforts were made to revive local interest, as evidenced by
a bidders’ conference and further meetings held with seven
prospective local investors, no firm proposals were received.
Outsourcing of WASA tanker service and the Ministry of Local
Government (MLG) pit emptying service was effected by merging the
two services. This assignment is commercially run by a
semi-independent unit under the responsibility of WASA and the
auspices of an Inter-Agency Steering Committee. The transaction is
to run for an interim period of nine (9) months from April, 2001
pending full privatisation of the operations.
Advertisements for the outsourcing of the Sanitation Services were
placed in local newspapers in October, 2001 that attracted five (5)
local bidders. Letters of invitations were sent to the five local
bidders in May, 2002 and only one bid was received from Cefas
Enterprises, a local bidder. The bid is presently being evaluated.
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Outsourcing of
WASA Vehicle Workshop |
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As part of the
divestiture of WASA non-core activities, advertisements for the
Workshop were made locally and in South Africa. One bid was
received from a local company, JKL Engineering (Pty) Ltd.
Negotiated sale of machinery and equipment contract, and a 7 year
lease agreement is before Cabinet for approval.
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Marakabei Lodge |
Marakabei Lodge was sold to MCM Enterprises for in November 2001.
MCM Enterprises is a local company owned by a Mosotho businessman
Mr. Mosuoe Moteane. Up to now, Marakabei Lodge has been sub-leased
by the Government to MCM Enterprises since April 1998 when efforts
to sell the lodge had been unsuccessful as the bids received were
found to be too low. The Lodge was non-operational from 1992 until
it was sub - leased to MCM Enterprises in April 1998 under the
privatisation programme.
MCM Enterprises expressed interest to purchase the Lodge in 2000, as
a result the Lodge was readvertised for sale. Only one bid was
received from MCM Enterprises and the Government entered into
negotiations accordingly.
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Maluti Oil |
Efforts to attract interested investors to take over Maluti Oil as a
business concern were without success. In order to free capital held
in fixed assets in the company, Maluti Oil was auctioned in July,
2001
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Basotho Fruit and
Vegetable Canners (BFVC) |
Negotiations of the amalgamation of BFVC with Langeberg’s Ficksburg
Canning Factory which were approved by Cabinet proved to be
unsuccessful due to the fact that, at the stage of finalising the
contract, Langeberg called for a number of inputs, some of which the
Ministry of Agriculture could not provide. The future direction in
relation to privatisation of BFVC is currently under consideration
by Government.
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Orange River Lodge |
An auction of the Orange
River Lodge was held in October, 1999 with participation by several
bidders. A firm offer was received from Mr. Kou that resulted in the
conclusion of the sale agreement with him, that was signed in
February, 2000. The final handing over of the Land Act Lease for the
property was effected in September, 2001.
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Lesotho
Pharmaceutical Corporation (LPC) |
 The search for a buyer for LPC, jointly conducted by PU and LNDC,
started in 1997 following Cabinet approval of a Privatisation Scheme
for LPC. A number of expressions of interest were received, which
did not culminate into bids except for one company, Time Controlling
Investments (TCI).
TCI was provided with information after Cabinet approved their
proposal to undertake due diligence in January, 2000. Subject to
satisfactory outcome of the due diligence review, TCI would purchase
majority shareholding of LPC. TCI undertook the due diligence but
did not meet the agreed deadline and was therefore unable to proceed
with the acquisition of LPC. TCI thereafter proposed to enter into
management contract but failed to meet conditions agreed upon. In
August, 2000 the Steering Committee for LPC recommended to Cabinet
that discussions with TCI be terminated. Although contacts have been
made with potential investors from countries such as the Peoples
Republic of China, Iran and Pakistan, no bids have been received as
yet.
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Maluti Highlands
Abattoir (MHA) |
 Privatisation of the Abattoir became a Government priority in
January 1998. A Privatisation Scheme was initially submitted to
Cabinet in April 1998. After clarifications, the Scheme was approved
by Cabinet in July 1998. The Scheme called for the enterprise to be
sold in its entirety together with Feedlot as a going concern.
Despite intensive advertising and local lobbying, the Privatisation
unit received no expressions of interest. The divestiture of the
enterprise was obviously complicated by its record of poor financial
performance (the entity has been a loss-maker since 1992 with
accumulated debt of about M30 million); unresolved questions of land
title; its association with the Government’s Feedlot Property; and
lack of a clear legal personality being a body which was set up by
simple legal notice.
Consideration was given to a management/employee buy-out in
association with local butchers, but this approach did not yield an
immediate bid. Privatisation Unit interviewed 60 butchers, most of
whom expressed interest in taking over jointly the Maluti Highlands
Abattoir but the Privatisation Unit did not receive any bids. An
interim management team was sought to run the Abattoir in
preparation for its take-over. Currently, negotiations are
continuing with an investor from a South African company called
Elwark Trading (Pty) Ltd.
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Tele-Com Lesotho (TCL) |
 The need to expand access to telecommunications services, improve
the affordability, the reliability and the quality of these services
and attract investment into the country prompted Government to
privatise Lesotho Telecommunications Corporation (LTC). In line with
this policy, the Lesotho Telecommunications Authority Act was passed
before Parliament in June 2000 to establish an independent
regulatory authority and LTC was concurrently incorporated under the
Companies Act as Tele-Com Lesotho (TCL) to act as service provider.
The regulatory authority is mandated to ensure that TCL and other
telecommunications service providers in Lesotho conduct their
business in an efficient and productive manner that will protect and
serve the interest of consumers.
Seventy percent (70% ) of Government’s shareholding in Tele-Com
Lesotho w as sold in November 2000 to Mountain Communications (Pty)
Ltd and the Government retained 30% for eventual sale to Basotho
investors. Mountain Communications is to offer 5% of its 70%
shareholding to an Employee Share Participation Scheme.
Given the small market size in Lesotho and the poor state of the
company at time of privatisation, TCL has been granted a five years
exclusivity period for provision of fixed line telecommunications
services. The regulatory authority will monitor TCL’s performance
against specific targets that have been set, some of which are
listed below, and are subject to penalty if not met.
Specific targets:
• Provide capacity for at least 40,000 new connections in the first
year;
• Connect at least 50,000 new lines in the first five years;
• Ensure provision of at least 1,250 pay phones in the first five
years;
• Establish internet access capability in the main commercial
centres in the first year;
• Achieve quality of service to defined minimum standards, which
will increase steadily over the first three years.
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Vodacom Lesotho |
 The sale of Government’s shareholding in VCL is part of Government’s
major programme for the restructuring of the telecommunications
sector. The sale will enable the privatised Tele-Com Lesotho to
obtain a licence from June 2001 to become the second cellular
service provider in the country. The objective is to create
competition in the cellular operator’s market, leading to more rapid
and efficient provision of cellular services.
Government’s 12% shareholding in Vodacom Lesotho was sold in
November 2000 to a Basotho investment group registered in Lesotho by
the name of Sekhametsi Investment Consortium. The preferred
investors were selected on the basis of a competitive tender
process. Bids were assessed on the basis of offer price, bidder’s
access to financial capital and the level of Basotho participation
in the bidding party.
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CAPITAL MARKETS
DEVELOPMENT
(19) Lesotho Unit Trust |
 As the privatisation of state-owned enterprises progressed, one of
the major public criticisms of the Lesotho Privatisation and Private
Sector Development Project was that Basotho have not been afforded
the opportunity to purchase shares of former state-owned
enterprises. A number of options were considered such as the
establishment of the stock exchange. Lesotho Unit Trust was
recommended as the most appropriate and viable option at that time.
The main principles on which the structure and portfolio of the Unit
Trust are based are:
• Accessibility – investors must have ready access to their savings.
• Competitiveness – the investment opportunity must be attractive in
terms of risk and returns compared with other opportunities in
Lesotho and South Africa.
• Low Risk - the possibility of loss of original investment must be
minimised to avoid complete loss of confidence in capital market
development.
Cabinet approved the establishment of the Lesotho Unit Trust in
February 2000 and agreed to grant a number of tax exemptions and
subsidies to maximise the chances of good returns from the Lesotho
Unit Trust. A private management company (Standard Bank Lesotho Unit
Trust (Pty) Ltd.) was recruited through a competitive tender process
to establish and operate the Lesotho Unit Trust, which was formally
launched at a public ceremony in August, 2001. The Management
Company will, among other duties, assess which privatised enterprise
shares are suitable for inclusion in Lesotho Unit Trust and market
this new investment opportunity to make people aware of its benefits
but also its risks. Assets of Lesotho Unit Trust will be held in
trust by the trustee (AON Lesotho) to ensure protection of unit
holders.
The Lesotho Unit Trust will operate in strict compliance with the
Central Bank Collective Investment Schemes Regulations of 2001,
published in the Gazette in January 2001.
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LESOTHO UTILITIES
SECTOR REFORM PROJECT (New Project)
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The Lesotho Utilities Reform Project is financed by the World Bank,
the African Development Bank, the European Union and the Government
of Lesotho to the amount of US$39.35 million. Among other things
the Project aims to improve the performance of the electricity
sector. A private sector management team for LEC, SAD-ELEC, was
appointed in February 2001 to manage, with remuneration based on
performance, all aspects of the operations, maintenance and
expansion of LEC for eighteen (18) months, applying normal
electricity utility principles to improve financial, commercial and
technical performance;
One of the key
objectives of LURP is the restructuring of the electricity sector
with a view to improving and expanding the delivery of electricity
in Lesotho.
The
restructuring process involves:
· Legislation
- up-dating legislation that governs the electricity sector and the
establishment of an independent sector regulator, the Lesotho
Electricity Authority (LEA), to ensure that electricity services are
provided efficiently, with maximum outreach and at a competitive
price to ensure that consumer welfare is protected;
· IMTF
- the engagement of a private sector management team, the Interim
Management Task Force (IMTF), to run the Lesotho Electricity
Corporation (LEC) for a period of eighteen months aimed at improving
the managerial, technical, commercial and financial performance of
LEC in preparation for LEC’s eventual privatisation;
· SAG
- Recruitment of a Sales Advisory Group to assist with: (i) drafting
of secondary legislation to supplement and enable implementation of
the new electricity legislation, and (ii) divestiture of LEC to the
private sector.
4. Progress to
date:
-
Legislation -
Lesotho Electricity Authority Bill has been granted Royal Assent
and is currently being prepared for publication by Government
Printers.
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IMTF - in place
since 1 February 2001;
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SAG - assignment
commenced in December 2001 and is expected to be completed in the
second half of 2002.
Muela
Hydropower Plant (MHP) Options Study
Objective: to propose the optimal
institutional, functional and management set up for MHP.
Study commenced in November 2001, to be
completed in February 2002.
Telecommunications Regulator
The long-term resident advisor to LTA
was recruited in August 2002.
Electricity
Regulator
Recruitment of
Advisor to Lesotho Electricity Authority is underway.
Additional
Advisory Assistance
Recruitment of a long-term resident
advisor to the Ministry of Communications is underway.
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ENTERPRISES IN
THE PIPELINE |
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 1.
Loti Brick was one of the first eight enterprises to be
listed for privatisation in July, 1996. A Privatisation Scheme
prepared by the Privatisation Unit in consultation with the Ministry
of Trade and Industry and the LNDC as the major shareholder
recommended the preservation of the enterprise as a private company,
with shares allocated to the management and staff, local
institutional investors and a strategic technical investor.
Thoughout this process all other shareholders of Loti Brick (Lesotho
National Development Bank with 23%, and Lesotho Energy Enterprises
with 4% equity) were kept in the picture. The scheme was approved by
Cabinet and invitations to tender published in October, 1996. After
several re-advertisements the Unit finally received three
non-responsive bids by January 24, 1997. Two of the bids received
were from COV1 and PROMAKARD, both of whom wished to participate as
institutional investors. A third bid from a South African company
based in the North West Province, WEENEN lent itself more to a
proposal for management of the enterpise without purchase of equity.
In the absence of any further proposals the evaluation committee
recommended in September, 1997 that the option of a perfomance-based
management contract be pursued with Weenen. Negotiations were held
with representatives of WEENEN in Maseru on October, 1997. -A draft
contract has been drafted and sent to WEENEN for their comments in
January, 1998. In the meantime KFW (Germany) have reiterated that
privatisation of Loti Brick was a condition for their 1990 loan
which financed the procurement of a kiln.
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2.
Basotho Fruit and
Vegetable Cannery |
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3.
Maluti Highlands
Abattoir |
NEW ENTRANTS
Maseru Private Hospital |
The Government of Lesotho has entered into a Management Contract
with Lenmed Hospital Management Services of South Africa to operate
Maseru Private Hospital for a period of two years. The Management
Contract will commence at the middle of October, 2001.
The Government of Lesotho acquired the building and other assets of
Maseru Private Hospital when the private hospital was placed under
liquidation. The Maseru Private Hospital was heavily indebted to the
former Lesotho Bank which was wholly owned by the Government.
Lenmed Hospital Management Services was recommended for
consideration by the liquidator of the Maseru Private Hospital,
after approaches had been made to several hospital management
companies many of whom expressed very limited interest in the
hospital. Prior to negotiations, a representative delegation
travelled to Ladysmith to see La Verna Hospital, a facility run and
managed by Lenmed Hospital Management Services. The delegation was
favourably impressed by the demonstrated capacity and high standards
maintained by Lenmed Hospital Management Services in its operations
of the Hospital.
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Sixteen (16) Small
Agricultural Enterprises |
A list of sixteen (16) Small Agricultural Enterprises was gazetted
and published in local newspapers in accordance with Section 16 of
the Privatisation Act of 1995. Subsequently privatisation schemes
for eight enterprises proposed for privatisation were prepared and
tabled before Government for approval in accordance with section 18
(1) of the Privatisation Act. Of the eight privatisation schemes
that were tabled before Government, the following six (6)
enterprises that were approved in April 2002 for privatisation have
already been gazetted:
Mejametalana Vegetable Farm;
Tšalitlama Vegetable Farm;
Molimo-Nthuse Pony Trading and Trekking Centre
Merino Sheep Stud Breeding Farm – Mokhotlong;
Merino Sheep Stud Breeding Farm – Quthing; and
Wool and Mohair Marketing Facilities – 95 Wool Sheds.
The following four (4) enterprises are recommended for liquidation
due to the fact that they are not viable and also not sustainable:
Tšakholo Fish Farm;
Forestry Facilities;
Basotho Pony Breeding Farm; and
Technical Operation Unit (TOU)
The privatisation of Botšabelo Dairy Farm is still awaiting approval
from Government.
Farmers Training Centres and Veterinary Services are proposed for
restructuring |
