Incentives
Lesotho has a business friendly, fiscal and financial environment. A number of financial incentives are available to manufacturing companies establishing in Lesotho including:
Company Taxation
The government of Lesotho, conscious of the role of manufacturing as the main spring of development has introduced:
§ 0% tax on income tax generated from exporting manufactured goods outside of Southern African Customs Union (SACU);
§ A permanent maximum manufacturing tax rate of 10% on profits.
§ No withholding tax on dividends distributed by manufacturing companies to local or foreign shareholders.
§ Free repatriation of profits derived from manufacturing companies.
§ Double taxation agreements with the Federal Republic of Germany, the Republic of South Africa, Mauritius and the United Kingdom.
TopLoan/Equity Finance
§ Loans
The Lesotho National Development Corporation may provide loan finance to projects which can demonstrate long-term viability. The duration of the loan can be up to 10 years. Every application for a loan must be accompanied by a detailed project proposal.
The application will be appraised in conjunction with any other LNDC involvement in the project, for example factory buildings or equity.
§ Equity Participation
The policy of the LNDC is not to take equity investments in projects unless requested to do so by the project promoter. The LNDC prefers to confine itself to the provision of serviced sites, factories and loan finance.
The exceptions to this policy relate to projects which are desirable in the national interest but for which no private investor can be found, and of course projects in which the promoters (local or foreign) feel the necessity of LNDC participation.
Usually, the LNDC will require board membership proportionate to its shareholding.
Banking Infrastructure
Lesotho is a member of the South African Common Monetary Area (CMA) and the Loti (plural Maloti) is pegged to the Rand. It is therefore a convertible currency and exporters in Lesotho can easily obtain foreign exchange for business transactions. Lesotho has a sophisticated banking infrastructure with four (4) full service banking networks operated by:
Standard Lesotho Bank
Nedbank
First National Bank
The first three have branches throughout the country and the three international banks have branches and agents worldwide which facilitate transfers.
LNDC operates as a development finance institution and promotes the development of industry and commerce.
Top Investment Protection
Lesotho government is irrevocably committed to the development of the private sector and is currently involved in an extensive privatisation programme.
It is also a signatory to the Convention on the Settlement of Investment Disputes between states and nationals of other states and is a member of the Multilateral Investment Guarantee Agency (MIGA). The latter promotes/encourages the flow of foreign direct investments to developing countries by providing investment guarantees to investors to mitigate against specified non-commercial risks associated with a project, such as: political risks, transfer restrictions, expropriation, breach of contract, war and civil disturbances in the host countries.
