FINANCIAL INCENTIVES

Lesotho: A Business Friendly Fiscal and Financial Environment

Company Taxation

The government of Lesotho, conscious of the role of manufacturing as the main spring of development has introduced:

A permanent maximum tax rate of 15% on profits earned by manufacturing companies.
No withholding tax on dividends distributed by manufacturing companies to local or foreign shareholders.
Free repatriation of profits. In addition in many countries, including the Republic of South Africa, dividends from Lesotho are not subject to further taxation when received by the shareholder.
Double taxation agreements with the Federal Republic of Germany, the Republic of South Africa, Mauritius and the United Kingdom.

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Financial Incentives

In addition to the tax incentive a number of other incentives are available to manufacturing companies establishing in Lesotho including:

Unimpeded access to foreign exchange.
Export Finance Facility.
General sales tax exemption on capital machinery and equipment for manufacturing industries.

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Availability of Loan/Equity Finance


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, training grants 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 at parity with 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 three full service banking networks operated by:

Lesotho Bank 1999 which is partly government owned.
Nedbank
Standard Bank

All three have branches throughout the country and the two international banks have branches and agents worldwide which facilitate transfers.

Lesotho National Development Corporation (LNDC) operates as a development finance institution and promotes the development of industry and commerce.

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Protection of Investment

Lesotho has a government 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.

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