Lesotho - The economy

A World Bank CoLuntry Econom-nic Report Lesotho: A Development Challenge O(tober 197,5  Lesotho: A Development Challenge This report is based on the findings of an economic mission to Lesotho in June/July 1973, composed of Messrs. Willem Maane (mission chief) and Robert van der Lugt (gen- eral economist), and a follow-up mission in March 1974 by Mr. Willem Maane, who is responsible for the scope and overall conclusions of the report. The World Bank VVashin8 on, D.C., U.S.A.  Copyright D 1975 by INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. All rights reserved Library of Congress Cataloging in Publication Data: International Bank for Reconstruction and Development. Lesotho: a development challenge. "This report is based on the findings of an economic mission to Lesotho in June/July 197:3, composed of Messrs. Willem Manne (mission chief) and Robert van der Lugt (general e( onnmist), and a follow-up mission in March 1974 by Mr. Willem Maane, who is responsihle for the scope and overall conclusions of the report." 1. Lesotho-Economic conditions. I. Maane, \'Villem, 1927- II. Title. HC51 7.l 4158 330.9'68'603 75-30508 ISBN 0-91 6058-06-9  The World Bank issues country economic reports in two series. IThis report is a working document and is, as such, part of an inforrmal series wholly based on materials prepared for restricted use within the Bank. The text is not meant to be definitive, but is offered so as to make some results of internal research widely available to scholars and practi- tioners throughout the world. The Bank maintains a continuing program to expand the scope and strengthen the quality of all social and eco- nomic statistics used in its operations and research activities. Some of these data are published routinely in the World Bank Atlas, the World Bank Annual Report, and Trends in Developing Countries. Other statistical series maintained by the Bank and used almost exclusively by Bank staff are published only infrequently. The World Bank Catalog lists all of the Bank's free and sale publications; it is available to any individual or institu- tion with a serious interest in economic and social development. To obtain more information about Bank publications and to request a copy of the Catalog, contact the Publications Unit, World Bank, 1 81 8 H Street, N.W., Washington, D.C. 20433 U.S.A., or the World Bank, 66 avenue d'lena, 75116 Paris, France. Other tiLles in) this working document series of country reports may be ordered from either the Washington or Paris offices; currently available are: Employment in Trinidad and Tobago (March 1973) Current Economic Position and Prospects of Ecuador (October 1 973) Current Economic Position and Prospects of Peru (December 1973) Chad: Development Potential and Constraints (1974 - ISBN 0-916058-00-X) Le Developpement du Tchad: Possibilites et Limites ('1974 - ISBN 0-916058-03-4) Senegal: Tradition, Diversification, and Economic Development (1974 - ISBN 0-916058-01-8) Se'ne6gal: Tradition, Diversification et Developpement Economique (1974 - ISBN 0-916058-05-0) Turkey: Prospects and Problems of an Expanding Economy (1975 - ISBN 0-916058-04-2) The second series Of Country reports is published for the World Bank by The Johns Hopkins University Press. In- dividual titles currently available may be obtained in ( lothbu1)indl and paperback editions from bookstores, The Johns Hopkins University Press (Baltimore, Maryland 21218, U.S.A.), or its agents: Econom7ic Growth of Colombia (1972 - ISBN 0-8018-1 389-1 I/ 0-8018-1l397-2) Nigeria: Options for Long-Term Deve lopment (1974 - ISBN 0-8() 1 8-1 002-5 i 0-801 8-1 603-3) Yu,goslavia: D wlr)/)m nt with Decentralization 11975 - ISBN 0-80'18-1 (702-i 0-8018-171 5-3) Kfenva: Inlo the Second Decade (1975 - ISBN 0-8(1 8-1754-4 0-801 8-1 755-2)  PERTINENT DATA The country : Lesotho The people : Mosotho (singular) Basotho (plural) The language: Sesotho Currency Equivalents as of June 1974 US$1 = Rand 0.67 Rand 1 = US$1.49 Weights and Measures 1 mile = 1.609 kilometers 1 kilometer = 0.621 miles 1 acre = 0.405 hectares 1 hectare = 2.47 acres 1 bag = 200 lb. = 90.74 kilograms Fiscal year April 1-March 31 GLOSSARY ADF Agricultural Development Fund BAFED Basutoland Factory Estates Development Company BEDCO Basotho Enterprises Development Corporation CIDA Canadian International Development Agency DANIDA Danish International Development Agency ESCOM Electricity Supply Commission of South Africa FAO Food and Agriculture Organization ILO International Labour Organisation IPPF International Planned Parenthood Federation ITU International Telecommunications Union LAC Lesotho Airways Corporation LCH Lesotho Cooperative Handicrafts Society LEC Lesotho Electricity Corporation LECUSA Lesotho Credit Union Scheme for Agriculture LIBA Lesotho Institute for Business and Administration LNDC Lesotho National Development Corporation LTI Lerotholi Technical Institute NTTC National Teacher Training College ODA Overseas Development Assistance OXFAM Oxford Relief Fund POSB Post Office Savings Bank SIDA Swedish International Development Agency UBLS University of Botswana, Lesotho,and Swaziland Unesco United Nations Educational, Scientific,and Cultural Organization UNDP United Nations Development Programme USAID U.S. Agency for International Development VIDO Village Industries Development Organization  TABLE OF COTENITS Page PERTINENT DATA iv GLOSSARY iv LIST OF TEXT TABLES viii COUNTRY DATA ix MAP xi SUiMMARY AND CONCLUSIONS xv The Economic Scene xv Economic Trends xvi Development Strategy and Future Prospects xviii I. LESOTHO'S CHALLENGE 1 II. THE SETTING 5 The Counrtry 5 Human Resources 6 Land Tenure: An Insurmountable Obstacle? 8 Economic Ties with South Africa 11 III. TRENDS IN THE ECONOMCY AS A WHOLE 15 Summary of Trends 15 National Accounts 15 Employment 18 Wages 20 Income Distribution 21 External Trade 23 IV. GOVERNMENT OPERATIONS 25 Overall Budgetary Position and Financing 25 Recurrent Revenue 25 Current Expenditures 28 Outlook for the Recurrent Budget 29 Capital Expenditure and Absorptive Capacity 32 V. THE SECTORS 37 Agriculture 37 Mining 47 Water Resources 48  Page MIanufacturing industries 49 Tourism 52 Transportation 52 Public Services 54 Education 55 Banking 60 VI. OUTLOOK FOR DEVELOPM4L'T 63 Financial Resources 64 Growth of the Economy 65 APPENDIX: STATISTICAL TABLES 71 Population and Employment 73 1.1 Population, 1891-1966 73 1.2 Resident African population by sex and age group, 1966 74 1.3 Basotho working in South African gold mines and collieries: number, deferred pay, and remittances, selected years, 1950-1973 75 National Accounts 76 2.1 Estimates of GDP at factor cost, 1966/67-1970/71 76 2.2 Escimates of domestic expenditure, 1966/67-1970/71 77 Balance of Payments 78 3.1 Recorded trade figures, 1967-1972 78 3.2 Classification of t1otlier exports," 1972 79 3.3 Exports of selected commodities, 1965-1972 80 External Debt 81 4.1 External public debt outstanding as of December 31, 1973 81 4.2 Outstanding external debt and estimated service payments, by year, 1968-1992 82 Public Finance 83 5.1 Central government budgetary position, 1966/67-1973/74 83 5.2 Central government current revenue, 1966/67-1973/74 84 5.3 Central government recurrent expenditure, 1966/67-1973/74 85 - vi -  5.4 Central government capital expenditure, 1966/67-1972/73 86 5.5 Five-Year Development Plan, capital expenditure by sector, 1970/71-1974/75 87 Money and Banking 88 6.1 Consolidated commercial banking statistics, 1969-1973 88 6.2 Lesotho National Development Corporation, assets and liabilities, 1969-1973 89 6.3 Lesotho Nationa.l Development Corporation, profit and loss accounts, 1969-1973 90 6.4 Lesotho Bank, assets and liabilities, 1966-1973 91 6.5 Lesotho Bank revenue and expenditure, 1966-1972 92 Agriculture 93 7.1 Size of holdings of farm households, 1950, 1960, 1970 93 7.2 Numbers of livestock, 1950, 1960, 1970 94 7.3 Crop statistics, 1950-1972 95 Other Sectors 96 8.1 Electricity statistics, 1970-1973 96 Prices 97 9.1 Urban retail price index, January 1973-April 1973 97 Transportation 98 10.1 Motor vehicle registration, 1972 98 - vii -  LIST OF TEXT TABLES 1.1: Summary of the public investment program, 1970/71-1974/75 3 2.1: African population, 1966 and 1973 7 3.1: Industrial origin of GDP at factor cost, 1966/67 and 1970/71 16 3.2: National accounts, origin and use of resources, 1970/71 17 3.3: Basotho male labor force, 1967 and 1973 18 3.4: African mine labor in South Africa, 1963 and 1973 19 3.5: Distribution of wealth and income 22 3.6: Estimated value of imports and exports of goods, 1966-1972 23 4.1: Central government budgetary position, 1966/67-1973/74 26 4.2: Central government current domestic revenue, 1966/67-1973/74 27 4.3: Central government recurrent expenditures, 1966/67-1973/74 28 4.4: Projection of the government recurrent budget, 1973/74-1980/81 30 4.5: Central government capital expenditure, 1966/67-1972/73 32 4.6: First Five-Year Development Plan planned and actual capital expenditure, 1970/71-1972/73 34 5.1: Production and yields of major crops 38 5.2: Number of livestock and exporcs of livestock products 39 5.3: Estimated income of rural households, 1970 40 5.4: Exports of diamonds, 1966-1972 47 5.5: Number of schools, 1970 56 5.6: Enrollment by sex 56 5.7: Consolidated commercial banking statistics, 1970-1973 60 6.1: Estimated financial resources for government investment, 1975/76-1979/80 64 6.2: Public debt as of mid-1973 65 6.3: Estimated service payments on public debt, 1972/73-1979/80 65 6.4: Tentative projection of GDP and GDP growth, 1970/71-1979/80 66 6.5: Estimated growth in wage employment, 1973-1980 67 6.6: Lesotho's labor force, 1973-1980 68  COUNTRY DATA - LESOTHO PIEh POPULATION DENSITY 3O,34) scr. km. 1.2 million (mid-1973)J 3d per sq. km. Rate of growth: 2.2% a year 280 per sq. km. of arable land 1-UPULATION CHAHACTERISTICS (1966/69) ACCESS TO ELECTRICITY Crude birth rate (per 1,000) 37 % of population - urban Crude death rate (per 1,000) 15 - rural Infant mortality (per i,O0O live births) 106 HEALTH (1972) INCOME DISTRIBUTION ( 1972) Population per physician 22,600 of national income, lowest quintile 15 Population per hospital bed 600 highest quintile 33 NUTRITION DISTllIBUTION OF LAND HOLDERSHIP (1970)2/ Calorie intake as % of requiremeits . held by the top 1O,v of holders 29 Per capita protein intake S held by the bottom 1, of holders 3 EDUCATION (1973) DISTRIBUTION OF CATTLE OWNERSHIP (1970) Adult literacy rate % 40 X owned by the top 10%, of owners 16 Primary school enrollment % 64 X owned by the bottom 1Q of owners 7 Secondary school enrollment % 6 ACCESS TO PIPED WATEH OI population - urban - rural GNP PER CAPITA IN 1971: about US$100 GROSS NATIONAL PHt LIUCT IN 1970/71 ANNUAL RATE OF GROWTH (%, constant prices) US$ Min. 196D-65 1965-70 GNP at market prices 86.d 100.0 * 0 Gross domestic investment 7.0 3.1 0 Gross national savings -4.9 -5.6 Current accowut Lalance txports of goods 16.6 19.4 Imports of gcods 49.7 57.3 -3 OUTPUT, LABORl FORCE AND PRCDUCTIVITY IN 1970,71 Value added Labor force' V.A. per worker US$, X Thousand ~ 6 U-S$ T Rural sector 35.8 60.2 227 1 16.0 TT7~ Industry 3.2 5.4 3 1 1000 417 Services 20.5 34.4 20 8 1000 417 Total/Average 59.5 100.0 250 100 240 100 GOVERNMENT FINANCE Central Government Rand Mln % of GDP 1972/73 1972/73 1966/67-1971772 Current recei-pts 12.0 24.0 16.3 Current expenditure J3.d 27.6 25.2 .'jrr-unt, surplus -1.8 -3.6 -8.9 capital expenditures 3.1 6.2 6.1 .xturnal assistaince (net) 2.7 5.7 14.1 -I TrcludinMg an estimated 200,000 riasot-ho migrant workers in South Africa. 2/t lt6:rS to ar.u!le land held under tr.A,itionai tenure arrangements. 3' xcludirj rri,;rant workers. not available P nc)t a, i I i-agle -zero o~- o,lgi  COUIJTRY D)ATA - LESOTHO 0'C:E;, CRET)IT Arl - PRICES 1965 1969 1970 1971 1972 June 1973 Mllion Rand outstanding end period) Money and Quasi Money .. Ban' 'Iredit to Putlic Sector .. 0.1 0.1 0.1 0.2 6