Lesotho - Economic memorandum

Report No. 2251-LSO F L CpY Economic Memorandum on Lesotho February 22, 1979 Eastern Africa Regional Office FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  FOR OFFICIAL USE ONLY TABLE OF CONTENTS Page No. Country Data SUMMARY AND CONCLUSIONS .......................................... i-iv INTRODUCTION ......1............................................. I. RECENT ECONOMIC DEVELOPMENTS ............................. 2 Output and Expenditure ........................ ..2......2 Sectoral Developments ................................. 4 Central Government Finances ........................... 6 Balance of Payments and External Debt .................. 8 Money and Banking ............................. ........ 11 II. EMPLOYMENT AND MIGRATION ........ .......................... 12 The Present Position ......................... ....... . 12 The Medium-term Employment Outlook ...................... 14 III. AGRICULTURE ................................................. 16 Recent Performance ...................................... 16 Policy Issues .............................................. 20 IV. PERSPECTIVES ON THE THIRD PLAN ...... ....................... 21 Development Planning ..................... ......... -.21 Diversification of Revenue Sources ..................... 23 Management of External Assistance ....................... 23 Population and Employment Policy ........................ 24 Public Sector Policy ... ................................. 25 STATISTICAL APPENDIX MAP This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Page 1 of 2 pages ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1977/78 MNUAL RATE OF GROWTH Mf constant prices) US$ M1n. 1973/14-1977/78 1977/78-V GNP at Market Prices 297.6 100.0 8.7 4.9 Gross Domestic Investment 47.6 16.0 9.2 5.3 Gross National Saving 28.0 9.4 Current Account Balance -19.6 -6.6 Exports of Goods, NFS 38.0 12.8 1.3 -7.7 Imports of Goods, NFS 216.4 72.7 18.0 7.6 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1976/77 Value Added Labor Force V. A. Per Worker RS$ Mln. 'TThous. %a Agriculture 50.1 41.0 343 91 146 45 Industry 12.4 10.2 7 2 1771 545 Services 59.7 48.8 26 7 2296 706 Unallocated Total/Average 122.2 100.0 376 100.0 325 100.0 GOVERNMENT FINANCE Central Government (Rands Hln) I of GDP 1977/78 1977-78 74/75-77/78 Current Receipts 53.7 33.5 44.8 Current Expenditure 53.1 28.2 37.7 Current Surplus 8.6 5.4 7.2 Capital Expenditures 25.7 16.0 21.5 External Assistance (net) 4.7 2.9 3.9 MONEY CREDIT and PRICES 1972 1973 1974 1975 1976 1977 (illion rands outstanding end period) Money and Quasi Money Bank credit to Public Sector 2.6 3.2 2.6 3.2 6.4 12.8 Bank Credit to Private Sector 4.8 5.7 8.6 8.4 11.6 13.6 (Percentages or Index Numbers) Money and Quasi Money as % of GDP .. .. .. General Price Index (1972 = 100) 2/ 100.0 112.8 122.4 140.8 155.6 183.2 Annual percentage changes ins General Price Index .. 12.8 8.5 15.0 10.5 17.7 Bank credit to Public Sector 100.0 23.0 -18.7 23.0 100.0 100.0 Bank credit to Private Sector 11.6 18.8 50.9 -3.2 38.1 17.2 NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered. I/ Provisional 2/ Covers urban households with annual income of less than R500. not available not applicable Page 2 of 2 pages TRADB PADENTS AND CAPITAL FWS BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1975-77) 1975 1976 1977 US $ Mln % (Millions US $) Exports of Goods, NFS 29.1 37.3 38.0 Imports of Goods, NFS 154.5 188.8 216.4 Cattle 0.3 2.1 Resource Gap (deficit = -) 425.4 -151.6 -178.5 Wool 2.2 15.4 Mohair 2.5 17.5 Interest Payments (net) .. .. .. Food 2.4 16.8 Workers' Remittances 86.3 98.4 113.4 Other 6.9 48.3 Other Factor Payments (net) Net Transfers 25.4 26.2 45.5 Balance on Current Account -13.7 -26.5 -19.6 Total f4T 100,0 Direct Foreign Investment * ** ** EXTERNAL DEBT, DECEMBER 31 1976 Net MLT Borrowing Disbursements ** ** '' US $ M1n Amortization ** * ** Subtotal ** * Public Debt, incl. guaranteed 15.4 Capital Grants Non-Guaranteed Private Debt Other Capital (net) ** ** ** Total outstanding & Disbursed Other items n.e.i Increase in Reserves (+) ** ** ** DEBT SERVICE RATIO for 19761/ Gross Reserves (end year) * Net Reserves (end year) * * . Public Debt, incl. guaranteed 1.3 Non-Guaranteed Private Debt puel and Related Materials Total outstanding & Disbursed Imports 9.7 13.4 * IBRD/IDA LENDING, July, 1978 (Million US $) RATE OF EXCHANGE IBRD IDA Outstanding & Disbursed . 15-8 1974 1975 1976 1977 1978 (July) Undisbursed . 19.3 US$1.00 = R 0.679 0.732 0.870 0.870 0.870 Outstanding incl. Undisbursed 35.1 R1.00 = US$ 1.472 1.367 1.150 1.150 1.150 1/ Ratio of Debt Service to Government current revenue. not available not applicable SUMMARY AND CONCLUSIONS i. Lesotho is one of the UN-designated least developed countries with a GNP per capita of only $230 in 1977. GDP per capita is even lower, about $140, or only 60 percent of GNP. The difference is accounted for by remittances from the estimated 165,000 Basotho workers employed in South Africa. Over the past few years, as a result of an increased number of migrant workers and a dramatic increase in miners' wages, the share of remittances in GNP has increased. sharply. Total domestic expenditure exceeds domestic product by more than 100 percent, and in recent years has also exceeded GNP by some 20-30 percent. All of these facts underscore the severe dependence of the Lesotho economy on migrants' remittances and transfers (of Customs Union Revenues) from South Africa. ii. In recent years, as in the past, Lesotho's domestic economic perform- ance has been heavily dependent on events in the agricultural sector. Crop production declined sharply in both 1974/75 and 1975/76 due to unfavorable weather; this was followed by a reported doubling of crop output in 1976/77 which was nevertheless only sufficient to restore production to the 1973/74 level. In the past four years, however, the domestic economy has also been propelled by a marked upswing in the mining, construction, tourism and govern- ment sectors. GDP at market prices is estimated to have increased in real terms at a rate of between five and six percent per year. The estimated investment level was an impressive 24 percent of GDP. iii. In its budget the Government is heavily dependent on customs receipts from South Africa, which have accounted for some 60 percent of total revenues in most recent years. The Government was faced with a serious stagnation in revenues between 1974/75 and 1976/77 as customs receipts declined slightly, but revenues jumped by 80 percent in 1977/78 thanks to a doubling in customs receipts resulting from the 1976 revision of the revenue sharing formula under the customs agreement. On the expenditure side, recurrent expenditures have been rising at a rapid pace as a result of continuing growth of public adminis- tration, increased recurrent budget demands of the expanding development program, and increases in the general level of public service wages and salaries in 1975 and 1977. The combination of revenue stagnation and rapid expenditure growth resulted in a recurrent budget deficit in 1976/77, the first after several years of surplus, but this was corrected by the jump in revenue in 1977/78. Capital expenditures, which previously had been constrained by the country's limited absorptive capacity, are estimated to have risen four-fold over the 1974/75 - 1977/78 period. Implementation capacity has been improving through the operations of a large program of technical assistance and through develop- ment of local skills and management. - ii - iv. The main developments in the external sector have been continuing rapid growth in merchandise imports and in migrants' remittances. The total value of imports increased almost ten-fold between 1970 and 1977. On average, commodity exports have covered less than ten percent of the cost of commodity imports over the past few years, and with the relative stagnation of exports the trade gap has been widening. Most of the trade deficit is covered by migrants' remittances and Customs Union transfers. On capital account the main feature was a four-fold increase in private inflows between 1974 and 1977, associated particularly with diamond mining investment. Following an overall payments surplus of R 6 million in 1974, an average balance of payments deficit of R 5 million a year has been recorded in 1975-77. However, this official deficit only partly reflects the country's foreign reserves position, given the substantial unrecording of external transactions which results partly from the integration of the monetary system with that of South Africa. v. Migrant remittances have made a strong positive impact on Lesotho's GNP and balance of payments, and migrant employment has relieved what might otherwise have been a serious domestic unemployment and underemployment problem. However, Lesotho now appears to be at a critical juncture with respect to migration. Prospects for continuing migration to South Africa of new male entrants to the labor force have declined since the mining authorities imple- mented a policy to increase recruitment of black South Africans (who comprised one half of mining employment in 1977 compared to only 25 percent in 1973) and accelerate mechanization of the gold mines; in addition, labor recruitment from Rhodesia (Zimbabwe) since 1975, followed by resumption of recruitment from Malawi in 1977, will further reduce Lesotho's employment opportunities. In 1977 the number of new Basotho migrants recruited for the gold mines dropped by 20 percent from the 1976 level. It seems quite conceivable that Lesotho will not be able to count on a continuation of the steady increase in migrant employment and migrant incomes which occurred during the decade 1967-77. vi. Government policy towards migration has traditionally been passive in the face of the strong economic incentive to migrate, stemming from lack of local employment opportunities, and possible political implications of any 'interference' with such an established way of life. At the same time, efforts to accelerate economic development and increase domestic employment have been hampered by the higher level of South African wages which has induced a serious leakage of skilled labor, as well as continuing upward pressure on the domestic wage structure. However, the developments cited above have heightened Government's concern about possible instability in the migrant labor flow and about the capacity of the domestic economy to absorb all of the incremental growth in the labor force. It is clear that neither subsistence agriculture nor modern sector wage employment could effectively absorb a rapidly rising labor force in the short-run. For the longer run, employment strategy must focus on (i) the feasibility of expanding the labor- intensive works program, (ii) the cottage industries program of the Lesotho National Development Corporation, and (iii) policies to raise rural incomes by increasing productivity in agriculture, in particular, by expanding high value cash crops. - iii - vii. The Government faces a number of critical issues in attempting to improve productivity and increase income-earning opportunities in agriculture. Natural constraints (weather, limited cultivable land, soil erosion) to increasing production are formidable, and declining viability of the sector has also resulted from the traditional tenure system, migration, lack of services, and policies and programs which have failed to generate sufficient farmer motivation. Total production of food crops is inadequate to meet domestic demand and has been rising less rapidly than population, thus necessitating higher and higher levels of food imports. The Government has entered into a number of projects and programs in an effort to overcome the constraints facing the agricultural sector, but results from many of these have so far been less than was hoped for. For the future the Government's agricultural development strategy will focus on the Basic Agricultural Services Program (BASP) which will attempt to expand the production of traditional crops through provision of storage, roads, inputs, credit and extension services. viii. The Government is now formulating the development strategy of its Third National Development Plan (TNDP) for the 1980-85 period. The Plan must examine the long-term viability of the agricultural sector, focussing partic- ularly on: (i) development of a suitable land use pattern; (ii) an adaptive soil conservation program, including afforestation; (iii) livestock development, particularly through improved animal husbandry; and (iv) the commercial feasibility of a range of high value crops. As a first step, the substantial body of available agricultural research and its policy implications should be assessed, and the need for further studies determined. ix. In recent years, development planning has improved with strengthen- ing of the professional staff of the Central Planning and Development Office (CPDO), but the demands of a rapidly expanding development program, and co-ordination and management of increasingly diversified external assistance, have strained the still limited capacity of the institution. In general, planning could be made more effective by: (i) strengthening the organization of the statistical department in order to improve reliability and coverage of national statistics for both Plan formulation and monitoring; (ii) more sys- tematic on-the-job training for young professionals; (iii) better coordination within and between key ministries; and (iv) improving management across the Government administration with special emphasis on technical assistance, in order to monitor its effectiveness and develop adequate counterpart capability. x. Current emphasis on project-oriented planning should be balanced with an emphasis also on macro-planning based on longer-term strategies. The Plan should be formulated within a perspective framework, of say 15 to 20 years, focusing on long-term issues of employment, migration, agriculture and domestic resource mobilization. Given the limited capacity of the CPDO, this task will require additional experienced macro-economists. Planning could also be improved by establishing an advisory committee, drawn from key minis- tries, parastatals, the university, and the private se,tor, under the leader- ship of the CPDO, to (i) provide an ongoing forum for sharpening policy issues - iv - contained in the country's basic development strategy, (ii) outline priorities and programs (including studies and statistical surveys) to meet planning re- quirements on a systematic basis, and (iii) strengthen the multi-disciplinary approach which should characterize planning in Lesotho. xi. In light of the changing situation in southern Africa, the Govern- ment is critically reviewing the costs and benefits of the country's regional economic links, in order to determine plausible changes or alternatives, particularly in the Customs Union and monetary arrangements. In addition, external aid policy should be re-examined with a view to (i) improving coordi- nation, and monitoring more systematically the impact of technical assistance, (ii) bolstering assistance by more effective local management and leadership, and (iii) ensuring that external aid is consistent with national priorities. Further, the Government's decision to seek technical assistance to review public sector policy is sound, given the critical role of the public sector (which accounts for over one-half of total investment) in the country's development, and the need to improve operational efficiency. Rapid prolifer- ation of public enterprises since independence in 1966, and inadequate assess- ment of their organizational and management requirements, have resulted in poor performance of a number of these enterprises. While strengthening of organization and management is essential, policy should also aim at greater uniformity in procedures, for example, in budgeting, recruitment practices, and procurement. Progress along these lines should lead to increased account- ability, more systematic monitoring of performance, and greater autonomy. INTRODUCTION 1. This memorandum assesses recent economic developments in Lesotho, and focuses on some of the main issues which should be addressed within the medium-term strategy of the Third National Development Plan (1980-85). 2. Lesotho is one of the UN-designated least developed countries. GNP per capita in 1977 was estimated at $230. 1/ The country is mountainous, soil erosion is extensive, and less than 15 percent of the land area is cur- rently considered suitable for crop production. The declining agricultural sector is characterized by low productivity, plot fragmentation due to the traditional tenure system, and lack of adequate and timely labor inputs because of higher income-earning opportunities in South Africa. Industry (comprising mining, construction, and manufacturing) is still in its infancy, accounting for less than 5 percent of GDP. 3. Lesotho's development is strongly influenced by its unique geo- political situation. It depends on South Africa for 90 percent of its mer- chandise trade and tourist traffic, employment of one half of its male labor force, and migrant labor remittances equivalent to 60 percent of the gross domestic product. These economic links are reinforced by the country's membership in the southern Africa Customs Union (which provides 60 percent of government revenue from a common pool of customs and excise duties and sales taxes) and the Rand Monetary Area, and by Lesotho's use of the South African rand as its currency. 4. Government development policy and programs as outlined in the Second National Development Plan (1975/76 - 1979/80) are aimed mainly at: (i) re- storing the viability of the agricultural sector; (ii) improving transportation, particularly roads, and communications between the mountain regions and the more economically developed lowlands; (iii) accelerating domestic employment; (iv) reforming the educational system to meet the country's development needs; (v) expanding the industrial base by strengthening the role of the Lesotho National Development Corporation (the government-owned development finance company) which is the main channel for industrial investment; and (vi) generally reducing the country's economic dependence on South Africa. The emphasis of the Plan is well directed to the country's main development problems, and the investment pattern, giving priority to agriculture and infrastructure, reflects the basic needs of an economy still at a very early stage of development. Particularly within the last five years the country's absorptive capacity has improved significantly (with actual investments rising from about 40 percent to within 60 to 70 percent of planned investments), but the shortage of adequately trained managers and professional and technical skills remains a serious constraint to development. 1/ GNP substantially exceeds GDP because of migrant workers' remittances. GDP per capita was only about $140 in 1977. -2- I. RECENT ECONOMIC DEVELOPMENTS Output and Expenditure 5. In recent years the structure of Lesotho's economy has been chang- ing; this is true both of the composition of domestic production and of the relationship between internal and external sources of income. The number of workers employed outside the country rose steadily up to 1977, reaching an estimated 165,000 in that year, a number equivalent to almost 30 percent of the total labor force and one-half of the active male labor force. Of these, some 130,000 were employed in the South African gold mines and collie- ries, a number nearly two-thirds greater than a decade earlier. In addition to the increasing numbers employed in the mines, the wages of mine workers have also been rising rapidly. Total cash income of mine workers rose more than five times between 1973 and 1977. The economy has become increasingly depen- dent on remittances from these workers; net factor income from outside the country was on estimated 3 1/2 times higher in 1977/78 than in 1973/74, and five times higher than in 1970/71. As a result of these trends, the share of remittances in total national income has been rising steadily, from around 30 percent in the early 1970's to about 40 percent of present. This is illustrated in Table 1. Table 1: GROSS DOMESTIC PRODUCT AND GROSS NATIONAL PRODUCT (in million of rands at current prices) /1 /1 /1 1970/71 1973/74 1974/75 1975/76 1976/77 1977/78 GDP at Factor cost 42.5 68.9 75.9 87.3 106.3 126.5 GDP at market prices 49.1 76.3 85.5 102.5 130.9 160.2 Net Factor Income 21.2 29.9 43.8 68.7 88.7 103.8 GNP at market prices 70.3 106.2 129.3 171.2 219.6 264.0 GDP/GNP 69.8% 71.8% 66.1% 59.9% 59.6% 60.7% GDP at Factor cost at 1972 prices /2 61.4 58.5 61.5 64.5 68.6 GNP at 1972 prices /2 99.6 106.4 129.5 143.2 150.8 /1 IMF/IBRD Staff Estimates /2 Deflated by the average index of consumer prices. Source: Statistical Appendix, Tables 2.1 and 2.2. 6. Lesotho's domestic economy is still heavily dependent on the perfor- mance of the agricultural sector, which accounted for more than 50 percent of GDP in the 1960's and still for some 45 percent in the early 1970's. However, in - 3 - more recent years there has been a significant increase in government activity and in the construction, mining and tourism sectors. GDP at constant factor cost declined by about 5 percent in 1974/75 due to a severe drop in crop output resulting from unfavorable weather. Crop production fell again in 1975/76 but this was offset by growth in other sectors. This was followed by a reported doubling of crop output in 1976/77. 1/ Overall GDP at factor cost is estimated to have increased about 5-6 percent a year in real terms since 1974/75. GNP, on the other hand, has been increasing since 1973/74 at a rate of 25 percent per year in current prices and at approximately 11 percent in constant prices, reflecting the steady growth in migrants' remittances. . 7. The country's expenditure pattern demonstrates its severe external dependence. The average level of consumption exceeds the domestic product by almost 75 percent, and in recent years has risen to exceed GNP. At the same time the investment level has been averaging 24 percent of GDP, due to the sustained rise in government construction activity and also a surge in private investment in 1975/76 and 1976/77, primarily in the new diamond mine. (See Appendix Table 2.2). Total domestic aggregate demand exceeds the GNP by a significant margin, as is shown in Table 2, and the margin has been increasing in recent years. Lesotho depends heavily on transfers and loans and grants from abroad to sustain the level of domestic expenditure. Domestic savings are always highly negative; gross national savings have declined sharply in recent years but are still slightly positive when allowance is made for net transfers. These aspects of Lesotho's expenditure pattern are illustrated in Table 2. Table 2: DOMESTIC EXPENDITURES (in millions of rands at current prices) /1 /1 /1 1973/74 1974/75 1975/76 1976/77 1977/78 Consumption 105.4 139.1 175.8 240.2 301.3 Investment 16.1 11.8 28.4 34.8 41.4 Gross Domestic Expenditure 121.5 150.9 204.2 275.0 342.7 Gross National Product 106.2 129.3 171.2 219.6 264.0 GDE/GNP 1.14 1.17 1.19 1.25 1.30 Gross Nat'l Savings/GNP /2 19.1% 4.9% 6.9% 1.2% 1.1% /1 IMF/IBRD Staff estimates. /2 GNP + Transfers - Consumption/GNP. Source: Statistical Appendix, Table 2.2. 1/ This dramatic recovery in agricultural output in 1976/77 is probably overstated by the official statistics since agricultural production data are subject to wide margins of error. -4- Sectoral Developments 8. Manufacturing is still at a very early stage of development, accounting in 1977/78 for only two percent of GDP and eight percent of wage employment. (Information on the performance of the manufacturing sector is inadequate, since there is no up-to-date Industrial Census and no index of industrial production.) Although the development of manufacturing in Lesotho's circumstances is a formidable task, prospects are now more favorable for an increasing rate of growth because of recent strengthening of the organization and management of the Lesotho National Development Corporation (LNDC). This financial intermediary is involved in almost all manufacturing ventures of any significance. It is the main channel for government invest- ment in industry through equity participation, loan guarantees for joint ventures and provision of physical facilities at serviced industrial sites. In addition, LNDC has taken steps to (i) strengthen its capital structure, (ii) increase its promotional activity outside southern Africa, particularly in Europe and Japan, in order to identify new opportunities for attracting overseas investment, and (iii) divest itself of a number of unprofitable subsidiaries. Altogether, these actions should increase LNDC's capacity to exploit the export opportunities provided by the country's membership in the southern Africa Customs Union, and by the Lome convention. Associated with LNDC in promoting industrial development is the Basotho Enterprises Develop- ment Corporation (BEDCO) which is concerned primarily with developing local enterprises, entrepreneurship and management. BEDCO provides similar facil- ities to those offered by LNDC, including technical assistance, but poor management has lowered its operational efficiency. However, needed technical assistance, particularly in accounting and business management, has recently been secured to improve BEDCO's capacity to accelerate small-scale economic activity. 9. Industrial policy calls for increasing emphasis on resource-based industries such as building materials production, stone crushing, agro- industries, and handicrafts, particularly wool and mohair products. At the same time, LNDC has launched a promotional drive to attract a number of new export industries, including furniture, pharmaceuticals and textiles, but with special emphasis on the assembly-type. Analysis of Lesotho's competi- tiveness over the range of these products will have to be carried out, and will require a more rapid build up, with technical assistance, of appropriate expertise within LNDC. The recent failure of a sizable electronics assembly enterprise underscores the need for careful design and appraisal of projects. On the financial side, LNDC's lengthening pipeline will soon require a new injection of investment funds. While current income is adequate to meet operating expenses, investment needs will depend on external assistance. Government efforts to put LNDC and BEDCO on a sound operational basis warrant continued international support. 10. Mining got a substantial boost in 1977 when De Beers Lesotho Mining Company (Pty),in which the Government has a 25 percent share of equity, began operating the country's first modern diamond mine at Letseng-La-Terai in the northeast of the country; average monthly production is now about 4,500 carats. Previously, diamond production had been carried out by local diggers using labor intensive methods. This new mine represents the country's largest single - 5 - investment, about R 37 million, or 33 percent of planned investments in the Second Plan period, and provides jobs for 600 workers or about 10 percent of employment in the industrial sector. Although diamond exports from the new mine only began in September 1977, the volume of total exports for that year was 15,000 carats, about double the average level of the previous three years, valued at R 1.3 million or 10 percent of merchandise exports. While the mine is expected to last only 8 years and to yield a comparatively low caratage of stones, (only about 5 carats per 100 tons of earth treated), most of the stones recovered are expected to be of gem quality. If Government plans for further expansion are implemented, and prices maintain a steady increase of about 10 percent a year, (after a 42 percent increase between September 1976 and November 1977, partly because of speculative pressure) diamond exports could reach R 25 million in 1980 or just over one-half of the value of pro- jected merchandise exports. The corresponding impact on government revenue from taxes and dividends would be about R 5 million a year, compared to an original forecast of R 1.5 million,1/ which would boost revenue generated within Lesotho by about 20 percent. 11. Since 1974, mineral exploration has been intensified with increased international assistance and results of a recent aeromagnetic survey are being examined to assess the country's mineral potential. This expanded activity should be accompanied by increased training of Basotho to meet the demand for high-level counterparts, and for localizing skilled posts in the new diamond mine. While a number of Basotho are undertaking overseas studies related to the mining sector, failure to meet academic entry requirements of overseas institutions has limited the number of candidates selected for train- ing in the past few years. In view of the growing importance of the mining sector, the Manpower Development Secretariat should consider with the Ministry of Education ways to ensure an adequate supply of suitable candidates, includ- ing special preparatory training where necessary. 12. Tourism has grown rapidly following construction and expansion of a 470-bed hotel and related casino facilities in Maseru. The number of tourists has increased from less than 5,000 a year in 1969 to an estimated 175,000 in 1977. In 1977/78, tourism accounted for about 7 percent of GDP, compared to 3 percent in 1974/75, and provided direct employment for about 800 workers, or 3 percent of modern sector employment. In addition, gaming and hotel accommodation levies accounted for 5 percent of non-customs revenues. Planned expansion in hotel capacity during the current plan period, including comple- tion of another international class hotel, will support the expected continu- ing growth in tourism, and will provide an additional 500 jobs. However, since tourism will continue to depend almost entirely on South Africa, which currently accounts for 90 percent of tourist traffic, and on the provision of casino facilities not available in the Republic, longer-term growth is likely to meet with increasing competition from the South African homelands where similar facilities are presently being planned. In addition, expansion of tourism has not been accompanied by linkages to the domestic economy, hence 1/ Second National Development Plan. - 6 - leakage of tourism earnings into imports is substantial. The feasibility of producing some meat and vegetables under contractual arrangements with hotels should be explored in reviewing agricultural policy during the thira NDP. Central Government Finances 13. After rising rapidly in the early 1970's, Government revenue stag- nated during the 1974/75 - 1976/77 period, due to a slight decline in customs receipts which accounted for about 55 percent of total revenue; in 1977/78 however, revenue jumped by almost 80 percent as customs receipts doubled after the 1976 revision of the revenuesharing formula of the Customs Union Agreement (Table 3). Although the amount of income tax also doubled in 1977/78, partly on account of rapidly rising incomes in the public service, and partly from strengthening of the tax administration, this source still represented only about 10 percent of government revenue. With a declining trend in the share of non-tax revenue (mainly attestation fees from migrant labor recruitment and payments under the Rand Monetary Agreement), reliance on customs union receipts for revenue growth has become even more pronounced. Taxation of migrants' earnings represents the most promising source for increasing domestic revenue, and is presently being examined within the context of an overall review of the fiscal system (para 54). Table 3: CENTRAL GOVERNMENT REVENUE (in millions of rands) 1970/71 1972/73 1974/75 1975/76 1976/77 /1 1977/78 /2 Customs receipts 6.3 6.7 17.3 15.5 16.5 32.8 Income tax 0.9 1.6 2.5 2.0 3.4 7.6 Poll tax 1.0 1.0 1.6 1.3 1.9 2.2 Other taxes 0.6 0.5 0.8 1.0 1.2 1.4 Non-tax revenues 1.4 1.4 7.3 9.5 7.1 9.6 TOTAL 10.3 11.3 29.4 29.3 30.1 53.7 /1 Estimated actual. /2 Revised budget estimates. Source: Statistical Appendix, Table 5.2. 14. Government budgetary expenditures have been rising at a rapid pace during the 1970's with a marked acceleration in the growth rate in the recent past (Table 4). In 1977/78, recurrent expenditure was an estimated 2.4 times its 1974/75 level, and 3.7 times the level in 1970/71. This significant in- crease was due mainly to (i) upward revisions in public service salaries of 20 percent in 1975 (the first since 1964) and 22 percent in 1977, particularly to stem migration of skilled manpower to South Africa, (ii) continuing expan- sion of the Government administration, and (iii) growing recurrent budgetary - 7 - demands of the expanding development program. In 1977/78, the Government's estimated wages and salaries bill is expected to absorb 50 percent of total revenue compared to 27 percent in 1974/75. The combination of revenue stagna- tion and rapid expenditure growth prior to 1977/78 resulted in a worsening of the recurrent budgetary situation which changed from a R 11 million surplus in 1974/75 to a R 2 million deficit in 1976/77. While this situation was created partly by delays in donor reimbursement for government expenditure on externally funded projects, it necessitated a drawing down of government liquid balances, an increase in its indebtedness to the banking system and a loan from the IMF Trust Fund. As of December 1977, net claims of the banking system on government were R 6.3 million compared to a net creditor position of R 6.1 million in December 1974. However, in 1977/78, recurrent revenue increased more rapidly than recurrent expenditure and an estimated R 8.6 mil- lion surplus was realized. The overall budgetary situation has been further bolstered by an estimated R 12.5 million increase in grants of which R 4.5 million represented reimbursement of capital expenditures incurred on donor funded projects; the remainder partly reflected the international response following Lesotho's appeal in 1976 for additional assistance to strengthen its economy and reduce its external dependence. 15. Capital expenditure, which previously had been constrained by the country's limited absorptive capacity, is estimated to have increased four- fold over the 1974/75-1977/78 period as a result of (i) greater investment opportunities uncovered by a number of sectoral studies on the country's economic potential, and (ii) improved implementation capacity stemming from a gradual buildup of local skilled manpower, and operation of a substantial technical assistance program (Table 4). While financing for the bulk of the capital program continued to come from abroad, in 1976/77 the Government financed 37 percent of capital expenditure from domestic resources, drawing mainly from the Miners' Deferred Pay Fund (MDPF) under which 60 percent of migrants' earnings are compulsorily repatriated to the Lesotho Development Bank. At the end of 1977, the balance in the MDPF stood at R 13 million, equivalent to 29 percent of estimated capital expenditure in 1977/78. - 8 - Table 4: SUMMARY OF CENTRAL GOVERNMENT FINANCES (in millions of rands) 1970/71 1973/74 1974/75 1975/76 1976/7711977/70/'2 Current Revenue 10.3 21.4 29.4 29.3 30.1 53.7 Current Expenditure 11.5 15.9 18.6 26.2 32.3 45.1 Current Surplus/Deficit -1.3 5.5 10.8 3.1 -2.2 8.6 Grants 2.6 3.3 3.1 3.2 0.6 12.5 Capital Expenditure 2.1 4.9 6.6 12.1 15.0 25.7 Overall Balance -0.8 3.9 7.3 -5.8 -16.5 -4.6 Financing External (net) 0.3 0.5 1.4 3.8 2.6 4.7 Domestic (net) 0.2 0.2 0.3 -0.3 5.4 1.7 Change in Government Balances -0.3 4.6 9.0 -2.3 -8.6 1.8 /1 Estimated actual /2 Revised budget estimates Source: Statistical Appendix, Table 5.1. Balance of Payments and External Debt 16. Lesotho's external sector is characterized by a chronic imbalance in merchandise trade which is funded largely by a substantial inflow of migrants' remittances and official transfers. The total value of imports has increased almost ten-fold between 1970 and 1977 (Table 5). While some improvement in statistical coverage is evident, this significant growth largely reflected (i) the capital goods requirements of an expanding development program; (ii) the increase in the number of migrants in South Africa; and (iii) the import demand arising from higher household incomes from migrant remittances. Over the 1974-77 period, import volume is estimated to have increased by 18 percent a year. At the same time, import prices increased by 16 percent a year, reflecting the continued high inflation in South Africa which supplies about 90 percent of Lesotho's imports. As a result of these price and volume trends, total import value rose by 156 percent between 1974 and 1977. Imports of consumption goods doubled between 1974 and 1976 partly as a result of the fall in crop production, which necessitated increased food imports, while capital goods increased almost threefold, largely due to the substantial investment in diamond mining. - 9 - Table 5: MERCHANDISE IMPORTS /1 (In millions of rands) 1970 1972 1973 1974 1975 1976 1977 2/ Consumption 16.6 32.5 47.1 62.4 89.2 132.8 156 Intermediate 3.3 5.5 6.5 11.1 15.3 24.1 27 Capital 3.1 5.0 6.9 8.4 12.8 22.7 27 Total 23.0 43.0 60.5 81.9 117.3 179.6 210 /1 Includes duties. /2 Staff estimates. Very provisional. Source: Statistical Appendix, Table 3.2. 17. Annual merchandise exports, which currently represent less than 10 percent of imports, rose fairly rapidly in the early 1970s but have grown very slowly and erratically since 1973 (Table 6). Although the country enjoys free access to the southern Africa regional market as well as favorable terms under the Lome convention, it has not been able to exploit these advantages, partly because of the shortage of entrepreneurs and trained managers, scarcity of capital, and few natural resources. A striking feature of the merchandise trade pattern has been the decline in official exports of wool and mohair, the main traditional export commodities. Despite a 60 percent price increase in these commodities over the 1974-77 period, recorded export volume declined by 32 percent partly as a result of (i) administrative difficulties within the Livestock Marketing Corporation (LMC); (ii) a recorded 32 percent drop in the livestock population; and (iii) unrecorded border trade with dealers in South Africa.l/While the relative weight of factors influencing the decline in the wool and mohair trade has not been fully determined, lack of farmer confidence appears to be significant. In 1976, LMC failed in its attempt to market wool and mohair outside traditional South African outlets; as a result, farmers obtained lower prices than those prevailing in the Republic. If LMC is to become effective, farmer confidence must be restored through reorganization and strengthening of its management and marketing capacity (para 42). 1/ See Statistical Appendix Table 3.3 - 10 - Table 6: MAIN COMMODITY EXPORTS (in millions of rands) 1970 1972 1973 1974 1975 1976 1977 /1 Wool 0.9 2.0 3.2 3.5 1.5 1.7 2.6 Mohair 0.6 1.1 1.5 1.6 2.3 2.0 1.9 Livestock 0.8 1.0 2.0 1.6 0.4 0.3 0.2 Diamonds 0.7 0.2 0.3 0.9 0.5 0.5 1.3 Other /2 1.2 1.8 1.8 2.2 4.6 10.2 6.2 Total 4.2 6.1 8.8 9.8 9.2 14.7 12.2 /1 Provisional. /2 Mainly miscellaneous manufactured goods. Source: Statistical Appendix, Table 3.2. 18. Because Lesotho's monetary system is integrated with that of South Africa, compilation of complete balance of payments statistics is difficult; in addition, adequate official attention has not yet been given to this exercise. Estimates of services and capital items in particular should be considered tentative because of data limitations. On the services account, net earnings of migrants in South Africa increased by about 35 percent a year between 1973 and 1977 as a result of rising mine wages, coupled with a steady increase in the number of migrants. Net transfers in 1977 were twice the 1974 level due to (i) the surge in customs receipts following revision of the revenue-sharing arrangements of the Customs Union Agreement, and (ii) a step-up in external assistance. However, because of the worsening trade imbalance, the current account deficit almost tripled over the 1974-77 period. On capital account, the main development has been a significant increase in private inflows in 1975 and 1976, associated particularly with diamond mining investment. Since 1974, when an overall payments surplus of R 6 million was realized, an average balance of payments deficit of R 5 million a year has been recorded; however, this only partially reflects the country's foreign reserves position, given the substantial unrecording of external transactions. - 11 - Table 7: BALANCE OF PAYMENTS (in millions of rands) 1974 1975 1976 1977 Exports /1 20.6 21.3 32.4 33.0 Imports /1 -85.5 -113.0 -164.2 -188.2 Resource Balance -62.9 -91.7 -131.8 -155.2 Workers remittances (net) 37.3 63.1 85.6 98.6 Net Transfers /2 19.7 18.6 22.8 39.6 Current Account -5.9 -10.0 -23.0 -17.0 Capital Account 11.9 7.8 15.6 12.2 Monetary movements and related items /3 6.0 -2.2 -7.8 -4.8 /1 Includes non-factor services. /2 Primarily Customs Union receipts. /3 Comprises changes in Government's net position at banks in Lesotho and changes in government balances abroad. Source: Statistical Appendix, Table 3.1. 19. External financial assistance has continued to be offered as grants or concessionary credits from a growing number of bilateral and multilateral sources. Average terms of public debt commitments during the past three years implied a grant element of 80 percent, comprising an average interest rate of 0.6 percent a year and a grace period of 10 years. Given the country's monetary links with South Africa, including full access to the rand monetary reserves, its debt service capacity is largely governed by the Government's revenue position. At December 1977, public debt (disbursed) amounted to US$16.8 million of which IDA accounted for 60 percent; debt service payments in 1977 were US$0.5 million, equivalent to one percent of government revenue. Money and Banking 20. Lesotho has no central bank or monetary authority, but under an agreement with South Africa it uses the rand as its currency; such an arrangement limits the scope for implementing an independent monetary policy. In May 1978, the Government announced its decision to establish - 12 - a monetary authority and create a separate currency, the maloti, which would be set at par with and be fully backed by the rand; both currencies would circulate in Lesotho as legal tender. Prior to 1973, no machinery existed for supervising and monitoring banking and financial institutions, or for strengthening their role in development; but legislation now provides for liquidity ratios, minimum capital requirements, treasury bill issue and management, and systematic reporting, all under the administration of a Commissioner of Financial Institutions within the Ministry of Finance. 21. A significant feature of the commercial banking system has been its continued surplus liquidity which increased from 77 percent over statu- tory requirements in 1974 to 147 percent in 1977. Although the absence of a central bank as a lender of last resort could influence commercial banks to hold above average levels of reserves, the situation also reflected (i) a doubling of savings and time deposits and (ii) a continuing low level of resource absorption in the private sector. Since surplus deposits con- tinued to be largely reinvested abroad, mainly in South Africa, foreign assets of commercial banks increased by 60 percent over the 1974-77 period. This excess liquidity underscores the need to develop profitable domestic investment opportunities in order to increase commercial lending for develop- ment, which to some extent has been limited by the traditional reluctance of commercial banks to accept livestock as collateral. In addition, recent establishment of the Lesotho Building Finance Corporation is expected to boost long-term lending to meet the rapidly increasing demand for middle-income housing. II. EMPLOYMENT AND MIGRATION The Present Position 22. The country's labor force, which in 1977 was estimated at 563,000 1/, has increased during the past decade at 2.1 percent a year. Three main components can be identified: (i) the modern wage sector of about 32,000, comprising 6 percent of the total labor force and characterized by a shortage of managerial, professional and technical skills, (ii) a migrant segment of about 165,000 2/ (mainly unskilled, but with a growing skilled/ semi-skilled element in recent years) employed mainly in the South African mines, and (iii) the residual labor force engaged mainly in subsistence agriculture and livestock-rearing (See Table 8). The overall labor force participation rate was 47 percent, largely reflecting the high participation of women and other family members in the subsistence sector. 1/ Based on manpower data in the Second National Development Plan and mission estimates. 2/ Official recruitment was 129,000; varying estimates of unofficial migration exist. - 13 - 23. While the annual increment to the labor force is estimated to be 10,000 to 12,000, domestic employment creation in the modern economy is only approximately 2,500 to 3,000 per year. Traditionally, most of the new male entrants to the labor force have migrated to South Africa for temporary employment, and during 1967-1977 the number of Basotho migrant workers in the mines increased by nearly two-thirds, following a nine-fold increase in the nominal wage of mine workers. However, since 1973 official South African mining policy has been directed to reducing dependence on foreign migrant labor by (i) increasing recruitment of black South Africans (who comprised one half of mining employment in 1977 compared to only 25 percent in 1973); and (ii) accelerating mechanization of the mines. In addition, labor recruitment from Rhodesia since 1975, and resumption of recruitment from Malawi in 1977,1/ can be expected to limit future job opportunities for Basotho migrants. Table 8: STRUCTURE OF EMPLOYMENT, 1977 /1 Modern Sector Mining 800 Manufacturing 3,600 Construction 3,500 Government 10,700 Tourism 800 Other Services 14,000 Total Modern Sector 33,400 Handicrafts and Informal Activities 23,000 Subsistence Agriculture 341,800 Domestic Labor Force 398,000 Migrant Labor 165,000 Total Labor Force 563,400 /1 Based on manpower data in the Second National Development Plan and mission estimates. 24. The inter-relationship between migration and the domestic economy, particularly the agricultural sector, is complex, but understanding of this link is gradually improving as a result of an expanding program of research fostered by the Government's declared policy to reduce migration. Rural economic conditions, including population pressure on the land and low 1/ In 1974, Malawi terminated recruitment of its workers (about 120,000) for South African mines following a plane crash in which 72 workers were killed. - 14 - agricultural productivity, as well as lack of work opportunities in the modern sector, exert a push to migrate which is reinforced by the pull of gainful employment options and substantially higher incomes in South Africa. In 1977, the Government minimum wage for unskilled workers in Lesotho was only R 480 per annum compared to about R 820 (plus free board, accommodation and medical services) for a mine worker. High wages in South Africa have also made it difficult for the Government to hold down wages for skilled and semi-skilled workers in the modern sector. Migration has other important implications for the Lesotho economy apart from its employment and wage effects. Remittances, which are estimated to be equivalent to 60 percent of domestic product, substantially augment rural household incomes. In turn, higher rural incomes generate additional demand for imports, mainly of con- sumption goods which have accounted for about 75 percent of imports in recent years. Returning migrants also bring back directly about 20 percent of Lesotho's imports. Customs duties on imports represent about 60 percent of Government revenue, and thus largely determine the level of Government recur- rent expenditure. 25. Traditionally, Government policy toward migration has been passive in the face of the strong economic incentive to migrate stemming from lack of local employment opportunities, and possible political implications of any 'interference' with such an established way of life. In recent years, however, the Government has become increasingly concerned about the economic implica- tions of a levelling off or a possible decline in migration on the one hand, and, on the other, migration's negative effect on the country's development policy. Although Government has intervened to the extent of introducing a compulsory scheme in 1975 to repatriate 60 percent of migrants' earnings to the Lesotho National Bank, an overall strategy for a more socially optimal migration and employment policy has not yet been formulated. The Medium-term Employment Outlook 26. Although the future level of migration is uncertain, official South African policy to reduce dependence on foreign labor, recent trends in recruit- ment from other countries and within South Africa itself, and ongoing research designed to accelerate mechanization of the mines, all indicate that the rapid growth in Basotho migration over the past decade is probably at an end. In view of this uncertainty surrounding the migrant labor situation, Government strategy is aimed at domestic employment maximization. In order to illustrate the possible demand/supply implications of a changing migrant labor pattern, we compare, in the paragraphs which follow, the employment prospects in the main productive sectors with the anticipated growth in the labor force over the Third Plan period. 27. In construction, which presently accounts for 10 percent of domestic wage employment, growth since 1975 has been about 17 percent a year, reflecting rapid expansion in housing, road construction, mining and tourism. Although this rate of growth is expected to slow down following completion of large- scale projects in mining and tourism, prospects for sustained growth of about 10-12 percent a year are favorable with further expansion particularly in housing, roads, and construction of an international airport. - 15 - 28. In pursuing its policy to maximize employment, the Government established a Labor-intensive Construction Unit (LCU) in 1976, which currently employs 300 workers on rural roads and airstrip construction. In 1979, opera- tions should extend into basic conservation works, doubling the present employ- ment level. However, official projections of up to 4,000 jobs envisaged over the Second Plan period will not materialize because of the slow start of the program, which resulted partly from a shortage of administrative and super- visory personnel. Labor-intensive public works are considered a potentially important factor in employment policy, and operations of the LCU are being closely monitored to assess the economic and technical feasibility of substan- tially expanding the program. The LCU was also established to develop an organizational and administrative capacity to cope with any emergency return of migrant workers (as happened in 1974 when 15,000 workers suddenly returned); so far, the build-up of such an emergency capacity has been slow. Any sudden large-scale return of migrants is considered unlikely because of strengthened consultative machinery between the mining authorities and the Government; however, the risk still remains, and the LCU should become increasingly geared to cope with such an eventuality. 29. In manufacturing, projected creation of 7,250 jobs during the Second Plan, implying a growth rate of 27 percent a year, is over-ambitious. Over the Third Plan period, employment growth will largely depend on the type of investments LNDC succeeds in attracting, particularly labor-intensive assembly- type industries. At the same time, a slowdown in migration could create favorable conditions for a strengthened BEDCO to exploit the industrial experience, supervisory skills, and artisanship of migrants in developing much-needed entrepreneurship, and in expanding small-scale economic activity. In particular, employment expansion should be sought through more rapid development of cottage industries (e.g., wool, mohair, handicrafts), since the growth potential of this subsector has not yet been fully exploited. Cottage industries should be accorded high priority within the program of BEDCO, and technical assistance should be sought for the necessary investment studies (raw materials, skills, markets, technology) on which a strategy for rapid expansion could be formulated. Based on these possibilities, an employment growth rate of at least 15 percent a year is assumed. 30. In mining, while no further growth in employment is envisaged from the new diamond mine, Government is providing equipment and training to reorganize diamond production by individual diggers on a cooperative basis, and an employment target of 2,000 is projected. Assuming that at least one- half of this target were achieved over the Third Plan, employment growth in the sector would be about 11 percent a year. In tourism, projected expansion should support a growth in employment of about 10 percent a year (para. 12), but in the other sectors, particularly government, it is assumed that employ- ment would increase more slowly, in line with the rate of GDP growth. With continuing implementation of major programs from the Second Plan (e.g., BASP) and improved Plan implementation, output growth of about six percent a year could be sustained. 31. If the average number of migrants remained at the 1977 level of 165,000, the domestic labor force would increase from 410,000 in 1978 to - 16 - 500,000 in 1985, implying a growth rate of 2.9 percent a year. Based on the favorable assumptions outlined above regarding (i) employment prospects in the main productive sectors, (ii) sustained GDP growth, and (iii) improved Plan implementation, the rate of growth of modern sector employment would increase from 8 percent to 10 percent a year. While this would create 41,000 new jobs, the corresponding labor force increment would be 90,000, leaving 49,000 persons to be absorbed in agriculture where the labor force would increase by 1.9 percent a year. This labor force and employment scenario is illustrated in Table 9 below. However, if migrant mine labor should decline by say 5 percent a year (assuming modern sector employment was the same as above), the labor force in agriculture would rise by 3.2 percent a year, and 87,000 additional persons would depend on agriculture for their livelihood. Clearly the primary impact of a constant or declining level of migration over the next plan period would be to increase the labor supply in agriculture where the bulk of the labor force growth would have to be absorbed. Thus attention must be focused on ways to increase productive employment in the agricultural sector. The problems which confront this effort are discussed in the next section. Table 9: POPULATION, EMPLOYMENT AND LABOR FORCE PROJECTIONS, 1978-85 1/ 1978 1980 1985 Growth Rate (thousands) % Population 1,273 1,333 1,494 2.3 Domestic Labor Force 410.0 433.0 500.0 2.9 Modern Sector 36.7 44.0 71.0 10.0 Informal Activities 23.5 25.0 30.0 3.5 Subsistence Agriculture 349.8 364.0 399.0 1.9 Migrant Labor 165.0 165.0 165.0 - Total Labor force 575.0 598.0 664.0 2.1 1/ Based on data contained in the Second National Development Plan and mission estimates. III. AGRICULTURE Recent Performance 32. Agriculture, including livestock, is the predominant sector in the Lesotho economy. Some 95 percent of the population lives in the rural areas and an estimated 85 percent of the people work on the layd. Lesotho contains - 17 - slightly over 3 million ha of land area, but less than 400,000 ha (13 percent) is considered cultivable with present farming methods. (About 75 percent of the total land area is classified as pasture.) 33. Under the traditional tenure system, agricultural land is divided fairly equally among the rural population. The average holding is only 2-2.5 ha per household, and most holdings vary between 1 and 6 ha with less than 3 percent in excess of 6 ha. (The per capita land allocation is even more equitable, since studies have shown a close correlation between size of holding and size of family.) In theory every adult male is entitled to a share of land which is allocated to him by the village chief; in practice rising population pressure has led to increasing landlessness which is mani- fested in the greater length of time younger males must await their alloca- tion. An estimated 12-15 percent of rural villagers do not have land at the present time. 34. Total production of food crops is inadequate to meet domestic demand and has been rising more slowly than population, thus necessitating a rising level of food imports, particularly grains. 1/ The absolute level of yields is very low and appears to have been declining steadily; agricultural census data imply that between 1950 and 1970 the yields of the principal crops fell between 23 and 60 percent. Total output is also subject to wide year-to-year fluctuations caused by weather. Crop output declined drastically in 1974/75 and 1975/76, due to unfavorable weather (Appendix Table 8.1). Official statistics indicate that there was a dramatic recovery in crop production of some 80 percent in 1976/77, despite an apparent decline in the area under cultivation. While it is clear from qualitative evidence that crop production recovered in 1976/77, it seems unlikely that yields reached the levels indi- cated in Appendix Table 8.1. In any event, the recovery was still only suf- ficient to restore foodgrain output to the 1973/74 level. 35. About half of the value of agricultural sector production comes from livestock - meat, milk, hides and skins, wool and mohair. Some 70 per- cent of all rural households own some grazing stock, primarily cattle, sheep and goats, but the distribution of livestock ownership is more unequal than that of land - only half of rural households have cattle and 10 percent of the population holds nearly half of the national herd. The number of livestock in the country is believed to have remained fairly stable for several decades, but there has been an apparent decline in herd size during recent years (Appendix Table 8.2). This reduction has occurred despite a recorded increase in live animal imports and a sharp reduction in exports, indicating possibly higher mortality. There has also been a decline in the quality of the herd 1/ Lesotho's foodgrain deficit is difficult to quantify because sizeable amounts of maize and wheat have traditionally been exported to South Africa for milling and subsequent re-import into Lesotho at subsidized prices enjoyed by South African consumers. However, in January 1977, South Africa removed the subsidy, thereby significantly raising the cost of grain imports. This action promoted the government decision to establish a flour mill in Lesotho. - 18 - due to inbreeding and poor husbandry practices, and in the quality of wool and mohair products, Lesotho's principal exports. 36. Lesotho's agricultural sector suffers from an unfavorable natural environment, particularly erratic or insufficient rainfall, frost and hail. In addition, overgrazing, overcropping and deforestation over many decades have resulted in drastic soil erosion in all ecological zones. Other in- hibiting factors include the fragmentation of plots under the traditional tenure system, the shortage of male labor due to migration which causes heavy dependence on women and children for farm labor, the low productivity of traditional cultivation practices, lack of modern inputs such as improved seeds and fertilizers (only about 6,000 tons of fertilizers are used annually for the entire country), and inadequate extension services, marketing, stor- age and processing facilities. 37. The result of all the above forces has been a steady decline in the share of the agricultural sector in the national economy, from more than 50 percent of GDP in the 1960's and early 1970's to only an estimated 30 percent in 1977/78. The point has now been reached where the average rural household derives only 20 percent of household income from agriculture, including livestock, (and only an estimated 6-7% from crop production), with the remainder coming from migrant remittances (59 percent) and other off-farm income (21 percent). The returns from farming are so low and so uncertain that there is very little incentive to invest labor and capital; this is reflected in the decline in cultivated acreage, to a level below 300,000 ha in recent years (Appendix Table 8.1). 38. The Government has made serious efforts to overcome the constraints facing agriculture through a variety of agricultural projects and programs designed to make farming economically viable so that the rural population can afford to stay on the land. 1/ Some of these are described briefly below. 39. The Thaba Bosiu project was started in 1973 with IDA support to deliver inputs and services to 17,000 farm families in an area of some 30,000 ha and to expand conservation works. The main objective was to in- crease yields for traditional subsistence crops. (Similar type projects include the Khomokhoana Rural Development Project funded by SIDA and the Sengu River Agricultural Extension Project funded by UNDP). However, by the fourth year of implementation, less than 50 percent coverage of the target area had been achieved, yields of the main crops have been disap- pointing, and soil conservation activities were only 25 percent of the ex- pected level. Incremental crop production per ha was only about 10 percent of the expected output. Despite the generally disappointing results to date, 1/ The Second National Development Plan originally allotted 33 percent of total public investment to the agricultural sector (revised Plan target of 24 percent). The Plan set a target rate of growth of crop production of 5.6 percent per annum from 1973/74 to 1979/80; this production tar- get growth rate has not been met thus far. - 19 - the project has had limited success in introducing asparagus as a cash crop. In 1970, FAO identified asparagus as a high-value crop (in terms of return to labor effort) which could be grown under Lesotho's climatic and soil conditions. A small asparagus scheme of 50 ha was started under the Thaba Bosiu project and a small canning plant is now in operation with UNDP fund- ing, but to date the total impact of this effort has been small. 40. The Cooperative Crop Production Program (CCPP) was started in 1976 as an experiment in reshaping the traditional farming system through modernized cultivation techniques employing tractors and other machinery. The program is essentially a share-cropping scheme in which groups of par- ticipating farmers provide a block of land (to overcome the constraint imposed by fragmentation of plots) and the Government supplies all other inputs and plants, harvests and markets the crop. Proceeds are shared equally by the Government and participating farmers. Emphasis has been primarily on winter wheat cultivation; the program incorporated an esti- mated 5-6,000 ha in 1976/77 and 7,000 ha in 1977/78. Little information is available about the costs or incremental output of this program, but there are indications that it has not been cost-effective. 41. The Government has also moved into marketing in recent years in an effort to improve upon the traditional marketing system by increasing competition and thereby offering additional incentives and improved income- earning opportunities for farmers. The Produce Marketing Corporation (PMC), a parastatal body, was established in 1973 to regulate and control markets, set quality standards and grade crops, and provide storage and marketing facilities. To date it has confined its activities principally to export marketing of peas and beans. By offering steady increases in producer prices, PMC has induced a favorable farmer response for these crops; area planted in- creased by 80 percent and output doubled between 1972/73 and 1975/76. The PMC experienced operating losses in its early years because it was unable to market all of the additional production; however, management has since been considerably strengthened and performance is gradually improving, with good prospects for bean exports to the European market. 42. Also in 1973, the Government established a Livestock Marketing Corporation (LMC) with wide powers to regulate and improve marketing in the livestock sector. Given its limited manpower and financial resources, the LMC limited itself to the marketing of wool and mohair, beginning in 1975. However, the Corporation proved incapable of competing effectively with private traders, in part because its two-stage payment system was a strong disincentive to farmers, but also because of managerial problems. The LMC's board was suspended in late 1977 and the Corporation is currently inactive pending a complete reorganization. Official wool and mohair ex- ports, which declined significantly in 1975 and 1976, are once again being channelled through the South African Wool and Mohair Board. - 20 - 43. Other recent Government efforts in support of agriculture include the Theba-Tseka Mountain Development Project 1/ and small projects in irri- gation, crop research, animal husbandry, dairy farming and fisheries. The Government has also established an Agricultural Development Bank and has expanded the Agricultural Training College to accelerate the training of critically needed agricultural extension staff. 44. For the future, the Government's agricultural development strategy has three principal objectives: a) to develop the lowlands, principally through the Basic Agricultural Services Program (BASP); b) to develop the highlands through control of grazing, destocking, soil conservation and development of infrastructure; and c) to strengthen the links between the two parts of the country by improving infrastructure and marketing services. Phase I of BASP began in 1978 with financing from IDA, EDF, ODM, UNDP and the Federal Republic of Germany. It will provide, over a five-year period, physical infrastructure such as storage facilities and roads, inputs, credit and extension services for expanding the production of maize, sorghum, wheat, beans and peas. The project area incorporates 295,000 ha, or almost 75 percent of all arable land. On the livestock side, the Government has plans to develop an abattoir to expand domestic processing of livestock which is presently limited to small local butcheries. This project, which is scheduled for completion by 1980, is designed to process 20,000 head of cattle and 30,000 small stock per year. This would facilitate a program of destocking, breed improvements and rangeland conservation. Policy Issues 45. The above section has shown clearly that, despite the implementation of a substantial agricultural program supported by considerable technical assistance, the decline of Lesotho's agricultural sector has continued. A combination of severe technical, economic and social constraints poses a complex agricultural problem whose solution has yet to be found. In this section, we can only indicate the general directions in which research, technical assistance and investments should be focussed in seeking such solutions. 46. Lesotho's agricultural decline is attributed partly to the migration of male laborers to South Africa. Results of a comprehensive study on the interrelationship between migration and domestic agriculture will soon become available. This study, which was carried out by the National University of Lesotho under the aegis of ILO, should provide important insights into rural household decision-making regarding crop and livestock production, agricul- tural investment, and the use of credit, extension and marketing services. The study should be an essential input to the formulation of agricultural policy in the Third Plan. In this regard, it seems evident from the low farmer participation in the Thaba Bosiu project, as well as in other proj- ects, that considerable further investigation of farmer attitudes and moti- vation is needed. There is also a need to involve the rural population more directly in the design of agricultural projects, something which has not always been done in the past. 1/ This project, funded by CIDA, started in 1975. Its principal focus is to improve the productivity of livestock in a 46,000 ha area of the central highlands. - 21 - 47. Given the extent of soil erosion in Lesotho, conservation, includ- ing afforestation, must become a priority component of agricultural policy. It will be necessary to devote increased resources to soil conservation and afforestation in future stages of BASP. The Government's approach has been to integrate conservation efforts with output expansion programs in order to gain the collaboration of the rural people. While this approach is sensible, results have nevertheless been disappointing; implementation of conservation works to date has been less than 50 percent of the mid-term target of the current Plan. In order to improve performance, ways must be found to (i) generate and sustain farmer motivation towards conservation, and (ii) develop an approach to conservation in which cost and technology will permit replica- tion on a national scale. 48. Lesotho's soil and climatic conditions seem favorable for the cul- tivation of certain high value crops whose production could be expanded provided satisfactory market outlets are available. In light of the favorable results obtained with asparagus, Government should examine the commercial feasibility of a range of other crops. At the same time, an analysis should be carried out to determine the incentives, including the levels of producer prices, that would be required to induce farmers to adopt new crops and farming methods. 49. There is need for more adaptive research in Lesotho in order to find new technical packages. Strengthening of the extension service is also required. In addition, it is important to carry out a comprehensive analysis of the entire agricultural sector. The analysis presently being undertaken with international assistance by a team from Colorado State Uni- versity should form the basis for future planning and policy formulation. Finally, the ability of the Ministry of Agriculture to prepare, implement and monitor development programs needs strengthening. Phase I of BASP is designed to provide such strengthening. IV. PERSPECTIVES ON THE THIRD NATIONAL DEVELOPMENT PLAN (1980-85) 50. This chapter briefly examines some of the main issues which should be addressed in the upcoming Third National Development Plan (1980-85) in light of Lesotho's planning experience so far, and the changing political climate in southern Africa, with a view to identifying ways in which the country's planning and implementation capacity could be improved. Development Planning 51. Within recent years, the professional staff of the CPDO has been considerably strengthened to meet the needs of a rapidly expanding development program; at the same time, Lesotho has secured a substantial increase in financial and technical aid from a variety of both bilateral and multilateral sources. Such assistance will continue to be essential to Plan implementation, - 22 - but its coordination and management has imposed a considerable strain on limited government administrative capacity. Although Government planning has gradually improved since the First Plan was inaugurated in 1970, effectiveness could be further enhanced by (i) strengthening the statistical department to increase reliability and coverage of national statistics for both Plan formu- lation and monitoring, (ii) improving coordination within and between key ministries, (iii) providing more systematic on-the-job training for young professional and technical staff and middle-level managers, and (iv) managing more effectively the substantial technical assistance program, particularly to ensure adequate development of local counterpart capability. Additionally, the growing body of research being carried out on important areas of the economy (e.g. migration, agriculture), should be systematically monitored by the CPDO in order to assess its policy implications. Preparation of the Third Plan underscores the need for additional experienced economists, (particularly in macro-economic and manpower planning), and current emphasis on project- oriented planning which developed during the early years of independence should be balanced with an emphasis also on macro-planning based on longer- term strategies. For example, the Third Plan might be formulated within the context of a perspective Plan (of say 15 to 20 years), which would focus on local resource mobilization, and the chronic problems of agriculture, employ- ment and migration. Although such perspective planning would be hampered by lack of adequate bench-mark data, the exercise itself would serve to institu- tionalize commitment to an appropriate long-term development strategy based on priorities which extend beyond the narrow questions of economic growth. 52. Information and educational programs must be expanded and intensi- fied to increase local participation in the planning process, to enlist increased support for the government's agricultural and rural development policies, and associated programs must be developed to address the difficult migrant labor situation. In the preparatory stages, Plan coordination could be improved by establishing a planning advisory committee comprising high- level officials from key ministries, parastatals, the university, and the private sector under the leadership of the CPDO. Such a committee would provide an on-going forum for (i) sharpening policy issues contained in the country's basic development strategy, (ii) reviewing research needs, (iii) outlining priorities and programs (including studies and statistical surveys) to meet planning requirements on a systematic basis, and (iv) strengthening the multi-disciplinary approach to planning. Regional Developments 53. In view of the changing political climate in southern Africa, and Lesotho's own economic vulnerablity, the Government is strongly committed to reducing the country's severe external dependence. Re-examination of the country's regional economic links is timely, in particular, the costs and benefits from membership in the southern Africa Customs Union and the Rand Monetary Area. External financial assistance has recently been secured for such a review, which is to be carried out by the University with Government participation. The research proposal calls for an analysis of the benefits and costs to Lesotho of these institutional arrangements in both the short and - 23 - long-run development context, and an assessment of plausible alternatives. In the case of the Customs Union, any proposed changes in or possible dissolu- tion of the Agreement would need to spell out the implications for (i) govern- ment revenue, (ii) import substitution and export potential, given Lesotho's free access to the regional market, and (iii) likely impact on domestic prices. On the monetary side, the main alternatives lie in (i) an independent monetary system, or (ii) a dual currency arrangement (similar to that of Swaziland), under which the rand would remain legal tender. These options must be assessed against the current advantages of access to the rand monetary reserves, annual compensation for use of the rand, and relief from conventional balance of payments management. Since it is also likely that altered economic relations with South Africa could influence the level of recruitment of migrant workers, particularly in the mines, the study should also assess the macro-economic implications of varying assumptions about the level of migra- tion over the next several years. Diversification of Revenue Sources 54. In 1977/78, Customs Union receipts accounted for 61 percent of gov- ernment revenue, and this dependence could increase to 70 percent during the Third Plan period. Given the future recurrent expenditure demands of a rapidly expanding development program and the uncertain future of the Customs Union itself, diversification of revenue sources becomes increasingly urgent if the current pace of development is to be sustained. Although any signifi- cant expansion of the narrow tax base is only feasible in the long-run, some scope exists for increasing domestic revenue during the Third Plan period, through taxation of migrants' incomes and further strengthening of the tax administration. The Government has recently sought IMF assistance for a review of the fiscal system; the findings of this study should enable the Government to take steps to mobilize a higher level of domestic revenue. Management of External Assistance 55. Because of the shortage of high-level manpower, Lesotho will con- tinue to depend for some time on a substantial amount of expatriate technical assistance for implementation of its development programs. At the end of 1977, nearly 600 professional and technical expatriates were in the country; their salaries and related costs represent an amount equivalent to approxi- mately 25 percent of capital expenditure over the Second Plan period. However, there is a widespread feeling that this assistance is not as effective as it should be; clearly, effectiveness could be increased if such assistance were (i) directed increasingly toward institution building and training and less toward operational work, (ii) better coordinated and monitored, and (iii) bolstered by a strengthened local management. Preparation of the Third Plan will provide a timely opportunity to review external assistance, focussing particularly on the extent to which (i) projects are consistent with national priorities, rather than reflecting only the preferences of individual donors, (ii) recurrent budgetary implications are manageable, and (iii) needed counter- part manpower is planned. In addition, the Government should consider estab- lishing a special management unit (preferably within the office of the Prime - 24 - Minister) to implement a management improvement program across the Government administration. This unit should also monitor the performance of public enterprises and the effectiveness of technical assistance. 56. Closely related to the management of technical assistance is the issue of aid coordination where improvement would reduce duplication of donors' efforts, enhance project preparation and implementation, and ease the administrative burden on Government. To some extent, better coordination has been hampered by competition among donors for preferred projects, and by the slow build up in Government capacity to administer a rapidly expanding and increasingly diversified aid program. While such donor rivalry is a common feature of international assistance programs, the Government's periodic donor conferences 1/ should provide a useful opportunity to keep external assistance focussed on locally-determined priorities. Population and Employment Policy 57. While the population growth rate of 2.3 percent a year cannot be considered explosive relative to that of a number of other developing coun- tries, population growth presents particular problems for Lesotho because of the scarcity of domestic resources. Given limited cultivable land, limited possibilities for substantial domestic employment outside agriculture, and the traditional system of land allocation, current population growth is already seriously increasing the pressure on land resources. Population density per sq km of agricultural land is estimated to have increased from 32 in 1960 to about 46 in 1975; in addition, an estimated 14 percent of rural households were without farmland in the latter year. 58. Government policy is in fact aimed at reducing the population growth rate from 2.3 to 2.0 percent by 1980. The Government is using its maternal and health care programs to provide more information on family planning ser- vices and to distribute contraceptive materials more widely, but we do not have information about the extent of coverage or effectiveness of these activi- ties. There are strong local sensitivities which constrain the introduction of any program of population control and which make the attainment of the 1980 growth rate target unlikely. Nevertheless, such programs are a key aspect of long-term development strategy and they will have to be strengthened if the population growth targets of the Third Plan and beyond are to be achieved. 59. The issues of labor force growth and employment prospects have been discussed earlier. Clearly, the question of domestic employment generation will be a major concern in the formulation of the Third Plan. At this time we merely wish to reiterate our belief that labor-intensive public works in infrastructure, conservation and possibly in other sectors should be an important part of the government's employment program. The existing Labor- intensive Construction Unit (para. 28) should receive full suport. 1/ In 1975 and 1977, the Government convened Donor Conferences to review with external assistance agencies its development program and need for continuing assistance. - 25 - Public Sector Policy 60. Lesotho's economic situation calls for an aggressive public sector policy; public investment accounted on average for just over one half of total investment during the last three years. In industry, improved performance of LNDC and BEDCO will be essential to accelerating industrial activity. In par- ticular, review of industrial policy should focus on the extent to which a capital-intensive bias in investment decisions is being created by (i) the industrial incentives scheme; (ii) the Customs Union arrangements under which substantial customs receipts are generated by imported machinery; and (iii) interest and exchange rate policies derived from current monetary arrangements with South Africa. At the same time, such a review should also determine if the above arrangements are inconsistent with government policy to expand the small-scale enterprises sector and accelerate labor-intensive employment. Also, because industrial investment will be increasingly in- fluenced by the generous incentives available to the 'homelands' in South Africa, LNDC should begin to study the feasibility of a more selective indus- trial strategy which would improve Lesotho's competitive position in the southern African market. 61. Given the critical role of the public sector for resource mobiliza- tion and allocation in Lesotho, the Government's recent decision to review its policy toward public enterprises is sound. Rapid proliferation of public enterprises over the past ten years has not been accompanied by an adequate concern for their organizational and management requirements, with the result that performance of a number of these enterprises has been poor. While basic strengthening of their organization and management remains a priority need, policy should also aim at greater uniformity in budgeting, information systems, recruitment practices and procurement; improvement along these lines should lead to increased accountability, more systematic monitoring of performance, and greater autonomy. - 26 - STATISTICAL APPENDIX 1. POPULATION AND EMPLOYMENT 1.1 Population by Sex and Age Group, 1976 1.2 Basotho Working in South African Gold Mines and Collieries; Deferred Pay and Remittances, 1950 - 1977 2. NATIONAL ACCOUNTS 2.1 Gross Domestic Product (Factor Cost) by Industrial Origin Current Prices, 1973/74 - 1977/78 2.2 Sources and Uses of Resources, Current Prices 1973/74 - 1977/78 3. BALANCE OF PAYMENTS 3.1 Balance of Payments, 1970-1977 3.2 Recorded Imports and Exports by Commodity, 1970-1977 3.3 Exports of Selected Commodities, 1967-77 4. EXTERNAL DEBT 4.1 External Public Debt by Type of Creditor at December 31, 1977 4.2 External Public Debt Transactions at December 31, 1977 5. GOVERNMENT ACCOUNTS 5.1 Government Budgetary Operations, 1970/71 - 1978/79 5.2 Government Revenues, 1970/71 - 1978/79 5.3 Functional Classification of Government Expenditure, 1973/74 - 1978/79 5.4 Economic Classification of Government Expenditure, 1973/74 - 1978/79 6. MONEY AND BANKING 6.1 Consolidated Commercial Bank Statistics, December 1975 - March 1978 6.2 Commercial Banks Credit to Statutory Bodies and Business Enterprises by Economic Sectors, March 1975 - March 1978 7. PRICES 7.1 Maseru Price Index, January 1975 - 1978 7.2 Middle and Low Income Retail Price Index, January 1975 - 1978 8. AGRICULTURE 8.1 Crop Statistics, 1972/73 - 1976/77 8.2 Numbers of Livestock, 1960-1977 - 27 - Table 1.1: POPULATION BY SEX AND AGE GROUP, 1976 Age Group Males Females Total Total 0-14 236,638 238,830 475,468 39.1 15-34 179,454 197,277 376,731 31.0 35-49 83,201 85,074 168,275 13.8 50-64 51,020 57,747 108,767 8.9 65+ 37,018 50,556 87,574 7.2 Total 587,331 629,484 1,216,815 100.0 Source: Population Census, 1976. - 28 - Table 1.2: BASOTHO WORKING IN SOUTH AFRICAN GOLD MINES AND COLLIERIES; COMPULSORY DEFERRED PAY AND REMITTANCES, 1950-77 Year Basotho Workers Deferred Pay ('000) Cin millions of rand) (in millions of rand) 1950 34 0.4 0.3 1955 44 0.5 0.7 1960 51 0.7 0.8 1965 68 1.1 1.1 1970 89 2.5 2.2 1971 87 3.0 2.0 1972 99 3.4 2.4 1973 111 4.7 4.0 1974 105 7.4 5.1 1975 113 12.8 7.2 1976 121 17.8 8.2 1977 129 18.3 9.1 Source: Bureau of Statistics. Table 2.1: GROSS DOMESTIC PRODUCT (FACTOR COST) BY INDUSTRIAL ORIGIN CURRENT PRICES, 1973/74-1977/78 (in millions of rand) 1/ 1/ 1/ 1973/74 1974/75 1975/76 1976/77 1977/78 Agriculture: 35.5 35.2 37.7 43.6 38.1 Crops (19.3) (17.1) (18.9) (24.5) (18.0) Livestock (16.2) (18.1) (18.8) (19.1) (20.1) Mining and quarrying 0.2 1.1 1.7 2.7 3.0 Manufacturing 1.8 3.2 3.6 2.8 2.6 Building and construction 1.7 1.0 2.6 5.3 13.1 Wholesale and retail trade 6.5 10.8 12.0 14.9 15.0 Catering 2.0 2.4 4.3 6.1 8.7 Transport and communications 1.7 2.1 2.1 2.9 3.6 Ownership of dwellings 7.6 8.6 8.8 10.9 17.0 Central government 6.6 6.3 9.3 11.5 18.7 2/ Other 5.3 5.0 5.2 5.6 6.7 Gross domestic product (factor cost) 68.9 75.7 87.3 106.3 126.5 Indirect taxes (net) 7.4 9.8 15.2 24.6 33.7 Gross domestic product (market prices) 76.3 85.5 102.5 130.9 160.2 1/ IBRD/IMF staff estimates. 2/ Includes electricity and water, finance, insurance and business, and other services. Source: Bureau of Statistics, National Accounts 1974/75, and IBRD/IMF staff estimates, Table 2.2: SOURCES AND USES OF RESOURCES, CURRENT PRICES 1973/74 - 1977/78 (In millions of rand) 1/ 1/ 1/ 1973/74 1974/75 1975/76 1976/77 1977/78 Consumption 105.4 139.1 175.8 240.2 301.3 Government 9.6 9.5 19.6 24.1 32.9 Private 95.8 129.6 156.2 216.1 268.4 Gross domestic investment 16.1 11.8 28.4 34.8 41.4 Fixed capital formation 10.4 9.4 26.6 37.0 36.9 Government (4.9) (5.3) (10.6) (17.6) (25.6) Private (5.5) (4.1) (16.0) (19.4) (11.2) 0 Changes in stocks 5.6 2.4 1.8 -2.2 4.5 Exports of goods and NFS 18.5 20.7 24.1 32.5 34.2 Total resources (sources = uses) 140.0 171.6 228.3 307.5 376.9 Imports of goods and NFS 63.7 86.1 125.8 176.6 216.7 Gross domestic product (market prices) 76.3 85.5 102.5 130.9 160.2 Gross national product (market prices)106.2 129.3 171.2 219.6 264.0 1/ Staff estimates Source: Bureau of Statistics, National Accounts 1974/75, and IBRD/IMF staff estimates. Table 3.1: BALANCE OF PAYMENTS, 1970-77 (In millions of rand) 1970 1971 1972 1973 1974 1975 1976 1977 Trade balance -18.3 -23.4 -32.4 -43.4 -64.2 -92.2 -132.6 -157.1 Exports f.o.b. 4.2 3.0 6.1 8.8 9.8 9.2 14.7 12.2 Imports c.i.f. -22.5 -26.4 -38.5 -52.2 -74.0 -101.4 -147.3 -169.3 Non-factor services (net) -2.4 -3.0 -2.8 -0.6 1.3 0.5 0.8 1.9 Factor services (net).!/ 20.8 21.6 28.4 44.7 37.3 63.1 85.6 98.6 Transfers (net) 14.1 15.6 16.0 21.6 19.7 18.6 22.8 39.6 Current balance 14.2 10.8 9.2 22.3 -5.9 -10.0 -23.4 -17.0 Private long-term capital 4.0 6.0 4.0 3.0 5.0 12.0 20.0 9.0 Government capital -1.7 -1.9 -1.5 -2.6 3.1 0.2 -9.0 -4.2 Official long-term capital (-1.7) (-1.9) (-1.5) (-2.6) (1.4) (3.2) (2.9) (4.2) Government short-term capital Vi (-) (-) () (-) (1.7) (-3.0) (-11.9) (-8.4) Deposits money banks capital -0.2 0.7 -1.5 -5.5 0.7 -8.7 -3.1 -3.9 Net errors and omissions -17.0 -14.4 -11.1 -16.4 3.1 4.3 7.7 11.3 Overall balance -0.7 1.2 -0.9 0.8 6.0 -2.2 -7.8 -4.8 1/ Provisional. 2/ Mainly migrant workers' remittances. 3/ Adjustment for customs duties included in merchandise imports. Source: Ministry of Finance and IMF staff estimates. - 32 - Table 3.2: RECORDED IMPORTS AND EXPORTS BY COMMODITY, 1970-77 (In millions of rand) 1970 1971 1972 1973 1974 1975 1976 19771/ Recorded Exports: Wool 0.9 0.7 2.0 3.2 3.5 1.5 1.7 2.6 Mohair 0.6 0.5 1.1 1.5 1.6 2.3 2.0 1.9 Diamonds 0.7 0.2 0.2 0.3 0.9 0.5 0.5 1.3 Cattle 0.7 0.6 0.7 1.6 1.3 0.3 0.2 0.2 Other live animals 0.1 0.1 0.3 0.4 0.3 0.1 0.1 0.0 Foodstuff 1.0 0.3 0.7 0.3 0.1 1.1 1.8 0.7 Others (mainly miscellaneous manufactured goods) 0.2 0.5 1.1 1.5 2.1 3.5 8.4 5.4 Total Recorded Exports 4.2 3.0 6.1 8.8 9.8 9.3 14.7 12.1 Recorded Imports: Foodstuff and livestock 6.0 5.6 10.1 16.0 17.0 21.9 37.9 Beverages and tobacco 1.2 1.3 1.6 2.2 3.4 5.2 7.9 Crude materials 0.3 0.6 0.5 0.4 0.5 0.8 1.3 Mineral fuels and lubricants 1.5 1.7 2.4 2.8 5.4 7.1 11.7 Animal and vegetable oils and fats 0.2 0.3 0.4 0.5 0.8 1.1 1.6 Chemicals 1.3 1.8 2.2 2.8 4.2 6.3 9.5 Manufactured goods classified by materials 8.8 11.9 9.1 11.3 17.7 26.5 41.8 Machinery and transport equipment 3.1 4.1 5.0 6.9 8.4 12.8 22.7 Miscellaneous manufactured goods 0.6 0.7 11.7 17.6 24.3 35.6 45.1 .. Total Recorded Imports 32.9 28.0 43.0 60.5 81.7 117.3 179.5 210.0 Recorded Trade Balance -18.7 -25.0 -36.9 -51.7 -71.9 -108.0 -164.8 -197.9 1/ Provisional. 2/ Includes duties. Source: Bureau of Statistics - 33 - Table 3.3: EXPORTS OF SELECTED COMMODITIES, 1967-77 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 Cattle ('000 head) 13.4 18.4 15.3 11.4 8.7 8.9 12.9 9.2 3.5 1.3 1.2 Sheep and goats ('000 head) 5.4 16.5 25.9 16.1 10.9 31.8 31.2 19.1 7.0 2.3 0.5 Wool (000 metric tons) 4.1 4.6 4.6 4.7 3.2 3.6 4.8 4.0 2.6 1.7 2.8 Mohair (000 metric tons) 1.0 1.1 1.1 1.0 0.9 0.8 0.6 0.7 0.6 0.3 0.4 Diamonds (000 carats) 21.7 11.9 29.8 16.5 6.8 9.0 8.6 11.8 3.5 7.1 15.0 Source: Bureau of Statistics Table 4.1: EXTERNAL PUBLIC DEBT OUTSTANDINGTINCLUDING UNDISBURSED AS OF DECEMBER 31, 1976 O11 REPAYABLE IN FOREIGN CURRENCY AND GOODS IIN T%OLSANOS Of U.S. DOCLLARS) 0 E 8 T OUT 5 TAN 0 ING TYPE OF CREDITOR CREDITOR COUNTRY DISBURSED ;UNDISBURSED; TOTAL PRIVATE BANK CREDITS UNITED KINGOCM 289 - 289 fU0At PRIVATE BANK CREDITS 289 - 289 OTHER PRIVATE EEBT SCUIIi AFRICA 361 - 361 1OTAL OTEil PRIVATE DEBT 361 - 361 MULTILATERAL LCANS AFRICAN DEV. BANK 422 478 900 ICA 9,999 9.998 19,997 SA-A (SP AR FUND AF) 2,800 - 29800 UN DEVEL. PRCGRAM 587 - 5BT TOTAL MULTILATERAL LOANS 13,808 10,476 24,284 Bit AFAL LOANS DENMARK - 3,456 3,456 SOUTH AFRICA 290 - 290 UNI1FO KINGDEM 686 - 686 TOTAL BILATERAL LOANS 976 3,456 4,43 TOTAL EXTEPNAL PUBLIC DEBT 15,434 13.932 29,3 Source: External Debt Division, IBRD Table 4.2: SERVICE PAYMENTS, COMMITMENTS, DISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL PUBLIC DEBT PPOJECTI(NS BASED ON DEnT CUTSTANCING INCLUDING UNDISBURSED AS nF DEC. 31, 1976 DFRT REPAYAeLE IN FOREIGN CURRENCY AND GOODS (IN IHCUSANOS OF U.S. DOLLARS) TOTAL YEAR :DEBT OUTSTANDING AT : T R A N S A C I 1 0 N S D t) R I N G P E R 1 0 D : OTHER CHANGES OFGINNING OF PERIOD : ------------:------------------------------------------2------------ ----------------------- DISBURSED : INCLUOING'f COMMIT- 2 DISEURSE- S E R V I C E P A Y M E N T S 3 CANCEL- : ADJUST- : NLY :UNDISBURSED: MEAIS MENTS :----------------------:----------- !LATIONS : MENT * PRINCIPAL : INTEREST : TOTAL II) (2) a (3) : (41 ( (5) 16) (7) 18) : 49) 1971 7,525 0,367 107 452 125 142 267 10 132 1972 8,013 8,471 - 455 145 222 367 - 519 1973 8,845 8,845 6,202 14 153 224 377 1,243 184 1S74 7,647 13,835 4,000 1,997 146 183 329 - -11 1915 9,487 17,678 E,280 4,535 170 219 389 - -644 1976 13,458 23v152 6,400 2,380 200 214 422 - 22 1977 15,434 29,366 * * * * * * THE FOLLOWING FIGURES ARE PROJECTED * * * + + * 1977 15,434 29,366 - 39577 243 214 457 1978 10,737 29,092 - 2,833 259 209 468 1979 21,305 20,826 - 1,969 263 200 463 1980 73,003 28,555 - 1,158 269 200 469 1981 23,886 28,279 - 1,090 276 205 481 1982 24,693 27,99 - 1,040 276 204 480 1983 25,455 27,711 - 1,040 314 199 513 19A4 26,183 27,405 - 611 365 196 561 195 26,424 27,035 - 611 653 215 868 1986 26,380 26,380 - - 092 209 1,101 1987 25,486 25,486 - - 836 196 1,032 1988 24,650 24,650 - - 736 187 923 1989 730815 23,915 - - 727 177 904 1990 23,187 23,187 - - 727 167 894 1991 22,461 22,461 - - 704 162 866 1992 21,756 21,756 - - 674 154 828 1993 21,082 21,082 - - 728 147 875 1994 20,354 20,354 - - 810 141 951 1995 19,543 19,543 - - 834 132 966 1996 18,709 10,709 - - 926 125 1,051 Source: External Debt Division, IBRD Table 5.1: GOVERNMENT BUDGETARY OPERATIONS, 1970/71-1978/79 (in millions of rands) 1970/71 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 Actual Estimated Revised Budget budget estimates estimates Total revenue 10.3 11.3 21.4 29.4 29.3 30.1 53.7 77.4 of which: Customs (6.3) (6.7) (14.6) (17.3) (15.5) (16.5) (32.8) (56.1) Current expenditure 11.5 13.0 15.9 18.6 26.2 32.3 45.1 52.7 Current surplus or deficit -1.2 -1.7 5.5 10.8 3.1 -2.2 8.6 24.7 Net lending - - - - 0.3 -0.1 -0.1 - Grants 2.6 3.6 3.3 3.1 3.2 0.6 12.5 31.5 Capital expenditure 2.1 3.3 4.9 6.6 12.1 15.0 25.7 66.4 Overall surplus or deficit -0.8 -1.4 3.9 7.3 6.1 -16.7 -4.7 -10.2 w Financing External (net) 0.3 - 0.5 1.4 3.8 2.6 4.7 14.1 IDA () () (0.1) (1.1) (1.5) (1.8) (3.5) (6.3) UNDP (-) (-) (0.1) (0.4) (0.4) (-) (-) (-) Arab League (-) (-) (-) (-) (1.7) (1.0) (-) (-) Others (0.3) (-) (0.3) (-) (0.5) (-) (1.3) (8.3) Amortization (-) (-) (-) (-0.1) (-0.3) (-0.2) (-0.1) (-0.5) Domestic (net) 0.2 0.3 0.2 0.3 - 5.5 1.8 1.4 Commercial banks (-) (0.2) (-) (0.4) (-) (5.7) (3.0) (1.7) Others (0.2) (0.1) (0.2) (0.2) (-) (-) (0.9) (1.2) Amortization (-) (-) (-) (-0.3) (-) (-0.2) (-2.1) (-1.5) Change in government balances (increase -) (0.3) 1.2 -4.6 -9.0 2.3 8.6 -1.8 -5.3 Errors and omissions (including items -- to be budgeted) - - - - - - 1.3 - Change in Treasury balances (increase -) (0.3) 1.2 -4.6 -9.0 2.3 8.6 -0.5 -5.3 Source: Ministry of Finance Table 5.2: GOVERNMENT REVENUES, 1970/71 - 1978/79 (In millions of rand) 1970/71 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 Actual Revised Budget Budget Estimates Estimates Tax revenue 8.81 9.85 18.19 22.19 19.81 23.00 44.04 67.69 Taxes on net income and profits 0.88 1.59 2.09 2.53 2.02 3.40 7.64 6.70 Company, corporate, enterprises (0.22) (0.30) (0.48) (0.73) (0.43) (0.74) (3.59) (2.50) Individuals (0.66) (1.29) (1.61) (1.80) (1.59) (2.66) (4.05) (4.20) Taxes on international trade 6.62 6.93 14.76 17.41 15.47 16.62 32.98 56.29 Custom Union pool (6.32) (6.72) (14.63) (17.29) (15.47) (16.52) (32.84) (56.14) Export duties (0.30) (0.21) (0.13) (0.12) (0.003) (0.10) (0.14) (0.15) Other taxes 1.31 1.33 1.34 2.25 2.32 2.98 3.42 4.70 of which: Poll tax (1.03) (1.03) (1.19) (1.60) (1.32) (1.90) (2.24) (2.14) Nontax revenue 1.37 1.40 3.17 7.25 9.46 7.07 9.64 9.76 Administration fees and charges 2.73 6.15 7.58 4.51 6.82 7.15 of which: Attestation fees (0.11) (0.46) (1.3) (1.46) (1.41) (1.29) Interest 0.15 0.76 1.52 2.21 2.32 1.95 of which Rand Monetary Area Agreement (-) (0.72) (1.10) (1.56) (1.63) (1.35) Others 0.29 0.34 0.36 0.35 0.50 0.66 of which: Fines and forfeits (0.10) (0.13) (0.15) (0.15) (0.18) (0.25) Rental of property (0.19) (0.21) (0.20) (0.20) (0.22) (0.25) Total revenue 10.26 11.27 21.36 29.44 29.27 30.07 53.68 77.45 Source: Ministry of Finance Table 5.3: FUNCTIONAL CLASSIFICATION OF GOVERNMENT EXPENDITURE, 1973/74 - 1978/79 (In millions of rand) Revised Budget Budget Actual Estimated Actual Estimates Estimates 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 General public services 6.65 6.44 9.32 11.50 16.74 19.49 General administration (3.18) (3.70) (5.60) (6.99) (8.07) (9.11) Public order and safety (3.47) (2.74) (3.72) (4.51) (8.67) (10.38) Education 4.21 4.79 8.90 8.44 13.74 14.76 Health 1.41 1.31 1.99 2.76 3.65 4.13 1 Social welfare 0.56 1.05 1.13 1.03 1.66 1.87 OD Community services 1.42 1.57 2.48 4.39 5.23 5.75 Economic services 6.15 8.70 13.74 18.36 28.11 68.72 Administration and research (0.35) (0.90) (1.27) (1.86) (2.92) (3.46) Agriculture (2.19) (4.41) (4.59) (5.44) (9.53) (28.53) Mining (0.15) (0.25) (0.21) (0.16) (0.41) (0.67) Water supply (0.54) (0.69) (0.90) (1.03) (0.44) (2.12) Roads (1.15) (1.26) (3.60) (6.73) (5.76) (15.34) Other transportation and communication (1.28) (1.19) (2.27) (2.14) (4.23) (8.07) Other services (0.49) (--) (0.90) (1.00) (4.82) (10.53) Other 0.41 1.34 0.77 0.84 1.67 4.38 Public debt (0.28) (0.58) (0.77) (0.84) (0.73) (3.55) Other purposes (0.13) (0.76) (--) (--) (0.94) (0.83) Total expenditure 20.81 25.20 38.33 47.32 70.80 119.10 Source: Ministry of Finance. Table 5.4: ECONOMIC CLASSIFICATION OF GOVERNMENT EXPENDITURE, 1973/74 - 1978/79 (In millions of rand) Revised Budget Budget Actual Estimated Actual Estimates Estimates 1973/74 1974/75 1975176 1976/77 1977/78 1978/79 Current expenditure 15.92 18.63 26.19 32.32 45.10 52.70 Expenditure on goods and services 12.94 14.15 24.00 29.73 42.11 45.16 Wages and salaries (7.48) (7.99) (17.42) (20.88) (27.52) (33.22) Employers' contribution to social security schemes (0.07) (0.59) (1.00) (0.76) (1.05) (1.05) Other purchases of goods and services (5.39) (5.57) (5.58) (8.09) (13.54) (10.89) Public debt 0.28 0.58 0.78 0.85 0.73 3.54 of which: interest payments (0.27) (0.54) (0.75) (0.80) (0.69) (1.35) Transfers 2.70 3.90 1.41 1.74 2.26 4.00 1/ Capital expenditure 4.89 6.57 12.14 15.00 25.70 66.40 Total expenditure 20.81 25.20 38.33 47.32 70.80 119.10 1/ Includes advances on projects of a capital nature. Source: Ministry of Finance. Table 6,1: CONSOLIDATED COMMERCIAL BANK STATISTICS, DEC. 1975 - MARCH 1978 (In millions of rand) 1975 1976 1977 1978 Dec. March June Sept. Dec. March June Sept. Dec. March Foreign assets 18.1 18.4 21.7 18.1 18.7 18.5- 20.4 25.3 25.5 24.4 Claims on government 1.8 1.6 1.7 3.1 4.1 7.7 12.0 7.5 8.5 9.6 Claims on statutory bodies 1.4 2.1 1.9 2.0 2.3 2.8 3.0 3.6 4.3 4.5 Claims on private sector 8.4 9.3 10.3 14.1 11.7 12.2 12.0 15.1 13.6 15.3 Reserves 1.2 0.6 0.8 0.9 2.7 1.0 1.0 1.1 3.5 2.2 o 1/ Assets - liabilities 30.9 32.0 36.4 38.2 39.5 42.2 48.4 52.6 55.4 56.0 Foreign liabilities 0.8 0.9 0.7 1.1 1.3 1.4 3.9 1.1 1.4 1.3 Government deposits 2.6 3.4 3.5 2.0 2.7 3.6 3.6 3.6 3.2 4.4 Demand deposits 7.4 8.1 9.4 8.9 11.4 11.5 13.1 16.8 18.8 18.1 Savings and time deposits 18.7 18.9 20.4 21.7 23.2 24.8 26.0 27.5 29.2 30.9 Other items 1.5 0.9 2.4 4.5 0.9 0.7 2.3 3.6 2.9 1.4 1/ Figures may not add up because of rounding errors. Source: Annual Report of the Commissioner of Financial Institutions. Table 6.2: COMMERCIAL BANKS CREDIT TO STATUTORY BODIES AND BUSINESS ENTERPRISES BY ECONOMIC SECTORS MARCH 1975 - MARCH 1978 (In thousands of rand) 1/ 1975 1976 1977 1978 March June Sept. Dec. March June Sept. Dec. March June Sept. Dec. March Agriculture, hunting, forestry, fishing 1.2 1.5 1.3 0.9 1.6 1.1 1.9 1.2 1.6 2.1 2.6 2.3 2.4 Mining and quarrying - - - - - 0.2 0.2 0.3 0.1 0.1 0.1 0.1 0.1 Manufacturing 0.5 0.6 0.9 0.9 0.8 1.0 1.1 1.4 1.4 1.4 1.4 1.6 1.7 Electricity, gas, water 0.7 1.1 0.3 0.1 0.3 0.3 0.5 0.6 0.8 0.6 0.6 0.6 0.6 Construction 0.7 0.8 0.4 0.5 0.4 0.5 0.5 0.3 0.5 0.7 1.2 1.3 1.9 Wholesale, retail, hotels, restaurants 4.1 4.0 3.4 5.0 3.5 4.3 5.1 3.8 3.7 3.0 4.6 4.8 5.3 Transport, storage communication - 0.1 - 0.3 0.2 0.2 0.5 0.3 0.3 0.3 0.3 0.4 0.6 Non-bank, financial institutions, real estate, business services 0.2 0.2 1.0 0.1 0.2 0.1 0.1 0.3 0.4 0.8 0.3 - 0.2 Community, social and personal services 0.8 0.7 0.5 0.3 0.4 0.4 0.6 0.6 0.6 1.1 1.6 0.9 1.0 Total 8.2 9.0 7.8 8.1 7.4 8.1 10.5 8.8 9.4 10.1 12.7 12.0 13.8 of which Statutory bodies (1.4) (2.1) (1.7) (1.4) (2.1) (1.7) (2.0) (2.3) (2.4) (3.4) (3.6) (4.3) (4.5) Business enterprises (6.9) (7.0) (6.1) (6.7) (5.2) (6.3) (8.4) (6.5) (6.7) (6.6) (9.0) (7.6) (9.2) 1/ Figures may not add up because of rounding errors. Source: Annual Report of the Commissioner of Financial Institutions. 1/ Table 7.1: RETAIL PRICE INDEX FOR MASERU JANUARY 1975-JANUARY 1978 (October 1972 = 100) 1975 1976 1977 1976 1977 1978 Weights Annual Average Jan. April July Oct. Jan. April July Oct. Jan. Food and drink 33.0 148.5 162.2 207.2 155.2 156.1 163.8 173.8 191.9 204.9 214.2 217.8 226.4 Clothing 15.4 119.3 130.2 136.5 126.2 129.1 132.7 132.9 135.9 136.5 136.8 137.0 143.0 Transport 9.5 128.6 154.6 178.4 147.9 154.5 156.8 159.2 168.8 175.6 180.2 188.9 192.8 Furniture & household equipment 6.5 124.0 128.3 168.2 127.9 127.6 128.7 128.9 133.1 133.8 137.8 133.8 134.3 Rent & homeowner costs 6.2 172.1 150.2 173.9 145.2 147.4 149.6 158.5 169.8 174.6 175.7 175.7 196.5 1 Fuel, light, and heat 4.8 169.5 208.3 239.5 203.2 207.7 209.1 213.2 219.0 237.5 250.8 250.8 254.8 Medical & personal care 4.1 183.0 191.6 199.0 189.8 188.4 193.4 194.9 196.7 198.6 200.2 200.7 203.6 Footwear 3.9 103.2 117.4 124.6 102.4 121.4 121.4 124.6 124.6 124.6 124.6 124.6 124.6 Other goods & services 16.6 135.5 154.4 227.9 148.3 153.2 155.9 160.1 170.2 176.6 178.9 180.8 205.2 All items 100.0 138.2 154.0 179.7 148.2 151.4 155.6 160.8 171.2 178.6 183.3 185.7 195.5 Source: Bureau of Statistics 1/ Based on the average expenditure pattern of all Maseru households, and largely reflects changes in cost of living of middle-to- high-income groups. Table 7.2 : MIDDLE- AND LOW-INCOME RETAIL PRICES INDICES, JANUARY 1975-JANUARY 1978 (October 1972 = 100) 1975 1976 1977 1976 1977 1978 Weights Annual Average Jan. April July Oct. Jan. April July Oct. Jan. 1/ Middle-income index Food and drink 34.0 147.1 163.1 204.4 155.5 157.2 164.7 174.9 190.1 201.6 210.5 215.4 226.2 Clothing 15.7 120.7 129.7 134.8 126.3 129.1 131.7 131.6 134.1 134.7 134.9 135.6 141.4 Transport 9.2 128.4 156.1 181.0 146.5 152.7 161.7 163.5 172.3 178.7 182.5 190.6 193.5 Furniture and household equipment 6.1 124.9 129.7 131.1 128.7 128.9 130.6 130.8 131.4 131.0 131.0 131.1 132.6 Rent and homeowner costs 5.4 129.0 138.4 155.4 135.7 137.9 136.1 144.0 151.9 155.4 157.2 157.2 182.7 Fuel, light, and heat 5.2 167.7 205.0 238.3 199.2 204.6 206.2 210.1 214.4 231.2 253.8 253.8 256.8 Medical and personal care 4.2 166.7 173.7 181.1 172.3 171.6 174.9 176.2 177.8 180.4 182.5 183.6 187.1 Footwear 3.6 106.2 117.0 123.4 106.0 119.8 120.1 122.1 123.3 123.5 123.5 123.5 123.5 Other goods and services 16.6 134.8 152.3 172.4 145.5 149.4 155.5 158.7 166.3 170.5 175.4 177.3 201.6 All items 100.0 137.2 152.8 176.7 146.9 149.2 155.1 159.9 168.3 174.8 180.4 183.3 194.0 2/ Low-income index Food and drink 45.3 140.6 163.1 206.1 155.4 156.9 165.4 174.7 191.4 202.7 212.1 218.3 227.1 Clothing 17.1 124.4 134.2 140.3 130.8 133.0 136.6 136.5 139.1 139.9 140.7 141.6 147.4 Transport 2.2 111.4 121.2 185.5 115.4 121.2 124.0 124.3 175.2 178.4 179.9 208.7 212.9 Furniture and household equipment 4.1 128.8 134.3 135.8 132.9 133.1 135.4 135.7 135.7 135.9 135.9 135.9 137.6 Rent and homeowner costs 4.1 130.7 138.1 147.7 143.0 146.2 126.4 136.8 146.7 147.3 148.5 148.5 171.6 Fuel, light, and heat 7.4 175.7 219.0 250.5 213.0 219.3 220.8 223.0 229.5 240.1 266.3 266.3 268.8 Medical and personal care 4.8 159.4 166.5 175.0 164.1 164.7 167.8 169.6 171.1 174.1 176.8 178.2 182.1 Footwear 4.0 107.5 117.5 123.0 107.4 120.1 120.4 122.1 122.8 123.1 123.1 123.1 123.1 Other goods and services 11.0 131.2 147.1 165.0 141.7 145.5 148.9 152.3 160.4 164.9 166.5 168.4 190.5 All items 100.0 140.8 155.6 183.2 150.1 152.9 157.3 162.1 173.6 180.4 187.9 191.0 199.9 Source: Bureau of Statistics. 1/ Covers middle-income households in six lowland towns. 2/ Covers all urban households with total annual income of less than R 500 at the time of the 1972/73 Urban Household Budget Survey. Table 8.1; CROP STATISTICS 1972/73 - 1976/77 1972/73 1973/74 1974/75 1975/76 1976/77 Area planted ('000 hectares) Maize 120.0 129.7 107.8 115.5 92.6 Sorghum 70.0 83.3 54.8 55.4 46.8 Wheat 95.0 76.0 55.1 59.7 43.9 Beans 15.0 19.7 28.1 35.1 17.2 Peas 12.0 10.2 10.0 13.1 9.7 Total 312.0 318.9 255.8 278.8 210.2 Production ('000 metric tons) Maize 64.0 122.5 70.3 49.1 125.9 Sorghum 59.0 84.0 37.4 24.5 62.3 Wheat 57.0 57.1 45.3 44.6 61.4 Beans 3.4 7.5 13.4 8.7 14.7 Peas 3.8 7.2 5.8 5.8 7.0 Average yield (kilograms per hectare) Maize 533.0 944.0 652.0 577.0 1567.0 Sorghum 843.0 1008.0 682.0 591.0 1466.0 Wheat 600.0 745.0 822.0 740.0 1247.0 Beans 227.0 381.0 477.0 292.0 1379.0 Peas 317.0 706.0 580.0 548.0 844.0 Gross value (millions of rand) Maize 2.8 5.9 3.5 2.7 8.1 Sorghum 2.5 5.6 2.4 1.5 4.5 Wheat 3.2 3.3 2.7 3.4 5.6 Beans 0.5 1.7 3.9 3.3 4.3 Peas 0.4 0.9 1.0 1.1 1.2 Source: Bureau of Statistics and data provided by the Lesotho authorities. - 45 - Table 8,'2; NUMBERS OF LIVESTOCK 1960-77 ('000) 1/ 1960 1970 1973 1974 1975 1976 1977 Cattle 546 552 466 512 482 485 428 Sheep 1466 1655 1557 1585 1364 1128 1000 Goats 672 974 962 885 808 617 670 Horses 135 110 114 115 93 104 93 Donkeys 97 90 97 102 88 88 88 Mules 7 4 3 2 2 1 1 Pigs 61 66 76 77 95 76 95 Chickens 771 841 579 874 686 752 ... 1/ Provisional Source: Bureau of Statistics. t 介