Nestled in the heart of Southern Africa, Lesotho offers a unique business environment shaped by its geographic, economic, and political contexts. While the country boasts certain advantages, businesses also face notable challenges.
AfricaScope, a sister company of GeoScope, completed the World Bank Enterprise Survey in Lesotho in 2023 to explore the hurdles and opportunities entrepreneurs encounter when operating in Lesotho.
Challenges of Doing Business in Lesotho
Access to Finance
A staggering 36% of surveyed firms identified access to finance as their biggest obstacle. While 90% of businesses have checking or savings accounts, only 20% use banks to finance investments, indicating a reliance on internal funds and a gap in accessible credit facilities.
Electricity Supply
Electricity remains a critical concern, with 65% of firms experiencing outages and the average delay for new electrical connections reaching 52 days. Such disruptions increase operational costs and reduce productivity.
Political Instability
Political instability was highlighted as a significant obstacle by 12% of firms. Uncertainty in governance can hinder long-term business planning and deter investment.
Regulatory and Tax Burdens
Compliance with regulations consumes 7% of senior management’s time, and 43% of firms reported being visited by tax officials. Lengthy processes for obtaining licenses, such as an average of 73 days for import licenses, add to operational inefficiencies.
Competition from the Informal Sector
Over half (55%) of formal businesses face competition from unregistered firms, which often operate with lower costs by evading taxes and regulations.
Skilled Workforce Availability
Only 33% of firms offer formal training programs, and many report challenges in finding adequately educated employees to meet their needs.
Opportunities in Lesotho’s Business Environment
Strategic Location and Trade Potential
Lesotho’s location within South Africa provides businesses with access to a larger regional market. About 18% of firms export directly, and 72% use imported inputs, demonstrating opportunities for trade expansion.
Female Participation in Business
Lesotho leads its regional peers in female economic participation, with women involved in the ownership of 55% of firms. This highlights a progressive trend and a potential for gender-focused entrepreneurial initiatives.
Emerging Sectors
Manufacturing and services dominate the formal economy, with sectors like textiles, construction, and IT poised for growth. The government’s focus on diversifying the economy presents opportunities for innovation and new ventures.
Infrastructure Improvements
Despite current challenges, ongoing investments in infrastructure, particularly electricity and water supply, offer prospects for businesses to benefit from future enhancements.
Financial Sector Growth
While access to credit is limited, the financial sector’s gradual development, supported by policy reforms, could provide more robust solutions for businesses in the coming years.
Navigating the Path Ahead
To thrive in Lesotho, businesses must be strategic and adaptable:
- Build Partnerships: Collaborating with local firms and leveraging regional networks can mitigate risks and open doors to new markets.
- Invest in Workforce Development: Establishing training programs can address skill shortages and enhance productivity.
- Advocate for Reforms: Engaging with policymakers to streamline regulatory processes and improve infrastructure can benefit the broader business community.
Lesotho is a land of contrasts, where challenges and opportunities coexist. Entrepreneurs who navigate its complexities with resilience and innovation can unlock its untapped potential and contribute to the nation’s economic growth. By addressing its hurdles and capitalizing on its strengths, Lesotho can become a more attractive destination for investment and entrepreneurship.
AfricaScope’s Innovative Approaches to Business Surveys
AfricaScope leverages innovative methodologies to conduct business surveys across Africa, ensuring accurate data collection even in complex environments. By using advanced sampling techniques, data collection tools, and localized approaches tailored to each country’s unique context, AfricaScope minimizes logistical challenges and enhances survey reliability. This expertise ensures that businesses gain actionable insights into market dynamics, consumer behaviour, and operational landscapes.
For companies seeking to complete surveys efficiently, AfricaScope offers end-to-end support that prioritizes accuracy, budget adherence, and timeliness. Their experience in navigating regulatory frameworks, training field teams, and integrating modern technologies ensures that projects meet international standards. By choosing AfricaScope, businesses can make informed decisions grounded in robust data, driving growth and competitive advantage.
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