Lesotho :: SADC Investment Portal

Lesotho

Country Profile

Lesotho flag The Kingdom of Lesotho is a constitutional monarchy. His Majesty King Letsie III is the Head of State. It is affectionately known as the “Kingdom in the Sky” – also the “Mountain Kingdom”. The Government of Lesotho (GOL) is elected every five years and is headed by a Prime Minister who recommends ministers to Cabinet. The Right Honourable The Prime Minister has executive authority as the King serves a largely ceremonial function and is prohibited from actively participating in political initiatives. The parliament is made up of two houses; the upper house of parliament, called the Senate, composed of 22 principal chiefs whose membership is hereditary, and eleven appointees of the King, acting on the advice of the prime minister and the National Assembly composed of politically elected Members of Parliament. The political landscape is stable with numerous political party participation. Its people are called Basotho (singular Mosotho) and make a population of 2.344 Million living in the country and the Diaspora. The official languages are Sesotho and English.

The Kingdom of Lesotho is a member of many regional economic organizations, including the Southern African Development Community (SADC), the African Union (AU) and the Southern African Customs Union (SACU). It is also active in the United Nations (UN) and its organs, the World Trade Organisation (WTO), the International Labour Organisation (ILO), the Non-Aligned Movement, the Commonwealth, and many other international organizations. It is signatory to international treaties and agreements.

Economic overview

The economy of Lesotho is based on subsistence farming and animal husbandry, as well as small-scale industries that include clothing, footwear, textiles, food processing and construction. The small manufacturing base depends largely on farm products to support the milling, canning, leather and jute industries.

To attain its macroeconomic objectives, the Government of Lesotho is continuing to place high priority on parastatal privatisation and private sector development, with this strategy forming the primary source of growth and employment creation. Based on free market principles and private ownership of property, the Lesotho economy presents a relatively open economic and business climate.

General information

Capital	Maseru
Area	30,355sq km (World data)
Languages	Sesotho and English
Population (2024)	2.344 Million (World meter)
Currency	Lesotho loti (M)
GDP	2373 M (2022) (UNCTADstats)
GDP per capita (current US$)	1029 (2022) (UNCTADstats)
GDP growth (annual %)	2.10 (2022) (UNCTADstats)

Why Lesotho?

a) Stability

Lesotho offers a stable social and political environment which is investor friendly. Further, it has a free enterprise and free market economic system, which forms the basis for sustained development and growth.

b) Skilled Labour

Lesotho has a young, abundant, predominantly English speaking, literate, well-motivated labour force with a tradition of manual dexterity at competitive wage rates.

c) Market Access

Lesotho enjoys preferential market access under the following Agreements/arrangements:

The 2002 SACU Agreement which provides for free movement for all domestic products within the common customs area;
Member of the World Trade Organization (WTO) and as an LDC benefits from Special and Differential Treatment;
Membership in Free Trade Area at the SADC level where 100% of all tradeable goods are tariff free; at the Tripartite level (COMESA_EAC_SADC) where 90% of all tradeable goods are liberalised and at the continent level under the AfCFTA where 97% of all tradeable goods are liberalized;
AGOA – duty free quota free market access for over 6000 products;
SADC- EPA and SACU-UK – Duty free Quota free market access to the EU and the UK;
Canada – special preference market access.

d) Protection of Property Rights

The right to private property is protected under the law. Property rights and interests are enforced, and owners of property enjoy protection under the Lesotho Constitution of 1993. All foreign and domestic private entities may freely establish, acquire, and dispose of interests in business enterprises.

e) Dispute Resolution

Lesotho is a member of the ICSID Convention and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Lesotho readily accepts binding international arbitration of investment disputes. Further, Lesotho has entered into a number of bilateral investment agreements that provide for international arbitration.

Lesotho National Development Corporation (LNDC)

LNDC is the main parastatal of the Government of Lesotho charged with the implementation of the country’s industrial development policies. Established by an Act of Parliament No. 20 of 1967 as amended by Order No. 13 of 1990 and Amendment Act No. 7 of 2000, the Corporation promotes Lesotho as an attractive investment location for both foreign and indigenous investors.

The corporation provides investment promotion, investment facilitation and after care services to investors. Some of the services include:

Provision of information on investment opportunities and doing business in Lesotho;
Hosting of site visits for potential investors;
Provision of guidance to investors for preparation of business plans and project briefs for the Environment Impact Assessment Certification (EIA);
Sorting out problems with government agencies and other service providers (over licences, permits, utilities etc) to ensure smooth start up and smooth operations of the business;
Facilitating investors in obtaining business registration, visas and work permits, and sectoral licences and permits;
Advocating for creation of a conducive climate for investment in the country through review of policies;
Securing markets for investors through coordination and participation in trade shows as well as hosting buyer’s visits;
Liaising with investors and government departments/service providers to ensure that investors’ grievances and complaints are addressed;
Identification of joint venture partners for existing investors who require joint venture partners.

One Stop Business Facilitation Centre (OBFC)

Launched in 2016, the OBFC makes it easier to do business in Lesotho and to facilitate FDI. It places all services required for the issuance of licenses, permits, and imports and exports clearances under one roof. This provides transparency and predictability to trade transactions and reduces the time and cost of trading.

Incentives

Lesotho offers the following fiscal incentives:

10% corporate income tax on manufacturing profits;
No withholding tax on dividends distributed by manufacturing firms to local or foreign shareholders;
Low WHT rate of 15% on management charge, royalty and interest, incurred to generate manufacturing income. The lower rate may apply to residents of the country to which Lesotho has signed the tax treaty (usually 10% or 7.5% in Lesotho tax treaties depending on a specific treaty).
Training costs are allowable at 125% for tax purposes;

Investment Opportunities

a) Agriculture

Lesotho’s population largely depends on subsistence agriculture for their livelihoods. The Government of Lesotho has made it part of its priorities to advance commercial agriculture as one of the growth poles. In alignment with the national strategy, LNDC has also intensified its efforts to promote investment in this area.

Investment opportunities in the sector entail:

Crop farming;
Aquaculture;
Horticulture;

Livestock farming;
Food processing (fruit and vegetables).

b) Manufacturing

The manufacturing industry in Lesotho is mainly focused on textile and clothing, and is an important source of employment and income for the country.

Opportunities in the sector include manufacturing of:

Textiles and garments;
Garment accessories such as zippers and buttons;
Leather and footwear

Automotive components;
Plastic products;
Consumer electrical and electronic appliances;
Packaging material.

c) Energy

Lesotho produces 80 megawatts of electricity and the demand in winter goes as high as 120 megawatts. Investment opportunities lie in:

Generation of solar energy;
Setting up of wind power plants;
Setting up of hydro power plants.

d) Infrastructure and Construction

Construction was a major driver of economic growth in Lesotho which saw it grow by 1.8 % in 2022.

Opportunities lie in:

Development of shared broadband infrastructure companies to support the ICT services industry;
Construction of industrial sites;
Setting up eco-lodges with conference facilities and outdoor entertainments.

e) Mining Sector

Historically Lesotho’s mining and resource-based industries focused mainly on diamond mining and sandstone quarrying. The mountains of Lesotho are heavy with some of the world's best value diamonds as discovered through the mining activities of the last two decades. The current direction focuses on exploring the mining value chain to seize opportunities for more investment, productivity of the sector and wealth creation for Basotho through both public and private investment.

Opportunities in the sector include:

Exploration and mining of diamonds;
Diamond polishing;
Sandstone mining and quarrying;

Harnessing water resources;
Development of a mining supplier park to service the emerging mining industry;
Ceramic ware and brick making.

f) ICT and Finance

The demand for ICT and financial services has increased with increasing industrial activity in Lesotho. Multinational companies present in Lesotho require cost effective ICT infrastructure and services to link their production centres with headquarters and logistics companies in order to be efficient. Demand for business financing has also grown with new opportunities opening in the market; with a ripple effect that has increased demand for competitive personal banking services.

Opportunities lie in:

Development of requisite infrastructure to support the ICT services;
Design and development of an innovation hub to harness local talent and create employment for youth;

Development of call centres and data banks;
Provision of business and personal banking services.

g) Tourism

Lesotho has spectacular scenery and potential for eco-tourism. The rugged countryside makes Lesotho ideal for off-road sports. The country hosts the Roof of Africa motorcycle rally annually and has introduced other annual events such as Maletsunyane braai festival and Lesotho sky cycling event. Lesotho is home to the world’s longest commercial single-drop abseil and Sub-Saharan Africa’s only ski resort.

Opportunities lie in:

Setting up of high-altitude training facilities;
Water-based sporting and recreational activities;

Setting up health spas and wellness resorts;
Setting up of accommodation facilities.

Starting a Business

Types of Companies

The Companies Act provides for the incorporation of:

A public company, which may offer its shares to the public and may or may not be quoted on a stock exchange;
A private company, which may not offer its shares to the public and may not have more than 50 members. The members of both types of company have limited liability;
A non-profit company is a public company which operates in the interests of the public or a section of the public and which prohibits the payment of a dividend to its members. A non-profit company may be excused from the requirement to have 'limited' at the end of its name.
An External company is a company incorporated elsewhere and operating in Lesotho.

Company Registration Process

Company registration is automated and conducted through https://www.companies.org.ls/ where an applicant creates a user account and then proceeds to apply for company registration by filling the online application form and paying fees. Once the application is processed, the applicant will obtain Company registration certificate and Tax Identification Number (TIN).

Requirements

Form 8 Consent to act as a company director;
Form 1 details for tax purposes;
Form 1A list of shareholders;
Own articles of incorporation if not adopting the standard model article;
Certified National ID Card - for the director(s) and the shareholder(s); or
Passport for the director(s) and the shareholder(s); or

Certified Driver's license - certified for the director(s) and the shareholder(s);
Certified Ante-nuptial contract for the director(s) if married
Affidavit if a shareholder is under 18 years old;
Certificate of incorporation if a shareholder is an active company;
Power of attorney when the incorporation is done by an attorney on behalf of directors and shareholders.

Cost

M 500 incorporation fees for a local company;
M 1000 incorporation fees for an external company;
M 30 for name reservation.

Duration

1-2 days.

Other Registrations

a) Business Permit

This permit authorises a foreign business to engage in a business in Lesotho.

Requirements

Business plan;
Capital resource of not less than M2million;
Employment resources if not less than 6 employees;
Business account maintained at a financial institution in Lesotho;

Corporate Social Responsibility plan;
Transfer of skills and technology plan;
Advancement of existing business undertakings;

b) Business Identification Card

All businesses are required to obtain a business identification card in order to operate in Lesotho. The Business ID is issued for a determined period, i.e., 3 years for nationals or locals and 1 year for foreign enterprises. Applications are made online through https://www.lesotho.elicenses.org

Requirements

Business plan;
Capital resource of not less than M2million in local financial institution.

c) Trading Licence

Depending on the type of activity, an applicant is required to obtain a trade licence. Licences are issued online through https://www.lesotho.elicenses.org. A Capital resource of not less than M2million in local financial institution is required.

d) Manufacturing License (Large and Small Scale Industry)

Manufacturing licenses are processed online through https://www.lesotho.elicenses.org.

Requirements

A minimum of USD 250,000 (Large Scale Industry);
Health Inspection certificate;
Environment impact assessment certificate (original);

Certified copies of Passport or any form of identity document recognized and approved by government of Lesotho;
Certified copies of certificate of incorporation, Particulars of the company and Articles of incorporation.

Taxation

Tax Registration

Registration entails providing the Revenue Services Lesotho (RSL) with personal details such as full names, address and details of income earned. These details are provided through a registration form available in all the RSL Digital Service Centres. The effect of registration is, first, to allow the RSL to allocate a specific taxpayer identification number (TIN).

Requirements for TIN Registration

Businesses

Business taxpayer registration form.
Certificate of registration/certificate of incorporation;

Memorandum of association/Charter/Constitution;
Business taxpayer registration form

Resident Individuals:

Trader’s license and;
Certified copy of National ID or passport of the owner.

Non-resident Individuals:

Trader’s license;
Copy of National ID or passport of the owner;
Certified copy of a valid work permit should also be submitted when registering.

Taxes

Below are the taxes applicable in Lesotho.

a) Individual Income Tax

It is a tax imposed on an individual’s (natural person’s) taxable income. An individual who derives income in Lesotho is expected by law to file an income tax return and pay tax due in Lesotho. The income tax return must be filed for each year of assessment not later than 30th June every year. The following should register for individual income tax:

Employees;
Partners in partnerships;

Sole Traders;
Directors;
Members of associations.

Taxation of Individual Income

Taxable Income of a resident individual is taxed in accordance with progressive two rate structures of 20% and 30%. These rates are subject to change according to an amendment by the parliament.

The tax structure for the financial year 2023/2024 is as follows:

Any chargeable income from M 1.00 to M 69, 120.00 or less per year is taxed at the rate of 20%;
Any amount in excess of M69, 120.00 is taxed at the rate of 30%;
The non-refundable personal tax credit of M 10, 824.00 is allowed in favour of a resident individual.

b) Corporate Income Tax

Corporate Income Tax is a tax that is charged on profits generated by the company and other corporate bodies in a given year of assessment. It is a direct tax administered under the Income Tax Act of 1993. Every company is required to file its annual income tax return on or before 30th June every year.

A corporate body is subject to corporate tax at the following rates:

Income tax rates for companies
Nature of income	Rate
Manufacturing income	10%
Income from commercial farming operations	10%
Other Income	25%

c) Withholding Tax

Withholding Tax (WHT are levied on supply of services and are applicable to both resident and non-resident suppliers. The tax is collected monthly or whenever there has been tax withheld, and the accounting thereof is performed annually upon the submission of the income tax return by the payee or the person to whose income the WHT had been deducted.

The applicable rates for WHT are classified as follows:

Resident contractors: 5%;
A lower rate of WHT may apply to residents of the country to which Lesotho has signed the tax treaty. Example, 7.5% for residents of South Africa according to Lesotho – Republic of South Africa treaty.

d) Value Added Tax

Value Added Tax (VAT) is a form of an indirect tax levied on goods and services consumed in Lesotho, regardless of whether supplied in and outside Lesotho. Rates for VAT are as follows:

0% - Exports and basic commodities;
10% - Electricity;
15% - Other goods and services.

Immigration Procedures

The Department of Immigration Services, under the Ministry of Home Affairs, is mandated to control movement of people into and out of the country. It also regulates and monitors the stay of non- citizens within the country through the issuance of residence permits and regular inspection for compliance. The Department also facilitates citizenship acquisition to the qualifying applicants.

Visa

Every citizen of a foreign country who wishes to visit the Kingdom of Lesotho must first obtain a visa from the Ministry Of Home Affairs. Citizens of countries that have visa abolition agreements with Lesotho and citizens of some Commonwealth countries are exempt from this rule. Investors can check whether their country is exempted from visa requirement through this link: http://evisalesotho.com/visa-exemptions/

Visa Application Process

Visas are currently issued manually at Immigration Headquarters in Maseru and no longer in Lesotho missions abroad. Foreigners living abroad can apply for the visa through visa-applications.immigration@gov.ls

There are two types of visas offered, namely;

Single entry visa; It is meant for a single journey and is valid for three months;
Multiple entry visa; It is meant for multiple journeys and is valid for six months.

Visa application requirements depend on the purpose of visit (such as business, Tourism etc.) and the response on the application takes at least five working days.

Requirements for Business Visa

Passport valid for travel with a validity date of at least six months;
Invitation letter from sponsor;
Trader’s License of the sponsor;
Tax Clearance of the sponsor;
Declaration taken under oath by the sponsor;
Residence permit of the sponsor (where applicable);
Work permit of the sponsor verified from source (where applicable);
Proof of work permit application/ letter of employment offer

3 Months bank statement of sponsor (showing economic activities);
Passport copy of applicant;
Educational certificates and transcripts translated into English & certified by the embassy or equivalent (where applicable);
Return ticket;
Medical Insurance;
Medical report;
South African transit visa (where applicable).

Visa Fees

Multiple Entry Visa M 2000;
Single Entry Visa M 1000.

Residence Permits

The Department of Immigration Services is mandated to issue residence permits to non-citizens residing in the country. Applicants can upload their applications at www.homeaffairslesotho.com or to get any additional information about the application process.

Types of residence permits offered are as follows;

Temporary residence permit valid for 90 days;
Two years residence permit valid for 2 years and renewable;
Study permit issued to applicant who is currently enrolled at an educational institution within the Kingdom of Lesotho;
Indefinite residence permit issued to applicants who have been residents in Lesotho for at least two years.

The residence permits are further categorized into.

Business Permit;
Teachers Permit;
Doctor’s Permit;
Volunteers Permit;
Missionary Permit;
Joining relative Permit;
Joining spouse and married woman permit;
Returning Citizens Permit etc.

Business People Permit

A Business people permit category falls under the residence permit and is issued to an applicant that currently has a business in The Kingdom of Lesotho or for applicant that wish to open a business within the Kingdom of Lesotho. The permit is applied online via https://www.homeaffairslesotho.com/Complete-Online-Form.html

Requirements

Duly completed online form;
Medical Certificate (To be filled by a Government Medical Practitioner within Lesotho);
Police clearance from Lesotho;
Police clearance from country of origin for 1st time applicants;
Work permit (certified by department of Labour & Employment);
Letter from employer;
Personal tax clearance (Certified from RSL);
Company tax clearance (certified from RSL);