We need more from Dr Majoro to stop the bleeding

We need more from Dr Majoro to stop the bleeding

WHEN one looks at the qualifications and experience of the man running Lesotho’s economy, Dr Moeketsi Majoro, we can only come to one conclusion – that he is the best man for the job.
Yet our economy is sinking.
Last Thursday, Dr Majoro made a stunning pronouncement on the status of the government purse. His statement came at a time of social and economic crisis unparalleled in the history of Lesotho.

Dr Majoro knows what ought to happen in order to stimulate our economic outlook. However, as I have argued in other forums, he is not the man who is not supposed to be the man taking care of the public purse.
That is precisely because he is all talk and no action. He cannot enforce his own austerity programmes and rein in his government colleagues who are leading lavish lifestyles off the public funds.
In my humble opinion, Dr Tim Thahane was a better finance minister. For one Dr Thahane managed to run a balanced budget for most of his tenure as Minister of Finance and a surplus in one of the fiscal years.

Dr Majoro appears to be out of his depth and I think we are ignoring subtle signs that he needs to be rescued.
The high spending by the government executives tops the agenda. Government reserves have been depleted and revenue streams keep shrinking. These problems are exacerbated by high levels of unemployment, especially among the youths, utter lack of private investment (reaching the highest shrunk in two decades), the distress in the agriculture sector and a construction industry which is among biggest employers of the workforce is in the doldrums.

The rest of the service sector is in the slow lane. Sector after sector of the economy is in distress. The economic growth rate has been declining. This is the predicament Lesotho finds itself in.
Dr Majoro has had two successive budget speeches. The two were rather a platform to appeal or charm the voters. Revenues and reserve streams continue declining and foreign investment remains subdued. The consumer confidence is at its lowest. A dwindling tax base remains the government’s sole revenue stream.
Given the calibre of our finance minister, one expects him to have focused on the current situation and to have taken pre-emptive measures. Instead what we received were alarmist statements on the state of our economy. The statements caused needless worry and panic.

I wonder if the minister accurately evaluated the detrimental consequences of his speech on the economy.
In his statement the minister said the government has only secured funds for the next two months to pay civil servants. This statement obviously creates panic on the market and compels the market to exercise conservative measures which may include restricted lending.
I would like to believe that the minister’s statement lacked in terms of ounce of creativity, innovation, political leadership and wisdom. As an economist I would have expected him to have accurately evaluated the consequence of such a statement.

It’s quite evident that fundamentally, our economy is struggling due to poor investment decisions, flight of capital, unemployment, income disparities, ruthless and irrational spending, a shortage of revenue-generating mechanisms, lack of leadership wisdom, a dysfunctional political system and endemic corruption.
The excessive spending by the executive has worsened matters.

As Finance Minister, Dr Majoro is entrusted with responsibility to formulate policies that are meant to curb all economic impediments. He is a custodian of procurement policy.
The question is: Why doesn’t the minister develop a policy that stops the brewing company in Lesotho to import bottled water and ice?
If a Good Samaritan were to inject M100 billion into our economy today, I am sure 95 percent of the injected amount will be realised in the economies of China and South Africa within a split of a second!

Why can’t he stop Minister Phori and Minister Mapesela when they are messing up our ability to earn at least M480 million from the sale of wool and mohair? This is a M480 million hole in our reserves under the watch of the Minister of Finance?
Why can’t Dr. Majoro develop a procurement policy that will ensure protection of local enterprise? Why can’t he force all foreign companies registered locally to bank and open offices in the country?

When analysed correctly, Lesotho’s economy is not explained by irresponsible expenditure alone; it is also explained by the declining revenue. Against this backdrop, a focus on cost-cutting alone is rather a futile exercise that demonstrates a high level of executive disengagement with reality.
We need to focus on establishing policies that will ensure protection of local enterprise and prohibition of capital flight.
Over the years, the government has witnessed a decline in SACU revenue and the tax revenue. The two were at the cornerstone of our economy but clearly no radical and proactive considerations were made to arrest this devastating economic situation.

The austerity measures the Minister of Finance is proposing is a repeat of what he proposed initially but dismally failed to implement. Is this a case of leadership through lip service? Indeed Dr Majoro has failed to implement all austerity measures he tabled in Parliament two years ago. Last weekend I saw a complete contrast of what he suggested pertaining to the use of government vehicles after office hours and weekends.

Dr Majoro’s austerity measures should be handled with care lest this brings more damage to the government’s reputation.
On the other hand one expects, the minister to place emphasis on developing policies that will ensure increased revenues streams and optimise capital circulation rather than placing focus only on expenditure cuts.

Dr Majoro essentially has several options at his disposal for stimulating the economy:
l Develop policy that seeks to influence the means of production. Adopt measures such as low-interest loans, force local companies (including mining and manufacturing companies) to bank in Lesotho. He must give tax incentives to those that comply and punish bad conduct or those that don’t comply heavily.
l Secondly, develop policy that will ensure that Governments stimulates private consumption by allowing citizens to hold onto more of their money.

l Develop policy that protects locally manufactured goods and services. Let government itself set an example by buying locally produced goods and services.
l Develop an understanding that borrowed money should be spent on direct revenue generating investments; social projects should be financed through direct government funds.

For instance, in monetary terms what will be the Return on Investment for the Marakabei to Monontša road, the Mpiti to Sehlabathebe roads? How long will the two roads take to break even? How will the loan be paid back?

We cannot afford to rob Paul and pay Peter. The Minister of Finance says we must increase the public debt by approaching capital markets. This debt has to be serviced at a high interest rate.
This is a dangerous direction we are taking as a country. Approaching capital markets will only increase the national debt and impose a higher financial burden on future generations. Robbing Paul to pay Peter could end up consuming vast amounts of money without having any significant effects on the economy.
Furthermore, he must facilitate a proposal to cut the number of government ministries. These in a true sense should be reduced by combining those doing similar work.
Most importantly, the minister must immediately eradicate the captured leadership presiding over organisations responsible for our natural resources. Take a closer look into the Lesotho mines. This is the environment where the wealth of Lesotho gets looted without mercy.

Please be warned that cutting salaries of civil servants and teachers will instigate unnecessary industrial unrest, social chaos and increased poverty. As the Minister of Finance, he must facilitate a policy that will dissuade the government from making unworthy political appointments.
The government should tackle high levels corruption and political violence. Majoro must encourage and facilitate clean governance and sound management of public property and public funds.
When one has a clearer idea and vision of what the government should and can do it becomes easier to make decisions on how to revive the economy in an effective manner. The most obvious of these are through agriculture, tourism, infrastructure and security coupled with adherence to the rule of law.

We must develop a policy that ensures protection of arable land. Agriculture still dominates our economy but is working well below its productive capacity. It is a sad irony that whilst agriculture plays such a major role Lesotho has slipped into being a major food deficit nation for many of its basic products. Any attempt to return agriculture to health must be based on realism and selectivity.

Tourism has enormous growth potential and the return on any additional investment in it whether it be facilities or promotion is very high. But would a recycled historical minister help?
Those, coupled with enormous devotion to upgrading our infrastructure in a long run such as the renewal energy, railways, all roads, power supply and telecommunications would nurture the economy back to health again.#

The government must impose time limits on its intervention. Once the economy regains momentum, it is up to the government to quickly repay the debts it incurred during the crisis. Otherwise the state runs the risk of remaining permanently in the red.

Dr Majoro says paying suppliers for their services and goods rendered to government will stimulate the economy. I don’t believe that the measure will be sufficient to stop the downward spiral of a sinking economy. Part of the reason, I wish to put forward, is that a portion of the government funds will flow into payment of services and goods that were already supplied anyway.
Suppliers took loans from banks and loan sharks to do that work. Besides, the package is simply too small to be capable of halting the downward trend.

By:Ramahooana matlosa

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