The making of the new MCC compact

The making of the new MCC compact

MASERU – IN December 2017, Lesotho was reselected to benefit from a second compact of the Millennium Challenge Corporation (MCC), a United States-funded programme that helps the poorest countries fight poverty and grow their private sector.
Since then, anticipation has been high because of the tremendous benefits Lesotho derived from the first compact. By the time the initial US$362 million compact ended in 2013, hundreds of thousands of Basotho had potable water and access to health facilities.

Several laws had been modernised and several institutions established to improve the business environment. All in all, over half Lesotho’s population has or will benefit from these investments. The second compact is expected to build on those achievements. But there are several steps to be followed before the second compact is signed.
That explains why an MCC team has been criss-crossing the country over the past months to consult politicians, the government, villagers, local government officials and other stakeholders on what they believe are the most pressing problems to be addressed under the second compact.

Over the weekend thepost spoke to MCC Lesotho Country Director, Dr Guyslain Ngeleza. We began by asking him about the progress so far towards the signing of the compact.

MCC’s focus is alleviating poverty through growth of the private sector. We believe that the private sector should be central in the battle against poverty. So the first question we ask ourselves is what is stopping the growth of the private sector in Lesotho.

We want to understand why the private sector in Lesotho is not creating jobs and contributing to the economic growth. To find the answers we teamed up with the Lesotho Millennium Development Agency (LMDA), our counterpart in Lesotho, to undertake a constraints analysis to understand why the private sector is not growing.

What did you find?

We found that HIV and AIDS are still a major problem. But beyond that, we also realised that there are serious issues with policy planning and coordination which affects execution within the government. But those are just indications. The second task is to understand what lies beneath these problems.
We have identified the problems, but that doesn’t mean we completely understand them. So we undertake a root cause analysis. To do that, the MCC, together with the LMDA, undertook a number of consultations in the country.

We visited all the districts to meet Basotho to understand the root cause of the problems we have identified. We want the people to tell us what lies beneath these problems and why they persist.
Based on those consultations and additional studies we, together with the LMDA, identified two concepts to explore further. It is early in the development of a proposed compact, but these are two areas that the teams are looking further into for possible consideration.

What are those concepts?

The first concept deals with strengthening the private sector so that there is growth. The second is to strengthen the health system and reduce the rate of HIV infections. In strengthening the private sector we are looking further at four sectors we believe can foster economic growth: agriculture, tourism, manufacturing and the creative industry.
The key question is why those sectors are growing slowly. The focus, therefore, should be to deal with the patronage and strengthen accountability in two ways: institutional reforms and building physical infrastructure.

What is the concept to deal with the health aspect of the problem?
We are still at an early stage in the project development process, so at this point, we are very much still considering different ideas and no project or concept is for certain going to be a part of the proposed compact.

When it comes to HIV and Aids, we would work very closely with President’s Emergency Plan for Aid Relief (PEPFAR) which is already doing tremendous work in the country.
In 2008 when the first compact kicked-in there were 270 000 people infected with HIV and only 12 percent of those were on treatment, meaning that many people were dying.
Now in 2018 there are about 320 000 people infected but 70 percent are on medication. The rate of infection remains high but not many people are dying.
The issue then becomes that of payment for the medication. There may be an opportunity to look at ways to strengthen the overall health system.

What comes after the development of these concepts?

We presented those concepts to our Investment Management Committee for approval. But I must say these are just concepts that could be turned into projects. That process will be from now until March of next year. During that time, we will be doing further studies and consultations.
After that, we will go back to MCC’s investment management committee with project proposals. It however does not automatically mean that projects will be implemented, as they must first be approved by MCC leadership.

What happens from March 2019?

Between March 2019 and January 2020 we will be doing feasibility studies and data collection so that we better define the projects so they meet the MCC’s conditions and objectives. We will be doing the beneficiary analysis and working closely with the government.
In January 2020, we will then present an investment memo to the Investment Management Committee. The Investment Memo is the document that designs the projects based on the studies.
The memo will also show how the projects meet the MCC criteria and conditions. Those are all internal MCC processes, and if the memo is approved, the Government of Lesotho and the MCC will negotiate a proposed compact. The proposed compact will be presented to MCC’s Board for a vote, and, if approved, can then be signed.

What have Basotho been telling your team during the consultations?

Generally, people recognise the impact of the first compact. In talking to Basotho we have learned that there are still huge problems that have to be addressed. For instance, the shepherds have problems with animal feed because the rangeland has been grown over by invasive plants.
The communities understand the issues clearly. They will tell you that there is need for strong coordination with the local authority so that government delivers public goods and services. (They say that) coordination is there in other places but absent in other areas.
In some hard-to-reach areas people urgently need roads and bridges. They are grateful for the investment in health. The visits have complimented [the information] we have gathered from the government and stakeholders. Again, all of these conversations have been helpful, but no assumptions should be made about what the proposed compact will focus on.
This consultation process is an important contributor to our work with the Government of Lesotho, but many factors will be considered as we continue to explore potential areas of focus for the work.

What’s your message to the government of Lesotho?

In general, reforms are the hardest thing to do. Lesotho needs to be prepared for reforms to improve the economy and pull people out of poverty. I must also point out that we are closely monitoring the SADC reform process.  Those SADC reforms are crucial for the sustainability of the investment we will make. The real benefit of that investment can only be realised if the country is politically stable.  We believe the SADC reforms are a pathway to the political stability necessary for the investment to benefit the people of Lesotho. We want all Basotho to be involved in the making of the compact because this investment is for them, first and foremost.

Staff reporter

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