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Lesotho - Economy (Notes)

ECONOMY Lesotho's economy is based on water and electricity sold to South Africa, manufacturing, earnings from the Southern African Customs Union (SACU), agriculture, livestock, and to some extent earnings of laborers employed in South Africa. Lesotho also exports diamonds, wool, and mohair. Lesotho is geographically surrounded by South Africa and economically integrated with it as well. The majority of households subsist on farming or migrant labor, primarily miners in South Africa for 3 to 9 months. The western lowlands form the main agricultural zone. Almost 50% of the population earns some income through crop cultivation or animal husbandry, with over half the country's income coming from the agricultural sector. Water is Lesotho's only significant natural resource. It is being exploited through the 30-year, multi-billion-dollar Lesotho Highlands Water Project (LHWP), which was initiated in 1986. The LHWP is designed to capture, store, and transfer water from the Orange River system and send it to South Africa's Free State and greater Johannesburg area, which features a large concentration of South African industry, population, and agriculture. Completion of the first phase of the project has made Lesotho almost completely self-sufficient in the production of electricity and generated approximately $24 million annually from the sale of electricity and water to South Africa. The World Bank, African Development Bank, European Investment Bank, and many other bilateral donors financed the project. Lesotho has taken advantage of the African Growth and Opportunity Act (AGOA) to become the largest exporter of garments to the U.S. from sub-Saharan Africa. Exports totaled $466.9 million in 2004. Employment reached 40,000. Asian investors own most factories. Lesotho has received economic aid from a variety of sources, including the United States, the World Bank, Ireland, the United Kingdom, the European Union, Germany, and the People's Republic of China. Lesotho has nearly 6,000 kilometers of unpaved and modern all-weather roads. There is a short rail line (freight) linking Lesotho with South Africa that is totally owned and operated by South Africa. Lesotho is a member of the Southern African Customs Union (SACU) in which tariffs have been eliminated on the trade of goods with other member countries, which include Botswana, Namibia, South Africa, and Swaziland. With the exception of Botswana, these countries also form a common currency and exchange control area known as the Common Monetary Area (CMA). The South African rand can be used interchangeably with the loti, the Lesotho currency (plural: maloti). One hundred lisente equal one loti. The loti is at par with the rand. HIV/AIDS According to recent estimates, the HIV/AIDS prevalence rate in Lesotho is about 29%, one of the highest rates in the world. The United Nations estimates that this rate will rise to 36% within the next 15 years, resulting in a sharp drop in life expectancy. According to the Lesotho Bureau of Statistics, in 2001 life expectancy was estimated at 48 for men and 56 for women. Recent statistics estimate that life expectancy has fallen to an average of 36.81. The government of Lesotho was initially slow to recognize the scale of the HIV/AIDS crisis, and its efforts to date in combating the spread of the disease have met with limited success. In 1999, the government finalized its Strategic Plan on HIV/AIDS, a diagram for addressing the education, prevention, counseling, and treatment needs of the populace. In late 2003, the government announced that it was forming a new National AIDS Commission to coordinate society-wide anti-AIDS activities. Also in 2003 the Government of Lesotho hosted a SADC Extraordinary Summit on HIV/AIDS. In July 2005 legislation was passed to create the National AIDS Commission.