30 May Interview with Dr. Retšelisitsoe A. Matlanyane, Minister of Finance and Development Planning, Lesotho
How would you describe the ministry in your words and what recent achievements and highlights would you like to share?
The Ministry of Finance and Development Planning within the government of Lesotho is a key ministry that coordinates other ministries. We not only do finance, but we also do economic planning. In executing our duties, we begin with planning and, as part of that, we are responsible for leading and outlining the national strategy. We work closely with line ministries to develop a coordinated and integrated strategy of how we’re going to move forward in the short, medium and long term. This gives us an opportunity to be at the center of strategic economic development and drive it through all government departments.
Secondly, we are responsible for resource mobilization, as well as coordination of spending activities and disbursement of funds while cognizant of maintenance of macroeconomic and macro fiscal stability. A key aspect of the Ministry’s role is ensuring effective coordination in public financial management including procurement and resource mobilization. This coordination is essential for maintaining macroeconomic stability, building financial buffers, managing risks and supporting all related functions.
You have launched a National Inclusion Strategy 2024-28, which has several aims, mainly around increasing financial inclusion. Can you outline the strategy, its major successes and what your goals are by 2028?
This second Financial Sector Development Strategy is a follow-up to the first one we did. Lesotho is a small country with several challenges, including high unemployment. This makes it important for us to have a more active private sector. There has to be access to finance for the private sector and financial inclusion. In the first strategy, financial inclusion was at the center. We worked hard to put the right technology in place and provide consumer education to ensure everyone is included in the financial sector. We’re happy with the results because we are one of the highest in the region at 90%.
This strategy is now looking at other aspects. Amongst other things, we need to strengthen the resilience of the financial system. We have to maintain financial sector resilience and stability. We aim to strengthen key parts of the financial and regulatory systems to ensure stability and resilience against both domestic and external shocks. In doing this, we are building on micro and macro prudential means of regulation to see that they work together. It is an approach that can hold and produce results that reduce systemic risks and manage them in a very comprehensive way. It’s also enhancing our crisis management and response mechanisms, as well as a resolution framework. Financial systems and institutions are prone to systemic risks, which must be managed effectively. In times of crisis, a strong response is needed to contain contagion within the system.
The second pillar of the strategy is financing for development. Despite achieving 90% inclusion of individuals and businesses, access to finance remains a significant challenge. Financial inclusion is one of the major problems that we have for small, medium and large businesses. The financial system itself is very liquid, but we need to ensure it is able to take up risks and whether the risks can be managed well. We’re working to strengthen credit infrastructure to support private sector development, particularly for youth-led startups, enabling them to create bankable projects that banks can finance with manageable risk. The focus is on SMEs because big businesses are stable. We’re also supporting the development of the credit market to ensure both consumers and providers understand how it functions.
Financial institutions must understand the private sector, just as businesses must understand how financial institutions operate to work together. There are targeted actions that will support green finance instruments, for example, foreign direct investment and facilitating the reform and modernization of exchange controls. We’re looking at liberalization and, if possible, deregulation of some of the impediments that we have seen and unlocking potential .
The third pillar focuses on developing long-term financing to improve efficiency. We are exploring capital markets, particularly in the pension sector, to tap into patient capital that can fund infrastructure and long-term projects. For businesses to thrive, infrastructure that supports trade and commerce is essential. This includes transport networks, electricity, office space and other key services. We must develop other key sectors such as pensions, insurance and capital markets.
The fourth pillar is cross-cutting issues that support these strategies. We’re looking at strengthening the national payment systems and establishing legislation that supports the private sector and the credit markets. We need to have resolution frameworks that help the business thrive. We believe that if we successfully implement this strategy, we’re well-positioned to do so. It will encourage both local and foreign businesses to become more active, unleashing their potential to grow and contribute more to the economy. We believe that, whether small, medium, or large, businesses will thrive in this improved environment. We’ll implement the Banking Act, Financial Stability Act, Consumer Protection Law and Road Traffic Act, including all other relevant legislation to unlock impediments across all sectors.
The African Development Bank (ADB) announced a $331 million investment into Lesotho. What message does such a strong investment send to the international community and what are your major goals and targets from it?
This is a timely and much-needed intervention and we’re grateful for it and fully committed to making the most of it. For me, it says that Lesotho has garnered the confidence of a multilateral development bank such as the ADB and others as well. We have come from a period where there was a bit of instability and changeovers of government within very short periods to a stable democracy and that has brought on the confidence of the ADB to realise it can now work with the government of Lesotho to improve things. This boosts what we are doing in the financial sector and other areas.
Lesotho has a very ambitious plan of development. We’re focusing on the energy and productive sectors, infrastructure development, technology and human capital because skilled people are essential to drive these efforts. We have embarked on a very ambitious plan to generate renewable energy from our natural resources like water, wind and sun. We can leverage our existing plans and activities, for example Lesotho currently produces half of its electricity needs primarily from renewable sources like hydro and solar. We think we can do more than what we need so that we can become a net exporter of renewable energy. We have joined programs like Mission 300, which was launched by the ADB and the World Bank. His Majesty the King is also leading a very ambitious and aggressive program of getting our resources used to generate clean energy. The HMK Jet Initiative (His Majesty King Letsie III’s Just Energy Transition Initiative) brings private sector investment into Lesotho’s energy sector through roadshows, power purchase agreements, independent power producers and energy sector reforms to support and enable these investments. We’re looking at mostly using hydro because we have the water, gravity, mountains and everything that it could take for us to produce that energy. We have wind in the mountain areas and we are very well positioned to be good in wind energy. We want to scale this up to the level where we are already with water — we are exporting water to South Africa and very soon we will be exporting to Botswana as well.
The second area we’re looking at is getting into food security by upscaling our production of food, which is something that we have been looking to do for a very long time. In this regard, unfortunately, we have to deal with climate change as well. We need to consider climate risks as we grow food and use resources, making sure we do it in a way that is smart for the climate.
Thirdly, we need to build infrastructure. Because of climate risks and climate change, a lot of our infrastructure has been dilapidated over time. We are building infrastructure to facilitate business and trade. One of the key things about the $331 million fund is that we have to use it for projects that have an impact on trade, because we’re going to access it through the regional window. The projects need a regional focus, which is why we’re discussing energy exports beyond Lesotho, to the Southern African Power Pool and signing power purchase agreements with countries outside of Lesotho.
Infrastructure connectivity is very important. It’s much more important right now that we are looking into strengthening our trade relations with the rest of Africa. After the US policy concerning tariffs, Intra-African trade has to grow. Among the impediments in Intra-African trade are transport connectivity and infrastructure. The barriers are at the borders, where infrastructure is needed, whether technological or any kind of infrastructure to make it easier for people, goods and services to move between borders. These are some of the priorities that we have for this funding.
Since August 2024, you have a partnership with the UN Development Program (UNDP) for sustainable development goals and the allocation of financing. Since then, what improvements and commitments from international investors have you seen?
Our partnership with the UNDP goes way back and we have several ongoing initiatives with them. What we have seen is that the opportunities are there to leverage on sustainable development goals and use those opportunities to bring in investors. Last year we launched a sustainable development goals investor map to attract both foreign and domestic private sector operators, showing them the opportunities and guiding them to the right areas in alignment with our national strategic development goals.
The second thing is our participation in the Integrated National Financing Framework, developed with the UNDP, to diversify financing that supports our economic activities. There are other credit infrastructures that we have put in place to supplement this one. For example, we have the Sebabatso Initiative under the prime minister’s office, supported by UNDP and the government of Lesotho, which is a youth initiative where we bring in youth innovators, entrepreneurs and startups to get assistance to leverage what they have and move into business and be productive. Several youths have benefited and enrolled in this. We are now part of Youth Connect Africa — the Lesotho chapter is being opened and will be launched very soon. We now have our youths integrating with youths in other African countries and getting funding from Youth Connect to advance their business.
In this current fiscal year, we have introduced an inclusive growth fund. We have invested $22 million to help businesses with access to finance, supplementing the work we are doing with the UNDP. With this, we will achieve two things. One is a much more elevated activity of private sector inclusivity in business and so forth. Secondly, the development of youth targeting unemployment in particular, so that they don’t look to be employed, but they go on to become employers themselves by going into business.
What is your impression of the extent to which the wider world understands Africa and the idiosyncrasies thereof and would greater regional collaboration on the continent help this?
I believe that there’s room for improvement in understanding Africa and the construct of African economies. Often we hear people from outside Africa talking about Africa and sometimes there’s an understanding that the 54 countries of Africa are the same. No, they’re not. They’re different. Every country has its peculiarities, strengths and weaknesses. But the world’s understanding of African economies may not be as comprehensive as is required. It is important that we get into countries and understand them. The structure of financial systems in Africa differs from country to country, as does the conduct of governments, legal frameworks and the ease of doing business. These differences need to be fully understood.
Credit rating agencies, in particular, must go deeper in analyzing African economies, considering their unique challenges, the policies and programs in place to address them, the policy space available and the direction and foresight of their governments. This is a subject that needs much more discussion and a bit of understanding between those that we seek to understand and those that seek to be understood. I wish analysts would spend more time understanding the economies, the numbers and the stories behind those numbers. They should spend time in the countries themselves, observing how things are done, why they are done that way and how local systems often have built-in risk mitigation frameworks within them. These systems are there, even if they’re not the usual ones people expect. They work in their own way because without them, many African countries wouldn’t have made it this far.
Thank you very much for your time, Minister. We would like to conclude by asking for your final thoughts and messaging for USA Today?
We are a small country within South Africa, but a rich one, rich in heritage, culture and our deep understanding of ourselves as a resilient society that has lived and endured for over 200 years. Lesotho is an independent state that has its own character, a good character that people may want to experience. If they do experience it, they’ll find that there is so much potential within Lesotho. It is a virgin ground that has not been exploited but that welcomes investors and people from everywhere. If exploited in the right way, it could be a gem and could be turned into a fantastic and phenomenal story of development.
We would like to invite everyone who has good intentions to be part of this developing story and beautiful society. The few people who have experienced Lesotho always want to come back. It has that magnetism about it. It’s a place that you want to be in and it is peaceful. A place that you feel could develop and become a sanctuary for humanity. There’s an opportunity for us and an opportunity for the world to see Lesotho in a different light, develop together and to make something beautiful out of it. I’m excited to be part of that story and to be among the people given the opportunity to advance it and make the world a better place.