Lesotho: Investing

FDI in Figures

According to UNCTAD's World Investment Report 2022, FDI inflows into Lesotho have been declining during the past years. They amounted to USD 27 million in 2021, showing a slight decline from USD 30 million in 2020. FDI stocks in the country amounted to USD 1.114 billion in 2021. In 2022, global FDI momentum weakened in the context of the war in Ukraine, rising food and energy prices, financial turmoil and debt pressures (UNCTAD’s Investment Trends Monitor). The textile industry traditionally attracts most investments and others are expected for hydroelectric facilities. Lesotho's small-scale manufacturing sector is also a recipient of FDI. South Africa, Turkey, Mauritius and South-eastern Asian countries are the main investors.

Lesotho is open to and eagerly seeking FDI, but recent measures seem to suggest a turn towards economic nationalism (U.S. Department of State). Also, high port authority expenses due to Lesotho's landlocked territory and the relatively low quality of its infrastructure are real constraints to investors. High credit and setup costs, skills mismatches, and gaps in legal and dispute resolution frameworks, insolvency resolution, and property rights continue to inhibit business development (IMF). The recent political crises have also discouraged foreign investment. The second phase of Lesotho Highlands Water Project has been blocked for several years. However, Lesotho has certain assets such as a high productivity rate, a skilled labour force and an untapped tourism potential. The African Growth and Opportunities Act (AGOA) - a special provision that grants textiles manufactured in Lesotho duty-free access to the U.S. - attracts FDI as nearly 80% of Lesotho's textile exports target the American market. The AGOA was extended by the U.S. Congress until 2025 but the textile industry is currently facing a crisis, as factories failed to secure orders from the U.S. and political development in Lesotho could lead to a suspension of this provision.

Country Comparison For the Protection of Investors

	Lesotho	Sub-Saharan Africa	United States	Germany
Index of Transaction Transparency*	3.0	5.5	7.0	5.0
Index of Manager’s Responsibility**	4.0	3.5	9.0	5.0
Index of Shareholders’ Power***	9.0	5.5	9.0	5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

Foreign Direct Investment	2020	2021	2022
FDI Inward Flow (million USD)	28	-12	-8
FDI Stock (million USD)	1,129.0	1,023.6	958.0
Number of Greenfield Investments*	2.0	2.0	0.0
Value of Greenfield Investments (million USD)	11	197	0

Source: UNCTAD - Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

Tax Rates

Value Added Tax (VAT): 15% (standard rate);
12% for telecommunications;
9% for electricity supplies.
Zero-rated items include export of goods or services; agricultural input (fertilizers, seeds and pesticides); beans; bread; lentils; livestock feed and poultry feed; maize (grain); milk; paraffin intended for use as fuel for cooking, illuminating or heating; peas; sorghum meal; unmalted sorghum grain; wheat; wheat flour.
Exempt items include education services provided by certain institutions; certain financial services; transportation services, defined as the transportation of fare-paying passengers and their personal effects by road; supply of public postal, transportation, medical or dental, financial, insurance, or education services; supply of unimproved land; certain supplies by way of lease or letting of immovable property subject to certain provisions; supply of water; supply by an amateur sporting organization of sport activities, where such activities are deemed for the purposes of this Act to be nonprofessional; supply of cultural activities and supplies deemed to be so by the Commissioner-General, which would include, but not restricted to, the collection of entrance fees, or where such events are regular events (provided that such activity is for a nonprofit supply or service); supply of charity arrangements undertaken by an organization or institution deemed by the Commissioner-General to engage in or conduct charitable activities or work subject to certain provisions.
Company Tax: 25%
Withholding Taxes: Dividends: 0% (paid in respect of manufacturing income)/25%, Interests: 15% (paid in respect of manufacturing income)/25%, Royalties: 15% (paid in respect of manufacturing income)/25%.
Bilateral Agreement: Lesotho and Mauritius concluded a Double Taxation Agreement.
Social Security Contributions Paid By Employers: There is no social security system in Lesotho.
Other Domestic Resources: Lesotho Revenue Authority; Overview of Lesotho's tax measures in response to Covid-19; Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

	Lesotho	Sub-Saharan Africa	United States	Germany
Number of Payments of Taxes per Year	32.0	36.6	10.6	9.0
Time Taken For Administrative Formalities (Hours)	327.0	284.8	175.0	218.0
Total Share of Taxes (% of Profit)	13.6	47.3	36.6	48.8

Setting Up a Company	Lesotho	Sub-Saharan Africa
Procedures (number)	6.00	7.51
Time (days)	15.00	21.30

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Income tax	Progressives rates from 20% to 30%
From LSL 0 to 64,200	20%
Above LSL 64,200	30%

Lesotho: Investing

FDI in Figures

Country Comparison For the Protection of Investors

Tax Rates

Individual Taxes

Country Comparison For Corporate Taxation

Investment Opportunities

Business Setup Procedures