Shelile parries Special Economic Zones criticism

RETHABILE MOHONO

MASERU – The Ministry of Trade and Industry has denied recent media reports suggesting it has a long-term agreement with Swiss financial group iSwiss to establish Special Economic Zones (SEZs) in the country. Minister Mokhethi Shelile clarified that iSwiss’s role is limited to that of an advisory partner, while the government remains focused on developing the necessary documentation to guide the project.

Despite these assurances, the Lesotho Special Economic Zones Policy for 2024–2029 has sparked heated debate, drawing sharp criticism for its controversial provisions. Designed to attract international investment, the policy explicitly restricts SEZ operations to foreign entities, effectively side-lining local entrepreneurs.

This move has raised concerns over the potential marginalisation of the Basotho business community, fuelling a sense of exclusion from what many hoped would be an economic boost for the entire nation.

One of the most contentious aspects of the policy is the designation of iSwiss as the government’s exclusive partner in managing the SEZs.  The agreement gives iSwiss a 75% stake in the joint venture, while the government retains only 25%.  Critics argue that such an arrangement is highly unusual and contrasts with the competitive processes typically seen in government policy frameworks.

“The Government of Lesotho and iSwiss agree to establish a joint venture… wherein the GoL shall hold a 25 percent interest in the share capital,” the policy reads, sparking further debate over the transparency and fairness of the process.

Local business leaders have voiced strong opposition to the SEZ policy, which permits only foreign-controlled limited liability companies to operate within the zones. Even more alarming to many is the provision allowing foreign administrators, who may not even reside in Lesotho, to manage the SEZs.

The share capital is to be “wholly owned by foreigners and non-residents,” leaving little room for Basotho businesses to participate.  Critics warn that this arrangement could create a legal and financial bubble that benefits only foreign investors while leaving local businesses out in the cold.

In addition to its exclusionary nature, the draft policy shifts a significant portion of the responsibility onto the government. The policy requires the government to provide legal and tax consultancy services for the Free Zone and to establish the necessary financial infrastructure — all at the government’s expense.

This, according to critics, further strains already limited public resources. The proposed SEZs aims to attract European and North American manufacturing firms in industries such as clothing, automotive, and medical equipment.

While proponents argue that this could lead to job creation and economic diversification, the policy’s restriction of local citizens from operating within these zones raises questions about the long-term benefits for the Basotho economy.

Will the benefits of foreign investment trickle down to local communities, or will the SEZs primarily serve foreign interests?

Another controversial element is the creation of the Free Zone Financial Authority, which would oversee banking and financial services within the SEZs.  This authority would have broad powers, including the ability to suspend licenses and freeze transactions, and would be responsible for ensuring compliance with international anti-money laundering regulations.

Local stakeholders are concerned that this could lead to an erosion of national financial sovereignty. As the government prepares to finalise the SEZ policy, local businesses and citizens continue to express their concerns. Many fear that the SEZs will benefit foreign investors at the expense of national economic development. While the SEZ initiative is part of Lesotho’s broader Economic Diversification Support Programme, supported by the African Development Bank, it remains unclear whether this venture will truly serve the interests of the Basotho people.