Minister expounds on LEC’s grave peril

• Promises a better future with interim management team
• As he outlines reasons for mass suspensions

MPHO RAMOLULA

MASERU – Lesotho Electricity Company’s (LEC) deteriorating performance and dire financial state reflect years of mismanagement and corruption as laid bare by an exhaustive review and external audit completed in January 2025.   

Following widespread derision of the goings-on at the state energy provision facility, acting energy minister, Mohlomi Moleko, restated this position talking to the media in Maseru on Monday.

Moleko’s public statement comes hot on the heels of the suspension of LEC managing director, Mohlomi Seitlheko, and his entire executive management team. The managers have all been slapped with an effective three months’ suspension.

This decision results from a forensic audit to investigate concerns related to procurement processes, financial management, governance structures and operational inefficiencies.

Nathaniel Maphathe, LEC board chairman, has since been appointed acting managing director “to ensure continuity in leadership and smooth operations of the company during this period.”

Maphathe has vacated his position as chairman of the board when assuming this position.

“This decisive action, far from being a knee-jerk reaction, is the result of a thorough review of evidence, including the findings of an external audit completed in January 2025,” Minister Moleko said highlighting the seriousness of the situation.

He said the decision is based on credible evidence from an external audit report, which exposed severe governance failures, fraudulent financial practices, and operational inefficiencies, noting that the external audit revealed significant financial irregularities.

This drastic measure immediately raises concerns about the future of Lesotho’s electricity supply and the nation’s economic stability. 

The decision, based on an external audit uncovering substantial financial irregularities, marks a significant intervention and prompts critical questions about the efficacy of existing governance structures within the state-owned enterprise.

The LEC is a vital state-owned enterprise responsible for generating, transmitting and distributing electricity throughout Lesotho. Its operations are paramount to the nation’s economic development, powering homes, businesses, and essential services. 

Reliable electricity is critical for attracting foreign investment, fostering industrial growth, and enhancing the overall quality of life for all citizens.  LEC’s financial health and operational efficiency, therefore, hold immense significance for Lesotho’s well-being.

Historically, the LEC has encountered challenges in maintaining consistent and reliable electricity supply, including infrastructure limitations, financial constraints, and previous governance issues.  These challenges have resulted in intermittent power outages, negatively affecting businesses, households, and the overall economy. 

The current investigation underscores the urgent need for robust oversight, transparent financial practices, and well-defined governance frameworks within state-owned enterprises to secure their long-term sustainability and the security of essential national services.

And Minister Moleko painted a grim picture of LEC’s current state.  He stated that following an extensive audit and internal investigations, the Ministry of Energy, in consultation with the company’s management board were compelled to suspend the entire 10-member executive committee.

The minister reported also that: “LEC’s current liabilities exceed its assets by a staggering M98.6 million, and alarmingly, its cash reserves have declined by a concerning M145.8 million. Critically, the company’s financial records failed to comply with international accounting standards. 

Non-compliance with international financial reporting standards (IFRS) resulted in the auditors issuing a disclaimer opinion due to unverified financial accounts.” 

He emphasized that the gravity of these financial issues necessitates an immediate and thorough forensic audit.

Beyond the financial irregularities, Moleko also detailed systemic governance weaknesses, explaining that the audit uncovered failures to adhere to company policies and corporate governance frameworks, including the King IV Code on Corporate Governance.

The King IV Code is a South African framework which emphasizes ethical leadership and responsible corporate behaviour, viewing corporate governance as a leadership issue crucial for creating ethical organisations. 

Furthermore, the use of manual financial entries without supporting documentation created a significant risk of fraudulent transactions, raising serious concerns about financial integrity within LEC, according to the minister.

Also highlighted is significant operational failures, including poor response to technical faults and customer complaints, neglect of critical infrastructure maintenance leading to an increased risk of system failures and network collapses, and unfair labour practices, such as wrongful dismissal, prolonged disciplinary hearings, and hiring practices based on favouritism rather than merit.

Minister Moleko pointed out that the suspension of the executive committee is a direct response to these critical issues, representing an attempt to address the multifaceted challenges facing LEC. 

He announced the establishment of an interim management team comprising experienced professionals with expertise in financial management, corporate governance, and the energy sector. Moleko said this team has a crucial mandate “to implement immediate corrective measures while preparing LEC for long-term sustainability.” 

“Their focus will be on strengthening internal controls and compliance, ensuring the provision of reliable power, and rebuilding public trust in LEC,” he added.

To ensure lasting change, government has already outlined several key reforms, a procurement overhaul to enhance transparency and eliminate corruption, financial system integration to prevent manual manipulation, crucial infrastructure investment to improve electricity reliability, and stronger accountability mechanisms for senior executives.

Minister Moleko reiterated this commitment to ensuring LEC operates efficiently, delivers reliable electricity to the public, and restore trust in the state-owned enterprise.

He asserted that this intervention is crucial for restoring financial stability, improving corporate governance, and securing the long-term viability of the company.

“We understand the concerns of employees, stakeholders and the public and we assure you that this intervention is in the best interest of the nation,” concluded Moleko.

The suspension of LEC’s executive committee represents a drastic but potentially necessary intervention to address a severe crisis.

The success of the interim management team, the findings of the forensic audit, and the implementation of the proposed reforms will be crucial in determining whether Lesotho can avert a major energy crisis and restore public confidence in the leadership and operations of its national electricity company.

The three-month suspension period will be pivotal in assessing the scope of the problems and initiating effective remedial actions.