MASERU – Although the Covid-19 regulations that stifled business activity have long been lifted, Lesotho’s economic growth has virtually ground to a halt. A 2020 United Nations Conference on Trade and Development (UNCTAD) report titled ‘Impact of the Covid-19 Pandemic on Trade and Development: Transitioning to a New Normal’ provided a comprehensive assessment of the economic knock-on effects, projecting that the global economy will contract by a staggering 4.3 percent – warning that the crisis could send an additional 130 million people into extreme poverty.
The way the world economy is set up is partly to blame for the disproportionate impact on the world’s poorest, who lack the resources necessary to respond to shocks such as Covid pandemic, according to the report. “The Covid-19 pandemic has gravely wounded the world economy with serious consequences for everyone,” UNCTAD Secretary-General Mukhisa Kituyi said. “Moving rapidly across borders, along the principal arteries of the global economy, the spread of the virus has benefited from the underlying interconnectedness – and frailties – of globalisation, catapulting a global health crisis into a global economic shock that has hit the most vulnerable the hardest.”
The report forecast that the United Nations’ Sustainable Development Agenda 2030 will be derailed unless immediate policy actions are taken, especially in favour of the poorest. A better recovery must centre on a renewed trade policy that tackles the twin challenges of market concentration and environmental impact, the report said. For poor countries like Lesotho this economic scenario translated into a less remarkable shift (increase or decrease), as the country’s economy has constantly been going through depression for some time.
According to World Bank reports, in recent years Lesotho’s economic performance has remained slow, exacerbated by the Covid-19 pandemic. However, agriculture has been the only key sector to have registered positive growth in the three quarters of 2021 due to favorable weather, government subsidies, and import substitution measures.
Reports further state that the other key sectors – manufacturing, particularly textiles, mining, construction, and services – have contracted due to the adverse effects of the pandemic and associated restrictions on economic activity, weak external demand, and supply chain disruptions, exacerbating pre-existing structural competitiveness problems.
Apart from that, it is highlighted that sustained political instability has also contributed largely to the weak economic performance. Real Gross Domestic Product (GDP) which is a macroeconomic indicator of the value of economic output for price changes, contracted by 3.2 percent and 1.2 percent in 2017 and 2018, respectively, before rebounding and expanding by 2.6 percent in 2019.
It then contracted sharply by 6.5 percent in 2020 largely due to the Covid-19 related restrictions and several country lockdowns. The downturn continued into 2021, with the economy shrinking by 11.1 percent in the first quarter, after which it recovered and expanded by 10.5 percent and 2.2 percent in the second and third quarter of 2021, respectively.
However, Real GDP growth is only projected to average 2.1 percent between 2022–2024. The expected recovery in the medium-term is set to be led by a rebound in the mining, manufacturing (including textiles) and construction activities on the back of supportive external demand conditions and improved business and consumer confidence.
According to the UNCTD 2020/1 Report, since the outbreak of Covid-19 the global economy contract by a staggering 4.3 percent in 2020, which also contributed to millions of jobs being lost. In early 2022, while the global economy was beginning to recover from the impact of the pandemic, two giant countries in agriculture and crude oil production, Ukraine and Russia, went to war and sanctions on Russia are hitting economies around the globe.
This forced prices of essential goods such as petrol, paraffin, diesel, oil and wheat to increase. Currently in Lesotho petrol (94) per litre is sold at M23.70, petrol (95) at M24.15, diesel (PPM) at M24.55, and domestic paraffin (retail price) at M18.90. Also South African bakery franchise, Blue Ribbon, recently announced bread price increase by M1.30 which is propelled by the ongoing Russia/Ukraine war.
Bloomberg has reported that out of 15 million tons of corn from the autumn harvest from Ukraine, most of which should be hitting world markets, has piled, with half the corn facing difficulty to get to buyers. Speaking to Public Eye in an interview about the Lesotho’s current economy situation, local economic commentator, Majakathata Mokoena, mentioned that prior to the pandemic Lesotho’s economy was already depressed – and that the Covid-19 added even more pressure to the already struggling economy.
“Though the economy line was constantly flat over the years, when Covid-19 broke out and there was no domestic demand, it contributed negatively towards the economic growth. However, the agricultural sector increased itself sufficient, which says there was growth in that sector,” he said.
He went on to say that currently the economy remains depressed due to the ongoing war between Ukraine and Russia which has contributed massively towards increasing the cost of living. “For instance, due to the on going war the availability of wheat remains low while the demand remains high, this means prices are expected to go high as this war continues,” he said explaining that Ukraine is an agriculture-orientated country, which produces about a fifth of the world’s high-grade wheat and seven percent of all wheat.
“These say one may have money to buy bread, but if the bread is not available that money has no use,” Mokoena said. ’Masehloho Selete, one of the local street vendors who sells sandwiches, said due to the increase of bread prices she has also increased her prices from M15 to M16.50 per sandwich.
“I make 60 sandwiches per day, and I normally return home with at least two or four unsold but ever since I increased my prices for the first time I went home with about ten unsold sandwiches,” she said, adding that everything is becoming expensive on a daily basis which makes life unbearable.