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Incentives
Lesotho has a business friendly, fiscal and financial
environment. A number of financial incentives are available
to manufacturing companies establishing in Lesotho
including:
- Unimpeded access to foreign exchange.
- Export Finance Facility.
- Long-term loans.
- The existence of an import vat credit facility provides
input tax credit upon importation and local purchasing of
raw materials and capital goods.
Company Taxation
The government of Lesotho, conscious of the role of
manufacturing as the main spring of development has
introduced:
- 0% tax on income tax generated from exporting manufactured
goods outside of Southern African Customs Union (SACU);
- A permanent maximum manufacturing tax rate of 10% on
profits.
- No withholding tax on dividends distributed by
manufacturing companies to local or foreign shareholders.
- Free repatriation of profits derived from manufacturing
companies.
- Double taxation agreements with the Federal Republic of
Germany, the Republic of South Africa, Mauritius and the
United Kingdom.
Loan/Equity Finance
- Loans
The Lesotho National Development Corporation may provide
loan finance to projects which can demonstrate long-term
viability. The duration of the loan can be up to 10 years.
Every application for a loan must be accompanied by a
detailed project proposal.
The application will be appraised in conjunction with any
other LNDC involvement in the project, for example factory
buildings or equity.
- Equity Participation
The policy of the LNDC is not to take equity investments in
projects unless requested to do so by the project promoter.
The LNDC prefers to confine itself to the provision of
serviced sites, factories and loan finance.
The exceptions to this policy relate to projects which are
desirable in the national interest but for which no private
investor can be found, and of course projects in which the
promoters (local or foreign) feel the necessity of LNDC
participation.
Usually, the LNDC will require board membership
proportionate to its shareholding.
Banking Infrastructure
Lesotho is a member of the South African Common Monetary
Area (CMA) and the Loti (plural Maloti) is pegged to the
Rand. It is therefore a convertible currency and exporters
in Lesotho can easily obtain foreign exchange for business
transactions. Lesotho has a sophisticated banking
infrastructure with four (4) full service banking networks
operated by:
- Standard Lesotho Bank
- Nedbank
- First National Bank
The first three have branches throughout the country and the
three international banks have branches and agents worldwide
which facilitate transfers.
LNDC operates as a development finance institution and
promotes the development of industry and commerce.
Investment Protection
Lesotho government is irrevocably committed to the
development of the private sector and is currently involved
in an extensive privatisation programme.
It is also a signatory to the Convention on the Settlement
of Investment Disputes between states and nationals of other
states and is a member of the Multilateral Investment
Guarantee Agency (MIGA). The latter promotes/encourages the
flow of foreign direct investments to developing countries
by providing investment guarantees to investors to mitigate
against specified non-commercial risks associated with a
project, such as: political risks, transfer restrictions,
expropriation, breach of contract, war and civil
disturbances in the host countries. |
