By Thando Mandela
With the Mining Indaba set to take place later this month, Lesotho is well on its path to reviving its extractive industry.
A first for the country having previously attended the Mining Indaba in Cape Town, South Africa, last year, the foresight of bringing it to Lesotho can only serve to further cement the country as a key player in the mining sector.
Under the banner: “The future of mining in a global landscape” the indaba will not only showcase what the country has to offer in terms of mining, but will also provide a platform to discuss chronic challenges faced by the sector. It is only through tackling the problem head-on that Lesotho can continue to attract investors that will ultimately play a role in the growth of the sector.
Despite its modest size, Lesotho has successfully managed to influence the global mining industry. The country deals primarily in diamond mines. However, other precious stones have been found in the country, such as sandstones, basalt and dolerite.
Basalt is currently used in the construction industry to build reinforcements while the clay deposits that are found in the country are instrumental in the pottery industry, which has huge potential to grow and create rural and commercial jobs.
Diamonds are instrumental in the growth of Lesotho’s foreign reserves and have boosted the country’s export earnings, accounting for 3% of the country’s total exports in 2011. It is an illustration of monumental growth considering that they only accounted for 0.1% in 2002. Currently, diamond exports and the sector account for 10% of Lesotho’s gross domestic product (GDP).
A substantial contribution considering that it stems from only four operational diamond mines, namely Letseng Diamonds, Storm Mountain Diamonds, Liqhobong Diamond and Mothae Diamond.
This proves that the country is capable of growing the economy through its extractive resources and has created the necessary business infrastructure that makes international trade plausible. Lesotho also supplies water to its neighbouring country South Africa and is establishing itself as a formidable player in the hydrogen supply sector.
The mining sector, however, continues to account for an increasing percentage of the GDP and along with water and hydrogen supply, Lesotho is open for business.
Lesotho is known to have produced some of the biggest diamonds in the world. All of which have been unearthed from Letseng Diamond Mine. The ability to continuously supply large diamonds sets Lesotho apart from other African states that mine this precious stone. The untapped potential makes the country a viable option for investors looking to work with government and the people of Lesotho.
The country, however, can benefit greatly from investments in explorative efforts because the mountains of Lesotho are lava laced and according to local geologists, the country could still discover more minerals.
Therefore, the government needs to plough more resources into this sector, and as it stands it does not possess the financial muscle to achieve this fate alone.
Hence the importance of percipient investors who are needed to collaborate with government to ensure that if there really are other minerals in Lesotho that they are extracted and cultivated for the benefit of the economy and the people.
In addition, UN reports have indicated in the past that deposits of oil were discovered in the Mohobong area. These reports date as far back as 1971 and 1981 and no further advancements have been made in this sector. It remains an untapped potential and possibility that make Lesotho more viable as a mining destination.
Collaborative efforts between government and investors can lead to the necessary explorative efforts that could quite possibly see Lesotho increase its mineral resources GDP share as well as continue to contribute significantly to global markets through exports.
Traces of coal have also been discovered by geologists and have physically been seen in the country. Given the electricity challenges and the huge potential of creating an export market for coal, this deserves urgent attention.
Neighbouring countries such as South Africa are exporting coal to Europe and other parts of the world and an addition of Lesotho could drive up exports and diversify the market. Not to mention the spillover effects of a new industry, economic injection and job creation.
To date, the mining sector’s economic contribution in Lesotho continues to grow. In 2004 the mining and quarrying sector accounted for 0.9% of the country’s GDP. This figure grew to 4.5% by 2011. This number has the potential to grow exponentially with more investment into the extractive economy, be it diamonds or a further exploration of the potential commodities that geologists have discovered exist in Lesotho.
But for growth to be sustainable and to lead to the transformation of the lives of the people, mining in the country needs to evolve from being a lucrative sector to mainly foreign investors to one that benefits the people more directly. Currently, a staggering 70% of mine ownership is controlled by foreign conglomerates who’s interests mainly lie in maximising profits for the benefit of their home countries and not the growth of the economy of Lesotho.
Despite being rich in minerals, the people of Lesotho continue to live in abject poverty and rely mainly on subsistence farming for survival.
A situation that can be turned around through partnerships with stakeholders that will invest in the mining opportunities in Lesotho with the view of benefiting locals as well. This can take the form of job opportunities and the creation of new industries.
The country mainly exports raw material, and investment in mining technology can lead to new opportunities in the diamond industry. Instead of unearthing uncut diamonds and exporting them, the people of Lesotho should be able to produce their own jewellery. Something that can easily be achieved through collaborative efforts with other African countries that produce gold, such as South Africa.
The upcoming Mining Indaba in Lesotho is an opportunity to not only showcase the country as a mining destination, but also offer a platform for other countries, especially those on the continent, to converge and seek solutions to grow their economies. It will allow for investments targeting the whole mining service value chain and stakeholders. All industry players are invited to partake in it, including SLP (Special Limited Partnership) and CSI investors.
Through forging strategic relationships, sharing technologies and resources, Africa in its entirety can rise and become producers rather than building economies that rely heavily on exporting raw materials and importing finished goods. Lesotho is already investing in energy transition in keeping with the global challenge of climate change as well as infrastructure development, manufacturing and construction.
There is even great potential to grow the tourism industry beyond the few sites that attract tourists such as Sani Pass, which boasts the highest pub in the continent. Mining tours should form part of tourism, especially where the biggest diamonds have been discovered. This can also form part of education as it documents the history of the country.
However, for this to happen, investment is needed to grow the mining sector beyond what it is today. The natural resources are there, sufficient political will exists and it is up to the rest of Africa and the world to realise that Lesotho is open for business.
Thando Mandela is a part of the organising committee for the Mining Indaba Khotla.
BUSINESS REPORT