Overview
Infant Industry Protection (IIP) in Lesotho refers to the set of legal, institutional, and policy measures designed to shield newly established domestic industries from external competition until they achieve sufficient competitiveness. For investors, understanding these policies is critical: they shape market access conditions, tariff structures, and participation opportunities, particularly in manufacturing, agro-processing, and textiles.
Lesotho’s protection framework is guided by national legislation, Southern African Customs Union (SACU) rules, and World Trade Organization (WTO) commitments. For the business environment, these measures influence entry strategies, sourcing decisions, and the balance between local and foreign investor participation.
Institutional and Legal Framework
Key legal and institutional provisions governing infant industry protection in Lesotho include:
- Business Licensing and Registration Act, 2019 & Business Licensing and Registration Regulations, 2020 & Business Licensing and Registration Regulations (Amendment) 2024 – Regulation 34, Schedule 16 – reserves and schedules 48 business activities reserved for citizens of Lesotho, excluding naturalised and registered citizens of Lesotho.
- Public Procurement Act, 2023 – establishes rules on procurement preference for domestic firms.
- LNDC Act – empowers LNDC to promote and support priority industries
- SACU – administered through SACU, allows application of protective tariffs on specific infant industries.
- WTO LDC Status – Lesotho, as a WTO Member, applies bound tariff rates but retains flexibility under infant industry provisions.
- Ministry of Trade, Industry, and Business Development (MTIBD) – responsible for trade policy formulation.
Treatment of Local vs. Foreign Investors
- Equal Investment Rights: The Companies Act, 2011 permits both local and foreign investors to incorporate and operate businesses.
- Foreign Ownership: Generally unrestricted, except in reserved small-scale retail and informal sectors (reserved for Basotho nationals).
- Participation in Infant Industry Schemes:
– Local firms receive priority access to protective measures.
– Foreign firms may participate if they establish joint ventures or significant local value addition. - Dispute Resolution: Investors benefit from Bilateral Investment Treaties (BITs), SACU Tribunal recourse, and WTO frameworks.
Preference and Incentive Schemes
| Measure | Beneficiary | Description | Legal Basis |
| Local Preference Margin | Domestic suppliers | Price preference (up to 10–15%) for Basotho firms in public procurement | Public Procurement Act, 2023 |
| SME Set-Asides | Basotho SMEs | Exclusive participation in contracts below certain thresholds | Public Procurement Regulations |
| Infant Industry Tariffs | New industries | Temporary tariffs to protect against imports | SACU Customs and Excise |
| Tax Holidays | Investors in priority sectors | Up to 10 years of corporate tax relief | LNDC Incentive Schemes |
| Training and Skills Support | Both local and foreign | Rebates for firms investing in workforce upskilling | LNDC Investment Incentives |
Actionable Checklist for Investors
- Conduct due diligence on reserved sectors and protected industries.
- Structure joint ventures with Basotho partners where required.
- Maximise local sourcing to benefit from procurement preferences.
- Align projects with LNDC and or national priority sectors (manufacturing, agro-processing, renewable energy).
- Ensure compliance with tax and procurement reporting obligations.
- Engage with the Ministry of Trade and LNDC for incentives guidance.
Key Takeaways
- Lesotho applies infant industry protection primarily through SACU tariffs and domestic procurement laws.
- Local SMEs and Basotho-owned companies enjoy preferential treatment, particularly in procurement.
- Foreign investors can participate effectively by forming joint ventures, subcontracting, or ensuring local value addition.
- Incentives include tax holidays, training rebates, and LNDC support schemes.
- Compliance with procurement regulations and reserved sector restrictions is essential.
Helpful Links
- Public Procurement Act, 2023 – Government of Lesotho
- Lesotho Companies Act, 2011
- Business Licensing and Registration Act, 2019 & Business Licensing and Registration Regulations, 2020
- Business Licensing and Registration Regulations (Amendment) 2024
- Southern African Customs Union (SACU)
- WTO: Lesotho Profile
- Ministry of Trade, Industry, and Business Development (MTIBD)