Lesotho offers a secure investment environment through a framework of domestic laws, regional agreements (SADC, SACU, AfCFTA), and international commitments. This framework protects property rights, ensures contract enforcement, allows profit repatriation, and provides dispute resolution, reducing investment risks. The chapter will detail how these national and regional instruments safeguard investments, distinguish between local and foreign investor treatment, highlight incentive schemes, and provide strategies for investors to navigate this system.
Investment Protection in Lesotho
Overview
Investor protection in Lesotho is shaped by a combination of domestic legislation, regional treaties, and international commitments. Safeguards cover property rights, contract enforcement, repatriation of profits, and access to dispute resolution mechanisms. For investors, these frameworks create predictability and reduce exposure to regulatory and political risks.
Lesotho’s position as a member of the Southern African Development Community (SADC), the Southern African Customs Union (SACU), and the African Continental Free Trade Area (AfCFTA) strengthens its investor protection regime beyond national boundaries, providing recourse to regional and continental instruments.
Institutional and Legal Framework
- Companies Act, 2011 – governs incorporation, shareholder rights, and limited liability.
- Public Procurement Act, 2023 – ensures fair competition in public procurement while introducing preferences for Basotho-owned enterprises
- Lesotho National Development Corporation (LNDC) Act– mandates LNDC to promote investment, administer incentives, and support investors.
- Investment Policy (2016) – sets out national objectives for promoting and protecting investment.
- SACU Customs and Excise Act – covers trade rules and customs treatment of investors within the customs union.
- SADC Protocol on Finance and Investment (FIP) – commits Lesotho to provide national treatment, fair protection, and transparent dispute resolution to regional investors.
- AfCFTA Investment Protocol (2023) – harmonises investor protection across Africa, with emphasis on sustainable development and responsible investment.
- Lesotho Bilateral Investment Treaties (BITs) – provide additional protection for foreign investors with treaty partners.
- WTO and UNCTAD – provide investor protection standards under global frameworks.
Treatment of Local vs. Foreign Investors
- Equal Rights: Domestic and foreign investors are entitled to protection of property, contracts, and repatriation of profits.
- Foreign Ownership: Allowed in most sectors, except reserved small-scale retail and informal enterprises restricted to Basotho nationals.
- Regional Reciprocity:
– Under the SADC FIP, regional investors receive national treatment and protection against expropriation.
– Under the AfCFTA Investment Protocol, continental investors benefit from harmonised guarantees, including fair treatment and transparency. - Dispute Resolution: Investors may access domestic courts, arbitration, SACU/SADC tribunals, or international forums (ICSID, UNCITRAL).
- Capital Mobility: Lesotho guarantees free transfer of dividends, royalties, and capital under its exchange control framework.
Preference and Incentive Schemes
| Measure | Beneficiary | Description | Legal Basis |
| Local Preference Margin | Basotho-owned firms | Up to 10–15% preference in government procurement | Public Procurement Act, 2023 |
| SME Set-Asides | Basotho SMEs | Exclusive access to contracts below thresholds | Procurement Regulations |
| Corporate Tax Incentives | Priority investors | Tax holidays and reduced corporate tax in textiles, agribusiness, renewable energy | LNDC Incentive Schemes |
| Repatriation Guarantees | Foreign investors | Unrestricted transfer of capital, dividends, royalties | Foreign Exchange Regulations |
| Industrial Infrastructure | Both local and foreign | Access to serviced factory shells, industrial estates, and utilities | LNDC Act |
| Regional Investor Protections | SADC/AfCFTA investors | National treatment, protection against expropriation, fair dispute settlement | SADC FIP; AfCFTA Protocol |
Investor Implications and Strategies
Practical impacts:
- Enhanced Protection: Investors benefit from domestic law, SADC FIP, and AfCFTA frameworks.
- Market Access: Foreign investors must consider reserved sectors but enjoy equal protection once established.
- Cross-Border Security: Regional and continental rules create predictability for investors.
- Sustainability Focus: AfCFTA emphasises responsible and sustainable investment compliance.
Actionable Checklist for Investors
- Verify sector eligibility, especially reserved areas restricted to Basotho nationals.
- Register with the One-Stop Business Facilitation Centre (OBFC) for streamlined entry.
- Explore BITs, SADC FIP, and AfCFTA protections relevant to country of origin.
- Structure joint ventures where local participation is advantageous.
- Ensure compliance with tax and procurement laws to access preferences.
- Factor in sustainability and ESG requirements under AfCFTA.
- Include arbitration clauses referencing ICSID, UNCITRAL, or SADC/AfCFTA mechanisms in contracts.
Key Takeaways
- Lesotho’s framework is anchored in domestic laws, SADC protocols, and the AfCFTA Investment Protocol.
- Foreign investors are broadly protected, with restrictions only in small-scale reserved sectors.
- Procurement preferences support Basotho SMEs, while incentives and protections are open to all qualifying investors.
- Regional and continental frameworks expand protections beyond national law.
- Sustainability and responsible investment standards are increasingly important.
Helpful Links
- Lesotho Companies Act, 2011 – LRA
- Public Procurement Act, 2023 – Government of Lesotho
- Lesotho National Development Corporation (LNDC)
- Southern African Customs Union (SACU)
- SADC Protocol on Finance and Investment
- AfCFTA Investment Protocol – AU Secretariat
- WTO: Lesotho Profile
- UNCTAD Investment Policy Hub – Lesotho
- Ministry of Trade, Industry, and Business Development (MTIBD)