Overview
Public procurement in Lesotho is governed by a centralized framework established under the Public Procurement Act, 2023, which created the Lesotho Public Procurement Authority (LPPA) and its Central Tender Board. The reform replaced the earlier decentralized procurement system that operated across government ministries and agencies. Public procurement plays a crucial role in Lesotho’s policy and business environment. It accounts for a significant share of public expenditure and is a critical channel for delivering public services, stimulating economic activity, and promoting private-sector participation. For investors, the procurement system provides opportunities to access government contracts but also requires navigating regulatory preferences designed to promote domestic participation.
Institutional and Legal Framework
- Public Procurement Act, 2023 – establishes the Lesotho Public Procurement Authority (LPPA), Public Procurement Tribunal, and Central Tender Board as the core institutions for oversight and management of procurement.
- Procurement Policy and Advisory Division (PPAD), Ministry of Finance and Development Planning – retains overarching responsibility for procurement policy and advice.
- Directorate of Corruption and Economic Offences (DCEO) – responsible for investigating corruption, including in procurement processes.
Treatment of Local vs. Foreign Investors
Foreign companies are permitted to participate in Lesotho’s procurement processes. However, they must register as a legal entity in Lesotho, obtain a trading license, and register for taxes.
Local preference margins are applied to promote domestic participation. Since Lesotho is not a signatory to the WTO Government Procurement Agreement (GPA), it is free to implement these domestic preference policies.
Preference and Incentive Schemes
| Criteria | Margin of Preference |
| Businesses ≥ 51 % Basotho-owned | 15 % |
| Businesses 30–50 % Basotho-owned | 10 % |
| Suppliers of Lesotho-origin goods | 10 % |
| ≥ 50 % of contract performed locally with Basotho staff | 10 % |
| ≥ 50 % subcontracted to Basotho businesses | 10 % |
| Highest local input or labor share | 10 % |
| Businesses 10–30 % Basotho-owned | 5 % |
Investor Implications and Strategies
Foreign investors may face competitive disadvantages due to local preference margins. Strategic partnerships with Basotho firms are often necessary to remain cost-competitive. Compliance requires legal registration, licensing, and partial execution of contracts locally. The procurement environment creates both challenges (higher competition for outsiders) and opportunities (incentives for joint ventures and local subcontracting).
Recommended strategies include:
- Form joint ventures with Basotho-owned firms (≥ 51 % local ownership yields 15 % preference).
- Subcontract ≥ 50 % of work to Basotho businesses.
- Source local goods, services, and labor to qualify for preference margins.
- Ensure full registration with local authorities, including LPPA and tax bodies.
- Build capacity and training programs to meet compliance requirements and strengthen partnerships.
Key Takeaways:
- Public procurement in Lesotho is centralized under the Public Procurement Act, 2023.
- Domestic preference margins are significant and favor Basotho ownership and participation.
- Foreign participation is allowed but requires legal registration and compliance with local rules.
- Joint ventures, subcontracting, and local sourcing are critical strategies for competitiveness.
- Transparency and accountability reforms aim to reduce risks, though corruption oversight remains an ongoing concern.
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