Bottlenecks, Challenges and Constraints

Policy and Planning

Inadequate Data Availability

The gathering of statistical information in areas related to biodiversity is a huge challenge. Because of the nature of the task, detailed, time-consuming and costly studies need to be undertaken by qualified experts to determine the state of national biodiversity on the ground across all regions of the state. The resource competition that exists within ministries may often favour projects that focus on improving the material circumstances of the population over projects that are focused on gathering statistics when allocation decisions are made. Perhaps the resources to gather the statistics that might inform data-driven environmental planning should be centralised in an agency whose core business is statistics rather than allocated directly to the responsible ministries. Ring-fencing funding for environmental statistics in the Bureau of Statistics, for example, would allow this agency to subcontract the relevant ministry partners to carry out data -gathering tasks.

Capacity constraints

Bureau of Statistics input is also important into the methodologies used to gather environmental data. Ideally, international statistical best practice would be followed; the same parameters would be consistently studied with an agreed periodicity. At the present time, studies are undertaken during episodic funding windows and the parameters of study are often specific to the project through which the funding is made available. Lesotho would benefit from international assistance in drafting and implementing a National Environmental Statistics Strategy which builds the country's current environmental statistical gathering capacities in the direction discussed immediately above. There is an opportunity for partners to contribute to providing the funding to allow baselines and ongoing measurements to be taken in an effort to seriously trace progress towards MDG 7. If on what remains of the road to 2015 the necessary policy adjustments are to be made reliable, timely, consistent data are essential. The Holy Grail would be an annual ‘Environmental State of the Nation’ report which details, inter alia, progress towards each of the environmental MDG indicators. There is the possibility to link this initiative to the on-going work of the Committee on Environmental Data Management.

Institutional Weakness

Lesotho does not currently have a Designated National Authority (DNA) to allow it to access funding under the Clean Development Mechanism (CDM) of the Kyoto Protocol. The DNA’s role is to evaluate and approve projects for funding under CDM. Cabinet has already discussed the issue but a renewed push to implementation seems sensible in light of the availability of additional funding for clean development projects flowing from COP-15. CDM predominantly targets cleaning up dirty industries (which is of limited relevance to Lesotho) but finance is also now being made available for forestry projects of which Lesotho could avail. It may, in practice, be difficult for local entrepreneurs to negotiate the complicated

approvals structure the CDM requires, especially in light of the fact no nationals have yet negotiated the process to act as a guide to their peers. The fact that the CDM requires a partnership between investor and mitigating nation also implies access to international contacts before projects can be gotten off the ground.

New Challenges

Assessment of the Impact of Global Economic Crisis on MDGs

Progress in achieving the MDGs is shaped not only by domestic policies but also to a great extent by the global economic environment.  As domestic economies become integrated with the global economy, they also become more vulnerable to problems elsewhere in the world.  Buoyancies and shocks alike are transmitted swiftly and greatly impact development efforts everywhere.

Developing countries already face big problems of chronic poverty, growing inequality, volatile food and fuel prices and poor health indicators.  Global financial crises make these problems much worse, reducing the fiscal space of governments and constraining growth rates that were already fragile.  Collectively, these effects undermine any progress made.

Lesotho, like most other countries, is not immune from these effects. The main channels of transmission of the current financial crisis in Lesotho are:

1.       Reduced fiscal space due to a decline in SACU revenues

2.       Falling remittances due to retrenchment of migrant miners

3.       Decline in textile exports

The challenges posed by the global economic crisis may have severe consequences if not addressed in time.  Lesotho is struggling with an epidemic of HIV/AIDS, chronic food insecurity and worsening health indices, leading to a drastic decline in life expectancy rates. The resources for dealing with these human challenges are thin already.  The adverse economic climate puts at risk whatever progress may have been achieved till date.

In addition to the three transmission channels, our analysis of the key impact of the global crisis also focuses on: the growth rates, effects of inflation on food and fuel prices, and unemployment rates, and the likely impact on the MDGs of these factors. The present analysis is based on a desk review of the indicators, and also includes anecdotal and media reports and Government statements.   However we recommend a more thorough quantitative assessment in the near future after obtaining the entire data set required.

1.       SACU Revenue

One of the main transmission channels of the global financial and economic crisis to Lesotho is SACU revenue, which accounted for 60 percent of the government’s revenue in 2008. This revenue is expected to decline by about 60 percent in 2010/11 and an additional 20 percent in 2011/12 (Figure 30). This will strain the government’s budget in the coming years and significant cuts in spending are expected.

The budget deficit for 2010/11 is expected to be approximately 12 percent of GDP. Though the Government proposes to make this up in part through direct budgetary support from donors, tightening expenditures, improving tax collections expandingthe tax base; the impact on public service delivery and progress on MDGs will be felt. The Government has recognized that the impact of the global economic crisis would mean a huge financing gap in its budget. This could potentially affect job creation;, constrain social protection initiatives for the vulnerable groups as also lead to reduced expenditure on education and health. If mitigation strategies are not put in place the achievement of the MDGs could be jeopardized. 

Even before the economic crisis appeared, the annual GDP growth had been only 3.5 percent on average, between 2000 and 2008.  This is quite modest when compared to the Sub Saharan growth rate of about 6 percent in the same period. With the onset of the economic crisis, the IMF has revised its projections of Sub Saharan Africa growth rates from a little over 5 percent in 2008 to about 3.3 percent in 2009, a decline of more than 3 percentage points less than the forecast a year ago.   Obviously this does not bode well for Lesotho. 

The economic crisis is estimated to slow down the growth rate in Lesotho temporarily as indicated in the recent budget. On the other hand, the numbers should be viewed with caution as data for a number of sectors is not available at present.  While it is true that GDP growth has been volatile due to changes in the textile sector; GDP growth rates have been less volatile than GNI growth rates, which reflect changes in remittances and SACU revenue (Fig. 31). These changes are likely to have a significant impact on achieving the MDGs, especially in reducing poverty and hunger and indirectly the health related goals. On the flip side, for Lesotho we also note that the severity of the HIV and AIDS epidemic has a long-term impact on development. In 2005, the Government of Lesotho and UNAIDS estimated that the GDP will be reduced by almost one third due to the epidemic by 2015.

Declining SACU revenues and consequent low national growth rates and income are serious concerns for a country suffering from chronic poverty. With more than half its population living below the poverty line and trend analysis of MDG 2, pertaining to eradication of extreme poverty and hunger, indicating that it is not on track, the reduced fiscal space will limit the Government’s ability to pursue a strategy, “…focused on (attaining) high, shared and sustainable growth and (on) protecting the poor.”[1] It will further constrain progress in other MDGs. (see section on Response capacity). 

1.       Remittances

Remittances have provided an income to tens of thousands of families in Lesotho for decades. The number of Basotho miners employed in South Africa has, however, declined from the peak years in the late 1980s and early 1990s and this decline is expected to continue. At the end of 1980s there were up to 130,000 Basotho working in the mines in South Africa. For the past five years they are estimated at 40,000-55,000. This means that many, especially rural families, have lost a vital source of income.

3.  Exports

The impact of economic crisis has been particularly severe in the garment sector, which is heavily concentrated on the American market. The impact of crisis is not yet seen in the export figures for 2008, as can be seen from the Fig.33, and more in depth analysis can only be done when the figures for 2009 are released.  But several indicators suggest the impact is devastating

Over 30 percent of Lesotho’s exports go to the United States of America. In 2009, the textiles sector formed approximately 90 percent of exports to the US. According to USITC data on imports from Lesotho under the African Growth and Opportunity Act (AGOA)[1], textiles and apparels declined by 27 percent between 2007 to 2009.  The decline between 2008 and 2009 was precipitous, 18 percent.

In 2008, the textile, clothing and footwear sector production accounted for M 1.55 billion, which was 11.8 percent of the GDP[2]. The textile factories were employing close to 42,000 people in 2008.  By the third quarter of 2009 they only employed a little over 38,000 on average[3]. Further retrenchments have since taken place.   For example in February, 2010, over 2,000 job losses occurred after the closure of yet another textile factory. The industry is expected to encounter more challenges by 2012, when the preferential access to the US market under the AGOA is ending. The industry was already vulnerable in 2005, when the Multi Fiber Arrangement (MFA) expired and textile quotas were removed and competition opened in the American market. The same year the dollar depreciated heavily, impacting the industry further. However, the industry recovered again in 2006 when the AGOA was extended, but the scheduled end of AGOA in 2012 threatens even further damage to the losses of the last two years. As the textile sector employs mainly women, the slowdown in the industry is increasing the already high unemployment among women and is threatening to raise further the poverty among women and female headed households.

One small ray of sunshine in a gloom landscape:  Between 2001 and 2006, income in the mining sector grew at a phenomenal annual average growth rate of 149 percent and by 2008 it represented 9.1 percent of the GDP. Despite the temporary scaling back due to the global financial crisis, this sector is expected to continue to grow rapidly in the future.   As the industry is a minor employer in Lesotho, the impact of the economic crisis was not felt as directly at the individual level as the textile sector retrenchments.

1.       Unemployment

The economic crisis has been quick in its impact on unemployment.  In 2008 the unemployment rate stood at 23 percent; by 2009 it had increased to 29.4 percent. Unemployment is higher among youth and women; women’s unemployment increased by 8.5 percentage points in one year (from 24.6 percent in 2008 to 33.1 percent in 2009). People in urban areas are more often employed with a salary than in rural areas, where people are mostly engaged in subsistence farming[4].

The loss of employment will be difficult to turn around in the short term and will thus have a lasting impact on the economy.  Many families do not have sufficient reserves to sustain themselves in the medium to long term. This will naturally increase poverty and hunger as well as health and access to education aspects. It is expected that primary education levels may not suffer too much since it is free and is twinned with school feeding programs. However, the costs of uniforms and books are a significant drain on limited incomes. 

2.       ODA

Official development assistance (ODA), or aid from abroad, is an important determinant of the pace and direction of the Government’s development efforts. In times of global financial crisis declines in ODA are generally expected since the crises affect the developed countries/donors, as well. 

For Lesotho the picture is somewhat different.  Although less than one third of the ODA that was pledged was actually given in 2008, the ODA net receipts have risen steadily.   In 2008 ODA was USD 136 million[5] , or about 10 percent of the GNI. The foreign grants and loans given to the government went up by over 200 percent from 2000/01 to 2008/09. ODA is expected to increase despite the economic crisis due to direct budget support from the African Development Bank, World Bank, EC and Irish Aid and a compact signed by the Government with the Millennium Challenge Corporation in 2007. Under this compact, USD 362.6 million is allocated to the areas of water, health and private sector development for a five-year period, 2009-2013. This beams a ray of hope for the MDGs in an otherwise dismal scenario of a restricted fiscal environment.

3.       Country specific exacerbating factors: Climate conditions combined with food and fuel price inflation

Other exacerbating factors for Lesotho are climate conditions and high food price inflation. The frequency of droughts has increased in the recent past, impacting agricultural output heavily. With an estimated 80 percent of the rural population being dependent on agricultural production, these droughts have a devastating impact on the whole country. In 2006/07 the country faced the worst drought in 30 years and one third of the population was vulnerable to food insecurity.

In addition to this, the high food price inflation has increased households’ vulnerability further. The consumer price index in Lesotho has been increasing on average by 7 percent annually since 2002.  But as can be seen from the Fig. 34:, the inflation of food prices has been significantly higher than the general inflation since 2006. This is likely to have a negative impact on work towards achieving the MDGs, where malnutrition and poverty are a huge challenge.

Fuel price inflation increased notably, albeit temporarily, in 2008. It followed the global trend and came down after the financial crisis in late 2008. Food price inflation finally slowed down at the end of 2009. Inflation of health and education costs has remained low, which may be due to the free health care facilities at the health centre level and free primary education policy of the Government. Access to water has improved but at the same time there has been a 5-9 percent increase in the water charges annually.

These price changes impact the households’ economic situation strongly, since consumables accounted for over half of the total household expenditure in 2009. The expenditure in rural areas is even higher, 60 percent of total household expenditure. Expenditure on health is very minimal, around 1 percent of total household expenditure and only M 137 annually, which is the same amount that is spent on alcohol and tobacco on average while spending on education accounts for over 5 percent of total household expenditure. 

The high inflation in the recent past, coupled with high rates of unemployment and, low or virtually no incomes put an already vulnerable population at great risk.  Hunger and malnutrition threaten many which in turn are reflected in maternal and child health indicators.   With maternal and child mortality indicators being off track in Lesotho the situation is indeed worrying.  A concerted effort from the Government, with assistance from all development partners will be required to protect these sectors of the population that are most vulnerable to the economic downturn.

1.       Response capacity

The country is alive to the serious situation it finds itself in presently. The economic crisis has exacerbated an already grave situation.   Mindful of the fact that the road to recovery may be a long one the Government appears to be gearing up to face the challenge. We examine this in the context of the Government’s recent budget proposals from the perspective of the MDGs:

·         Total Budget expenditure is M 10, 476 million, of which recurrent expenditure is M 6,906 million and capital expenditure is M 3,570 million. Grants, including budget support (from development partners) would equal M 1,809 million.  Soft loans would amount to M 502 million.

·         In 2010/11 the Government budget decreased from the previous fiscal year, and the decrease mainly impacts ministries’ recurrent expenditure, which went down by 16 percent, while the total capital budget increased by 3.5 percent.

Source: Ministry of Finance and Development Planning

• ·         On MDG 1 (Combating HIV/AIDS), the Government continues to place emphasis on fighting HIV/AIDS and reducing the negative social and economic impacts on individuals, families and communities. Public expenditure for the fiscal years 2005/06, 2006/07, and 2007/08 shows an increase, while in 2008/09 the allocation shows a decline. Given the prevailing intensity of the disease, this area needs continuous support from the government as any decline in allocation could adversely impact ongoing efforts and also give a wrong to signal to donors about the government’s priorities.

• ·         On MDG 2 (Eradicating extreme poverty and hunger), the Government’s focus on attaining high, shared and pro-poor growth and private sector led development is laudable. Emphasis has also been placed on revitalizing the agriculture sector to enhance food security; even though the budgetary outlay for 2010/2011 has seen a slight decline.

• ·         In MDG 3 (Achieve universal primary education), which is on track in Lesotho, the budget allocation has been much higher than in the health, food security and trade. This may be one of the reasons for a good performance on the MDG.

• ·                     The proportion of the total allocation that was given to education, agriculture and food security and trade show a slightly declining trend over the last ten years, whereas health has seen an increasing trend.  This suggests that the government is now focusing on health, which will hopefully start showing results on the health related MDGs.

• ·                     The Government intends to invest heavily in infrastructure and has expressed an intention to mobilize financing from the private sector under the PPP initiative. PPPs can be useful tools in enhancing service delivery and in promoting and accelerating achievement of MDGs.

• ·                     Further, as a response to the economic crisis, the government injected M50 million into the trade sector and established a facility to provide export credit to local textile manufacturers.

Assessment of the impact of Climate Change on MDGs

The UN Framework Convention on Climate Change (UNFCCC) has identified Lesotho as particularly susceptible to the adverse effects of climate change given its low adaptive capacity. Lesotho is also among the 49 countries that the Marrakech Accords identified as poor and eligible for help through a special Least Developed Countries Fund created by the international community to help such countries adapt to climate change. Since 70% of Lesotho’s people rely on subsistence farming and the land is prone to drought, flooding, land degradation, desertification and loss of biodiversity, the impact of climate change cannot be underestimated.

Channels of transmission

Studies by the UNFCCC and Lesotho Meteorological Services suggest that probable climate change scenarios for Lesotho include increasing temperatures, changes in rainfall patterns, decreasing summer precipitation, increasing intensity and frequency of extreme weather events. All the three most common symptoms of climate change are expected to affect Lesotho: precipitation variability, long-term changes in temperature, and more frequent extreme events. It is likely that the climate will turn warmer, with lower rainfall in the spring and summer, higher rainfall in winter, and gradually increasing rainfall in autumn. In addition, increased floods and droughts are also predicted.

These changes are likely to impact agricultural conditions in Lesotho severely. The decreased predictability of weather patterns is likely lead to reduced agricultural yields and cause crop failure and damage. This has potential to make food insecurity worse. Greater precipitation in Lesotho’s harsh winter is likely to bring more snowfall, which may in turn negatively impact livestock husbandry.

Although Lesotho has always experienced extreme climatic conditions, such as snow, frosts, hailstorms, droughts, floods and tornadoes, the frequency and intensity of these climate events is on the increase. These events endanger agricultural output and livestock, which causes food insecurity and hunger.

The most critical factor for agricultural output is its spatial and temporal distribution of precipitation. Some years the crop output remains low due to the absence of rain at critical stages of the plant growth cycle although the total annual rainfall may be normal.

Because employment opportunities remain scarce, especially in the rural areas, people rely almost entirely on the landscape for their livelihoods. This leads to greater vulnerability to climate shocks and an increased load on already stretched environmental resources. The vulnerability of the country was witnessed in 2002/03 and 2006/07, when the worst drought in 30 years drove the country into an emergency state.

Access to water is one of the critical elements that will be impacted by climate change. Water is needed for domestic needs, rearing livestock, crop irrigation, hydropower generation, small-scale industrial activities and to perform rituals. Diminishing rainfall and droughts will lead to reduced availability of surface and ground water, making access to water more difficult. This drives people to use water from doubtful sources and increases incidence of water-borne infections such as typhoid.

Food insecurity continues to be a big problem in Lesotho. Even during non-crisis years 70 percent of the cereals are imported. Droughts, early frosts and excessive rainfall can cause the country to fall into a national emergency, as evidenced by the national emergencies during the droughts of 2002/03, 2006/07. Climate change is likely to bring more years like those.

Forests are extremely important in arresting soil erosion. They play a critical role in the vulnerable zones, where people use wood for cooking and income generation, and as a building material, forage and shelter. Lesotho is one of the least forested countries in Africa with less than 1% of the country as woodland. Only 874 hectares are planted with trees. The mountainous terrain is fragile and vulnerable to erosion. Lesotho loses about 730,771 tonnes of soil as a result of gully erosion and 38,842,399 tonnes of soil sheet and rill erosion annually. This is more than 2% of the topsoil every year and at this rate all the soil will be lost by year 2040.

Chronic droughts have impeded recovery of grasses and vegetation that once protected the land from erosion. Predictions are that the climatic and environmental factors causing rapid soil erosion, such as high temperatures, scant vegetation cover, droughts, rainstorms, strong winds and heavy snowfall will intensify, resulting in the acceleration of soil erosion and desertification. Some predictions are that the 10% of Lesotho’s land that is now suitable for agriculture could shrink to as little as 3% as a result of climate change.

Climate change could also impact the diseases in the country. As the climate becomes warmer, tropical diseases are likely to surface, for which the country is ill prepared. For example, temperate highland Lesotho is currently free from malaria. As the climate warms, there is potential for the climatic conditions in the country to alter sufficiently to support the lifecycle of malaria-bearing mosquitoes. This would put an additional load on health services that are already stretched.

Lesotho has produced a National Adaptation Plan of Action (NAPA) on Climate Change, which focuses on projects to improve agriculture, institutional capacity building and policy reform to integrate climate change, improvement of early warning system, improvement of village water supply in drought prone areas, management and reclamation of degraded lands, conservation and rehabilitation of wetlands, and promotion of food processing and preservation technologies. These projects all have a short-term focus on technology and infrastructure investments that improve the ecosystem functions which support human livelihoods.

The Government is working on four projects with the UN to alleviate climate change problems. One is a climate change adaptation effort, the ‘Africa Adaption Programme’, which aims at dealing comprehensively with the impact of climate change in Lesotho and ensuring that the right policies and interventions are in place to mitigate the effects of climate change.

The second is a joint UN programme on human security, which will provide protection to 20,000 people affected by climate change. The third is a project on renewable energy, aiming to encourage usage of renewable energies in communities and households. The fourth is a disaster risk reduction project that aims at ensuring that the legal and institutional framework for disaster risk reduction is in place, the risks are identified and assessed and integrated in development plans, that preparedness and response plans exist, and finally that gender equality is strengthened in the process. Efforts are also underway to ensure that the other projects now being framed and executed in Lesotho are ‘climate-proofed’ to the greatest extent possible.

A Final Word

While the foregoing discussion highlights the factors that have a significant impact on the progress of the MDGs, as yet we don’t have sufficient data and analysis to quantify the magnitude of these impacts.  This will be an ongoing area of research for use in the update to be provided in the full MDGCR in June 2010.