Lesotho’s money woes deepen …as government misses revenue collection target

By Sechaba Mokhethi

Maseru – Thrown a lifeline by the Constitutional Court to avert a possible government shutdown after the National Assembly blocked legislation appropriating funds for the fiscal year 2017/18, Lesotho faces a tough road ahead with the Lesotho Revenue Authority (LRA) failing to meet government’s set target for tax collection.

This is the second time the revenue collecting body misses a set target since it was established in 2003, missing the M6.4 billion (R6.4bn) mark for the 2016/17 fiscal year by a whooping M430.8 million (R430.8m). The LRA had collected M5.8 billion (R5.8bn) in the 2014/15 financial year.

In a recent media briefing finance minister, Tlohang Sekhamane, attributed the poor performance to several factors that included unsatisfactory performance in the mining sector borne by unfavourable global diamond prices.

The mining sector contributes about 30 percent of the overall income tax collection through Company Income Tax (CIT).

The LRA managed to collect around M3.7 billion through income tax in the just ended financial year, with the minister indicating this was due to the poor performance of the CIT.

Sekhamane further pointed out the appreciation of the South African rand in 2016 as another factor that impacted negatively on the value of Lesotho’s diamond exports, as well as “bad weather that increased production costs.”

The rand during this financial year gained around 15.1 percent beginning August last year, gaining for seven straight weeks versus the US dollar, the Euro, and the British pound.

The minister showed also that there had been massive default in payment of taxes leading to the shortfall, pointing an accusing finger on the retail and wholesale sectors – which he said account for between 55 and 60 percent of Value Added Tax collection.

While this shortfall paints a gloomy picture, the lease of life handed to the Lesotho government through the Constitutional Court ruling allowing for government to tap its Consolidated Fund gives a breather for the sourcing of funds to carry on government business.

Proponents of this legal bid to have government barred from accessing the Consolidated Fund to run its business had argued that Section 113 of the Constitution of Lesotho prescribes that parliament may make provision for the finance minister to withdraw from the Consolidated Fund for the purpose of meeting expenditure.

This part of legislation, according to the Constitution, can only be invoked if the minister responsible for finance realises that the Appropriation Act for any financial year will not come into operation by the beginning of that financial year.

The court, however, interpreted the section to authorise the finance minister to make withdrawals from the Consolidated Fund because it appeared to the court according to the constitution, should it appear to the minister that the Appropriation Act will not be passed before the beginning of the next financial year, he may authorise withdrawal from the Consolidated Fund for the purposes of carrying out functions of the government.

According to the court verdict, such withdrawals were limited to a period of the first four months of the next financial year.

“The amount of such withdrawals is limited to the one-third of the amount that has been laid before the national assembly for the preceeding financial year.

In our view, the process of tabling the estimates of 2017/18 was not completed.”

The court said: “We also agree that the intents and purposes of constitution empower the minister to act in view of his opinion at this point because it appears the appropriation act will not come into operation at the beginning of the next financial year.”

The court, therefore, declared that the finance minister may authorise the withdrawals from the Consolidated Fund on the basis of 2016/17 estimates – in terms of Section 113 of the Constitution – read with section 18 of the Public Finance Management Act.

The Lesotho government reels from these developments while in the middle of a standoff with National University of Lesotho (NUL) students who were last week violently dispersed from the streets by the police.

They were protesting against the non-committal stance of Prime Minister Pakalitha Mosisili’s cabinet in their financial plight at the university.

The students want Mosisili to address failure by government to pay the hiked tuition fees for students sponsored by the National Manpower Development Secretariat (NMDS) in the current academic year. The shortfall ranges from M600 to M6, 500 subject to the faculty a student studied.

The shortfall, according to the NUL, is supposed to be settled by the end of May by concerned students; NUL examinations are penciled to be written the same month.

The NUL students gave Mosisili 48 hours to address their grievances, which were initially forwarded to him last year, indicating nothing had come to fruition following several consultations with NUL management and government.

The university has since been closed down and teaching suspended, this following multiple violent demonstrations at the NUL Roma and Maseru campuses during which scores of students were beaten and shot – several were treated and released while some remain in hospital. An NUL employee was also reportedly hit by a stray bullet in an office at the university premises.

Prime Minister Mosisili late on Tuesday responded to the students issues, but they remain unmoved, indicating the response has not addressed their issues of concern.

April 2017
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