Business Precinct
Business Precinct
An opportunity to invest in a PPP project for a mixed-use business precinct in Maseru servicing the agriculture, mining, manufacturing and tourism sectors.
Introduction
The intention is to attract companies to the precinct that support Lesotho’s major economic sectors – agriculture, mining, manufacturing and tourism. Some government ministries may also move to the site. The project is located at the Maseru Racecourse site, 3kms from the city centre along the Maseru bypass road.
Strengths &
Opportunities
The proposed location of the project is the former Racecourse. It is a spacious site connected by road from the city centre and the south part of Maseru, providing convenient access for the city’s labour force.
Telecommunications in the area are excellent and the South African mobile signal can be received there.
OF THE POPULATION
Corporate Income Tax (CIT) is:
10%
LIVE IN RURAL AREAS
There is scope to include sporting facilities, an education centre and apartment blocks making the precinct a mixed-use development.
The project aligns with SDGs 8, 9, 10 and 11.
Lesotho has high levels of connectivity via three main submarine cables: the Eastern Africa Submarine Cable System; Seacom and the West Africa Cable System. Within the country the Lesotho Communications Authority has deployed 46 base stations to remote areas via the Universal Service Fund, the most successful in Africa.
Markets
Lesotho’s membership of SADC and SACU allows Lesotho to export deciduous fruit to SADC countries without being subject to quotas or tariffs. The estimated market size is 300 million consumers. Lesotho’s geographical position and good road connections with South Africa permit short lead times and reasonable costs to transport produce from the Maseru area to Johannesburg, Cape Town and Durban (the port of dispatch for exports by sea). Lesotho has already trialled the export of fruit to South Africa to supply supermarket chains, with encouraging results.
Apricots and peaches are AGOA-eligible, so they can be exported to the USA, provided that US health standards are met. That potentially opens up a market of 300 million consumers. Apples, apricots, peaches and plums may also be exported tariff-free to the EU under the EU/SADC EPA, again subject to compliance with relevant standards. The 27 EU member states have a population of around 450 million.
Beyond those markets Lesotho could also exploit its trade preferences under the Generalized System of Preferences to export to countries such as China, Japan, Australia, Canada and Turkey.
Fiscal Incentives
Corporate tax: 10% on profits from sales of agricultural goods produced in Lesotho Training: Cost of Lesotho citizens allowable at 125% for tax purposes
Withholding tax:
- 10% on service contracts with non-residents
- 25% on dividends distributed from income by resident companies to non-resident shareholders
- No withholding tax on dividends distributed to Lesotho residents
VAT:
- 15% on goods and services sold in Lesotho
- 0% on direct exports
Risk guarantees:
- Partial credit guarantee through the LNDC
- Tailor-made, agriculture-specific loan through the Post Bank of Lesotho
Specific incentives for the horticulture sector:
- Access to a Sesotho language technical training manual for local workers in on-farm and crop management
- Access to demonstration and crop pilot plots
- Facilitation support to identify and mobilize village level farmer engagement
- Access to technical data on historical crop performance
Support from the LNDC includes:
- Serviced industrial and commercial sites at competitive rentals
- Provision of industrial and commercial buildings at competitive rentals
- Financial assistance on a selective basis
- Investment facilitation services
- Assistance with permits and licenses
- Assistance with company registration
- Assistance with industrial relations issues
- Appraisal of investment projects
- Assistance with preparation of project briefs for the Environment Impact Assessment (EIA) Certification
The project would align with SDGs 1, 2, 8, 9, 10 and 15.
Financial Analysis
comprising fixed assets of LSL 244m and pre-production expenditure of approximately LSL 16.8m will be required for
the establishment of the Business Precinct investment opportunity. The graphs below illustrate a financially viable operation with
the opportunity generating profits when structured as a PPP project.
At a discount rate of 10%, the Business Precinct does not generate the minimum required rate of return from an NPV and IRR perspective. Similarly, the profitability index and payback period are also not feasible. This initiative, however, becomes financially viable if structured as a Public Private Partnership (PPP) with the State making available a financial grant and/or land to enable the development of the Business Precinct.
Once structured as a PPP, the initiative is not only financially viable but also responds favourably to the country’s developmental objectives through its positive socioeconomic impact in terms of employment creation, clustering and potential forex
earning opportunities.
Financial Analysis
Lesotho National Development Corporation
Email: ip@lndc.org.ls