Manufacturing is a relatively new sector of Lesotho’s economy, largely because South Africa strongly discouraged competing industries until after the end of apartheid in 1994. The emphasis has been on small-scale enterprises; several industrial estates operate small projects, producing candles, ceramics, furniture, and jewelry. Other activities include weaving, canning, and diamond cutting and polishing. Clothing from wool and mohair, food products, fertilizers, and television sets are also produced. Urban development has stimulated construction and catering and other service industries.

In the early 21st century the textile industry grew, aided by favourable trade agreements such as the U.S.-led African Growth and Opportunity Act and the World Trade Organization’s Agreement on Textiles and Clothing; the sector diminished, however, when certain trade protections expired in 2005, and competition from countries such as China rendered the Lesotho textile sector largely uncompetitive.

Finance and trade

Lesotho’s currency, the loti (plural: maloti), is issued by the Central Bank of Lesotho. The currency was introduced in 1980 as a way to establish monetary independence from South Africa. Lesotho is a member of the Common Monetary Area, comprising Lesotho, Swaziland, South Africa, and (since 1990) Namibia. This organization allows Lesotho the freedom to set the exchange rate of its own currency, although at the beginning of the 21st century the loti was fixed to the South African rand. Lesotho has a few commercial and development banks.

Lesotho, South Africa, Botswana, Namibia, and Swaziland are members of the Southern African Customs Union (SACU), which allows for the free exchange of goods between member countries. Payments were made to the member countries by South Africa beginning in 1969 as compensation for those countries’ lack of freedom to conduct economic policies that were completely independent of South Africa. Lesotho is also a member of the Southern African Development Community (SADC), a regional organization focused on economic cooperation and integration.

Lesotho’s principal exports are clothing, furniture, and footwear, while its main imports are manufactured goods, foodstuffs, machinery, and transport equipment. The country maintained a trade deficit into the 21st century. Most trade is with countries in Africa and North America. The large deficit is offset somewhat by the remittances of Lesotho’s migrant workers, external aid, and receipts from SACU.

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Labour, taxation, and services

Many Sotho seek employment in South Africa. In the mid-1990s about one-fourth of all Sotho working males were employed in South Africa; by the early 2000s, though, the number had declined to about one-fifth. The great majority of the temporary migrant workers are men under age 40, but increasing numbers of young women are now seeking employment—legally and illegally—in South Africa.

The government is the country’s largest employer outside of agriculture, with a large share of the government’s annual budget consisting of payments to its public employees. In the 1990s more than half of government revenue was derived from the SACU; in the early 21st century this figure fluctuated between two-fifths and one-half. The government has sought to reduce the dependency on SACU revenues by improving its collection of income and sales taxes. Lesotho has several trade unions and associations.

A growing number of visitors have been attracted to Lesotho’s mountain scenery, and the country has done much to develop a tourism base. Roads and pony trails have been developed, trout streams stocked, and hotels and a ski resort built.

Transportation and telecommunications

Since independence, access to the more remote villages has been made easier by construction of hard-top roads in the lowlands, by the opening of good-quality gravel roads to the highlands, and by the availability of four-wheel-drive vehicles and aircraft that provide domestic flights. However, the small, sturdy Basotho pony is still widely used in the rural areas, along with donkeys and oxen. A main road runs along the western and southern boundary, and a mountain road from Maseru reaches into the interior. These two main arteries are served by short-distance feeder roads, while villages in the mountains are served by bridle paths. Railways are nonexistent, except for a short line that links the capital to the South African rail network. Light aircraft are used extensively for passengers and for transporting mail and freight to the interior. There is an international airport south of Maseru, and several smaller airports are located throughout the country.

In the early 21st century the number of telephone landlines in the country had more than doubled since the 1990s, but mobile phone usage had grown far more rapidly and surpassed the use of landlines. Internet access has been available since 1998 and is growing in popularity.

Constitutional framework

A constitution was written when Lesotho became independent in 1966, but it was suspended in 1970 by Chief Leabua Jonathan, then prime minister, when it appeared that the opposition party would prevail in the country’s first postindependence elections. A new constitution, approved by a constituent assembly in July 1991, was not promulgated until the March 1993 general elections. Lesotho is a constitutional monarchy, with the king as the head of state. The prime minister serves as the head of government and head of the armed forces. The bicameral parliament consists of an elected National Assembly and an appointed Senate. The 120 members of the National Assembly are elected to five-year terms—80 directly, 40 proportionally—while the Senate consists of 22 traditional chiefs and 11 members chosen by the king. The king himself does not hold executive authority and is instead a national symbol; executive power rests with the cabinet, which is led by the prime minister. Political parties were dissolved in 1986 but reauthorized in 1991.

Local government

Lesotho is divided into 10 administrative districts, each of which is under the direction of a district council, headed by an administrator. The subdistrict tier of local government is administered through community and municipal councils. District council members are indirectly elected by the community and municipal councils within the district, while community and municipal council members are directly elected by their constituents. Traditional chiefs are also included in district, community, and municipal councils.