Bereng Mpaki
The government has been urged to reconsider its mining sector investment incentives to prevent potential revenue losses that the state may be incurring.
This concern was raised during a recent dialogue titled “Re-Thinking the Use of Tax Incentives and Other Investment Promotion Tools in Lesotho,” facilitated by the International Institute for Sustainable Development (IISD) in Maseru this week.
IISD, an independent think tank focused on sustainable development policy, collaborates with governments, intergovernmental organisations, academic institutions, and the private sector to provide research, analysis, technical assistance, and policy recommendations.
The IISD delegation’s visit to Lesotho forms part of a three-year technical assistance program aimed at supporting the country’s incentive reform efforts.
Discussions at the IISD-led workshop centered on improving Lesotho’s investment framework, optimising tax incentives as a trade promotion tool, and positioning the country to align with the Global Minimum Tax.
Stakeholders from key public sector entities—including the Lesotho National Development Corporation (LNDC), Revenue Services Lesotho (RSL), the Ministry of Trade, Investment and Business Development, the Ministry of Finance, and the Department of Mining—were in attendance.
During the discussions, Liteboho Tlebere, the acting Chief Legal officer from the Department of Mining, expressed strong reservations about offering incentives in the mining sector. He warned that foreign investors often exploit these incentives, leading to reduced government revenue.
Tlebere highlighted that mining companies frequently cite “cash flow problems” as a justification to request deferred royalty payments, which results in the state receiving lower-than-expected royalty revenue.
According to the Mines and Minerals Act, 2005, holders of diamond mining leases are required to pay 10 percent of their gross sales value as royalties to the government. However, the Act also allows mining companies to apply for deferred royalty payments, with the duration determined by the Minister of Mining.
Additionally, minerals extracted for testing or examination purposes are exempt from royalty payments at the minister’s discretion—a provision that is susceptible to abuse by both mining companies and government officials.
“The open-ended wording of the Act creates regulatory challenges, particularly regarding the deferment of royalty payments and safeguarding the state’s interests,” the legal mind noted.
Lesotho currently offers several incentives to mining companies, including 100 percent depreciation on mining equipment investments, reduced electricity rates and zero-rated exports among others.
Other investment incentives including No withholding tax on dividends distributed by manufacturing firms, factory space incentives, and training or tertiary education expense allowance.
Many of these incentives are intended to attract investment but may be contributing to financial shortfalls for the government; a challenge the IISD assistance program to Lesotho hopes to address by the end of three years.
The IISD experts that were in Lesotho for the mission included Elisangela Rita, the Senior Policy Advisor, Tax Incentives and Sustainable Investment, Economic Law and Policy Program; Viola Tarus, Policy Advisor, Tax and Extractives, Economic Law and Policy Program; Kudzai Mataba, Policy Analyst, Tax and Investment, Economic Law and Policy Progam; and Josefina del Rosario Lago, the Policy Analyst, Tax Investment, Economic Law and Policy Program.

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