Background

Overview

Lesotho, formerly known as Basutoland under the direct mandate of the British, became independent on 4 October 1966. In the early days of the country’s independence, the geopolitical competition between the People’s Republic of China (PRC, also referred to as ‘China’ in this profile) and Taiwan (Republic of China) to win allies was in full swing. Until 1966, the PRC had been more successful than Taiwan in gaining support in Africa, managing to establish diplomatic relations with 20 African countriesSee p. 34 . However, as China was primarily occupied with the Cultural Revolution at the time of Lesotho’s independence, Taiwan saw a chance to win an ally on the African continent and immediately began to step up its engagement with the newly independent country.

The first official state-to-state interactionSee pp. 113–16 between Lesotho and Taiwan took place at the southern African country’s independence ceremony on 4 October 1966 in Maseru, the capital. Taiwan’s Vice-Minister for Foreign Affairs offered his congratulations and expressed his country’s willingness to cooperate with Lesotho. Only two months later, Lesotho’s Prime Minister Jonathan Leabua (in office from 1966 to 1986) visited Taiwan, Japan, and South Korea. One year later, Leabua paid another visit to Taiwan, to study agricultural development projects. In 1967, the two governments signed their first basic agreement. A special technical cooperation scheme and a friendship treaty followed in 1968 and 1969.

Despite lacking official diplomatic ties with Lesotho, the PRC closely monitored events there as part of its efforts to understand and potentially support movements across southern Africa in opposition to South Africa’s Apartheid regime. At the time, Lesotho was politically divided into two factions: the Basotho National Party (BNP), Leabua’s party, and the opposition Basutoland Congress Party (BCP). The BNP was backed by South Africa’s Apartheid regime and often relied on South African military support to suppress the BCP. This made the BNP hugely unpopular among not only BCP supporters but also the general population. For this reason, Leabua occasionally criticised South Africa’s economic influence in Lesotho. This in turn was picked up by the Chinese press and quoted as an exampleSee p. 85 of a big country ‘bullying the small’, nourishing the Chinese public’s goodwill towards Lesotho.

In the spirit of opening to the non-socialist world, the PRC intensified its contacts with the BNP to deepen relations towards the end of the 1980s. The efforts culminated in an official visitSee p. 86 by Leabua to China in 1983 to study ‘socialist modernisation’ in Shanghai. Leabua must have been impressed with the progress China had made since announcing major economic reforms a few years earlier, because, like other countries at the time, he decided to establish diplomatic relations with Beijing that year, which entailed severing diplomatic ties with Taiwan.

After this, more state-to-state interactions took place. This was reflectedSee pp. 86–87 in the signing of an agreement on economic and technical cooperation in 1983, as well as in the emergency relief provided by the Chinese Government in the form of a 75,000 USD donation to buy food during a drought in 1984. Likewise, the number of official state visits between China and Lesotho increased. From the Chinese side, this included visits by the Minster of Metallurgical Industry Li Dongye in 1983, the Vice-Minister of Foreign Trade and Economic Cooperation Lu Xuejian in 1988, and the Foreign Minister Qian Qichen in July 1989. From Lesotho’s side, King Moshoeshoe II travelled to China in 1985 in the hope of gaining support against South Africa’s interference in the country’s affairs, while Queen Mamohato Bereng Seeiso took a trip to the PRC in 1987.

However, during the 1980s, China’s engagement in Lesotho remained rather symbolic See p. 87 and did not translate into any meaningful economic cooperation. In this area, private investors from Taiwan were more active and had a bigger impact on creating jobs and bringing foreign investment to Lesotho. This, in conjunction with Taiwan’s ‘cheque-book diplomacy’See p. 88 and a military coup against Leabua in 1986, explains why, in 1990, Lesotho’s military government severed diplomatic relations with the PRC. It took another four years, until the overthrow of the military government in 1994, for Lesotho to sever diplomatic relationsSee p. 89 with Taiwan for good.

In 1996, the PRC Government signed an agreement on the construction of Lesotho’s first national convention centre. Like many Chinese state projects, this was a ‘turnkey project’ (全套项目), and included not only the planning and construction of the facilities, but also the importing of materials and labour from China. In 1997, Lesotho’s new Prime Minister Bethuel Pakalitha Mosisili (in office 1998–2012 and 2015–17) took a very cooperative approach towards China and, under his tenure, state-level interactions increased. These included China’s dispatch of medical teams to Lesotho in 1997, the construction of the Botha Bothe Industrial Park in 2002, and the partial forgiving of Lesotho’s debt. Other projects included the Lesotho National Library, the ’Manthabiseng Convention Centre, the parliament building, and phase one of the Mafeteng Solar Power Plant Project, as well as several technical cooperation projects in agriculture.

Since the 2000s, steady progress has been made in bilateral cooperation. Exact figures and forms of finance are often not made public. Yet, according to the Chinese Embassy in Lesotho, several assistance and cooperation projects, including the first phase of the technical cooperation project for land use and physical planning, the radio and television network expansion project, and the solar energy demonstration project were completed by 2023. In 2024, further projects were announced. These included the Police Fingerprint Examination Laboratory, for which the equipment is already in place and installation and training will begin soon; the Maseru Fire Station and Fire Engine project, with construction and delivery set to proceed after the signing of the implementation agreement; and the Maseru Agriculture Storage and Logistics Infrastructure project, which was scheduled to begin construction in June 2024.

Exchanges and cooperation in other fields continued to deepen. In July 2013, an art troupe of university students from Shanghai staged performances in Lesotho. In October 2014, the two governments signed the ‘Implementation Programme for the Years 2014 to 2017 of the Agreement on the Cultural Cooperation between the Government of the People’s Republic of China and the Government of the Kingdom of Lesotho’. The same year, the ‘Licence Agreement between the State Administration of Press and Publication, Radio, Film and Television of the People’s Republic of China and Lesotho National Broadcasting Services’was signed. This included the provision of scholarships for study and technical training in China. According to the Chinese Embassy in Lesotho, as part of Forum on China–Africa Cooperation (FOCAC) activities, China organised training for approximately 300 Basotho in China in 2019, bringing to more than 3,000 the total number of Basotho trained in the PRC.

Zooming In: Lesotho’s Political Economy

While the above provides an overview of the geopolitical tensions that underpin Lesotho’s relations with the PRC, the southern African country is a good example of how economic ties and interactions between ordinary people are often more influential than official diplomatic relations. To fully understand these dynamics, it is essential to examine Lesotho’s complex postcolonial history and its political economy, in which China’s state-owned enterprises and other official actors have never played a big role.

At the time of its independence, Lesotho was (and continues to be) a small, landlocked country with no significant natural resources, except for water. While economic development is not necessarily tied to natural resources, for a country like Lesotho, it was nevertheless a strong impediment. Historically, agriculture was essential for providing employment opportunities and enabling economic growth (World Bank 1965: 5). By the early 1970s, however, it became clear that soil erosion and population growth would have a detrimental impact on the agricultural sector (World Bank 1965: 5; Rosenberg 2007: 461). Therefore, developing the private sector became essential.

Boosting Private Sector Development

After independence, Lesotho’s private sector was small, comprising mostly public sector entities, print shops, and mission operations, with a combined turnover See p. 68 of less than 1 million ZAR and only 500 employees. South African companies controlled See p. 38 foreign trade as well as the insurance and wholesale and retail sectors, leaving minimal space for local Basotho enterprises. With a weak industrial base and limited employment opportunities in the private sector, most Basotho, particularly men, sought work in South African mines and farms, with 35,000 Basotho men See p. 18 employed in South Africa between 1967 and 1973, compared with just 2,000 jobs created domestically during the same period. Those who stayed in Lesotho were engaged in subsistence agriculture or the public sector.

Lesotho experienced a brief period of economic growth See p. 8 in the mid-1970s as migrant workers’ remittances poured in, while customs revenues, diamond production, and inflows of external assistance from Western donors concomitantly increased. During this brief period, Basotho entrepreneurs established small businesses, aiming to build an alternative future that did not rely on working in South African mines. However, Lesotho’s economic growth stagnated See p. 2 by the 1980s. According to the World Bank, See p. 35 its private sector ‘provided only a limited number of jobs, employing only 13 percent of the domestic workforce’. Lacking the capital to change this situation, Lesotho recognised the need to target foreign investors, much like the approach taken by China and Taiwan at the time. The government first set up several institutions aimed at attracting investment and developing an indigenous industry sector. These institutions  included See p. 228 the Lesotho National Development Corporation, the Basotho Traders Association, the Basotho Enterprise Development Corporation, and the Lesotho Chamber of Commerce and Industry.

These institutions were instrumental in promoting economic cooperation with Taiwan and later China, while also supporting the growth of the private sector and the creation of employment opportunities for Basotho. For instance, the Highlands Water Project became Lesotho’s ‘brightest investment opportunity’. See p. vi Through the construction of large water reservoirs and dams in its remote highlands, Lesotho became the primary supplier of water and a key energy provider to South Africa. The revenues generated from these projects continue to be a crucial source of incomeSee p. 81  for the government to this day, but also created temporary employment opportunities for Basotho.

By far the most impactful initiative for creating employment and boosting the private sector was the establishment of Taiwanese-owned textile and garment factories. Taiwanese investors had been exploring business opportunities in Lesotho since 1974, when Taiwan and Lesotho signed mutual visa waiver agreements,See p. 92 encouraging Taiwanese investors to travel to the region. Taiwanese investors were already actively investing in the textile and garment sectors across the border in South Africa’s homelands, or Bantustans. These were 10 rural regions designated by the Apartheid regime as separate ‘nations’ for various ethnic groups among Black South Africans. The governments of the homelands offered favourable conditions to Taiwanese factories hoping to boost economic development and employment creation. However, this opportunity was short-lived, as increasing international sanctions against the Apartheid regime pressured Taiwanese investors to relocate their production. Nearby Lesotho presented a more viable option See p. 1004 for continuing operations while circumventing these sanctions.

The textile industry received a further temporary boost when Lesotho signed the African Growth and Opportunity Act (AGOA) (US) in 2001, allowing the country to expand its textile and apparel exports to the United States. However, overall economic diversification has been challenging due to structural constraints. The public sector dominates the economy and offers limited employment opportunities, primarily catering to highly skilled and educated Basotho. The manufacturing sector in Lesotho is concentrated in two areas: mining and textile/apparel manufacturing. These two sectors account for 84 per cent of formal sector employment and more than two-thirds of total exports.

Textile and apparel exports have been declining due to competitiveness issues and labour market challenges, with Kenya overtaking Lesotho as the top apparel exporter to the United States under the AGOA. Employment in the export manufacturing sector dropped from ‘a peak of 43,500 in February 2020 to 31,000 in April 2020 due to the COVID-19 pandemic. While it rebounded to 39,000 by September 2020, it later fell to 37,000 by June 2022.’ Job losses in this sector have hit women particularly hard, as they make up 80 per cent of the workforce but are more likely to hold lower-skilled positions compared with men. Additionally, prospects for growth and job creation in the mining sector, which focuses mainly on diamond exports, remain limited.

Anti-Foreign Riots and Tensions

Although the factories created employment opportunities on an unprecedented scale in Lesotho, they also set the stage for ongoing tensions between Basotho and Taiwanese and Chinese migrants for two reasons. First, the new factories had a reputation for exploiting workers See p. 230 (Tangri 1993: 230). Second, in addition to large-scale investors, small-scale businesspeople from Taiwan and later from China began to seize opportunities outside the textile and garment industries. This created the impression of a growing, unwanted presence of Chinese migrants.

The first national outcry about the presence of the Taiwanese—who were generally referred to as ‘the Chinese’ See p. 221—occurred as early as 1987. In 1991, the situation escalatedSee p. 221 when a Mosotho was killed by the security guard of a Taiwanese-owned shop. Angry Basotho attacked Taiwanese shops, and many Taiwanese fled to South Africa. Many did not return to Lesotho but the number of migrants from mainland China grew.

Small numbers of migrants from Shanghai  came to Lesotho See p. 9 as early as the mid-1980s. These pioneers often worked in the Taiwanese-owned factories and decided to stay in Lesotho to open small shops and businesses. However, at the time, migrants from mainland China constituted a small, less-visible minority as textile and garment factories were predominantly Taiwanese-owned. The first migrants from Fuqing, a county in China’s Fujian Province, which later would constitute the largest migrant group in Lesotho, arrived in 1992See Chen, Chunguang, 福清华侨史 [Overseas Chinese History of Fuqing], Communist Party Publishing House, 2010, p. 74. These pioneers played a key role See p. 90 in establishing and shaping the Fuqingese community in the country.

The 1990s in Lesotho were marked by political instability, largely due to rivalries between the main political parties, culminating in riots in 1998. The unrest was sparked by widespread dissatisfaction with the results of the 1998 parliamentary elections, which many viewed as fraudulent. In September 1998, protests turned violent, leading to clashes between demonstrators and security forces. The unrest exposed deep-seated political and economic grievances. The riots caused significant property damage, particularly to foreign businesses, disrupted daily life, and ultimately led to a substantial exodus of Taiwanese small business owners.

The businesses left by Taiwanese migrants were soon taken over by migrants from mainland China. Unlike Taiwanese migration, which was often a by-product of state-sponsored projects, migration from China largely resulted from private initiative. These new migrants came mostly from Fujian Province, in particular Fuqing county-level city. They set up small shops and businesses across Lesotho, creating the impression that ‘the Chinese are everywhere’. To this day, relations between the Basotho and Chinese migrants remain strained, with Basotho perceiving the latter as monopolising business opportunities and primarily offering low-paid jobs and inexpensive goods. Although there have been no major large-scale riots in Lesotho since 1998, Chinese migrants are often targeted in robberies and other crimes, and they tend to perceive the overall environment as unstable and unsafe.

BRI Status

As a small, landlocked country, Lesotho is not a prominent player in China’s Belt and Road Initiative (BRI), which it joined officially only in 2019. That year, Prime Minister Tom Thabane (in office 2012–15 and 2017–20) visited China and supported the BRI for its potential to further Lesotho’s development. The Chinese Embassy in Maseru highlights recent projects as examples of BRI cooperation. These include the Mpiti–Sehlabathebe road, which will enable access to the Sehlabathebe National Park, a World Heritage site; the Maseru District Hospital and Eye Clinic to improve healthcare services; and new initiatives like the Mafeteng Solar Power Station and the Maseru Fire Station. These projects are in line with China’s BRI goals and aim to bolster infrastructure development, stimulate economic growth, and improve living conditions in Lesotho.

Current Economic Relations

Trade: China is not a major trading partner of Lesotho in terms of value, with South Africa and the United States dominating Lesotho’s external trade. In 2023, South Africa was Lesotho’s largest import source, accounting for 78.4 per cent of its imports, and a major export destination, making up 37.4 per cent of Lesotho’s exports. The United States followed as a key export destination, with a 28.1 per cent share. China accounted for only 6.1 per cent of Lesotho’s imports—a percentage that is smaller than Belgium and the United Arab Emirates.

The modest trade volume between China and Lesotho largely stems from the nature of Lesotho’s primary imports and exports, which do not align well with China’s industrial capacities or typical export offerings to Africa. Lesotho’s key imports—such as refined petroleum (12 per cent), light rubberised knitted fabric (5.4 per cent), raw cotton (4.5 per cent), electricity (2.8 per cent), and synthetic filament yarn woven fabric (2 per cent)—are not goods that China typically exports to African markets. Meanwhile, Lesotho’s main exports—including diamonds (35.2 per cent), knitted women’s suits (8.5 per cent), non-knitted men’s suits (8.4 per cent), water (5.3 per cent), and knitted T-shirts (5.3 per cent)—are either difficult to transport to China or are items that China already produces in large quantities, such as apparel. This mismatch results in a relatively limited trade relationship between the two countries.

In 2017, Lesotho’s total exports amounted to 900 million USD, but its exports to China were worth just 23.9 USD million. The main products exported to China in that year included wool (15.4 million USD), low-voltage protection equipment (3.5 million USD), and diamonds (1.9 million USD). The limited role of China in Lesotho’s trade is evident in the total export value of diamonds, along with knitted fabric and synthetic yarn, which amounted to 172,199 USD and 94,424 USD, respectively. Lesotho’s exports to China are declining, decreasing from 23.9 million USD in 2017 to 20.9 million USD in 2022. To illustrate this, we can examine the trade statistics from 2022. Lesotho’s total imports amounted to almost 1.9 billion USD, but China’s exports to the country reached barely 116 million USD (up from 61.3 million USD in 2017, with an average annual growth of 13.7 per cent). These exports primarily consisted of light rubberised knitted fabric (46.2 million USD), synthetic filament yarn woven fabric (13 million USD), and iron structures (4.21 million USD).

Investment: The share of foreign direct investment (FDI) in Lesotho’s gross domestic product has historically ranged between 1 per cent and 1.4 per cent. The investment was predominantly directed towards two sectors: export-oriented manufacturing, particularly in the garment industry, which is mostly controlled by Taiwanese and Chinese investors, and the Lesotho Highlands Water Project, a collaboration with South Africa that created temporary jobs in construction. More than 90 per cent of FDI in the country has been directed to ‘cut–make–trim’ operations that utilise imported fabrics, representing about 38 of the estimated 55 foreign affiliates in the country. However, this once-promising sector has experienced a sharp decline: while it was experiencing annual growth rates of 25 per cent in 2001, by 2024 the rate had dropped to 1.3 per cent.

Lesotho needs foreign investment to boost employment opportunities and economic growth. However, there has been growing criticism in Lesotho of foreign investors who repatriate their profits instead of reinvesting in the country. To counter this, Lesotho has introduced regulations to limit foreign participation in small business and certain sectors, reserving these opportunities for Basotho. Although these policies target foreign operators, they predominantly impact Chinese nationals who are active in these sectors.

For example, the Trading Enterprises Regulations of 2011 and the Business Licensing and Registration Regulations of 2020 restrict foreign ownership in specific businesses to a maximum of 49 per cent, affecting sectors such as barbershops, snack bars, and small retail enterprises. The Business Licensing and Registration Act 2019 requires foreign investors to show proof of 123,152 USD in capital or deposit the same amount locally, though this conflicts with the Central Bank of Lesotho’s minimum threshold of 250,000 USD, causing confusion. The Act also imposes annual renewal requirements for business identification cards on foreigners, while locals renew every three years—a process many find burdensome.

Aid/Development Projects: China is not a major source of development assistance for Lesotho. Due to historical ties, the Republic of Ireland and the United States are prominent donors to Lesotho. Additionally, South Africa and Lesotho have collaborated on the Lesotho Highlands Water Project, a key initiative for water supply and hydropower that brings in about 15 million USD in annual royalties and creates substantial employment opportunities.

Key Controversies

Economic concerns: One major controversy surrounding Chinese investment in Lesotho is the perception that it often benefits Chinese nationals more than local communities. In the wholesale and retail sectors, many Basotho argue that Chinese businesses exclude them from economic opportunities. Moreover, critics contend that these businesses often repatriate profits instead of reinvesting them in the local economy. Additionally, Chinese nationals in these sectors are often victims of violent crime, further complicating the relationship between local communities and foreign businesses. In 2019, a Chinese shop-owner was killed in his store, highlighting the dangers faced by foreign nationals in Lesotho’s retail sector. Although many shops are equipped with security cameras and guards, these measures often prove ineffective in preventing violent crime.

A more recent development is the trade of wool with China. Historically, this trade was organised through a South African broker. However, in 2019, the government decided to open it to a Chinese broker. That same year, several thousand farmers in Lesotho marched to parliament to protest regulations requiring them to sell their wool and mohair to this Chinese broker.

Labour and Employment Issues: Chinese-run businesses in Lesotho have also faced scrutiny of their labour practices. Chinese-owned firms are perceived as offering lower wages and poorer working conditions. This has led to dissatisfaction among Basotho workers and created tensions between the local workforce and Chinese employers. Chinese and Taiwanese-operated factories frequently face protests from workers about pay and working conditions. In February 2021, a woman was shot and killed during violent clashes between factory workers and police. The demonstrations resulted in the looting of several businesses in Maseru. Lesotho’s 50,000 factory workers demanded a 20 per cent salary increase for the lowest-paid employees. Company management offered only a 5 per cent increase, citing the impact of the Covid-19 pandemic.

Covid-19: The outbreak of the coronavirus led to scaremongering in Lesotho, prompting some textile workers at Tzicc Clothing to down tools in February 2020 after their Chinese colleagues returned to the factory wearing masks and were separated from them. The Basotho workers were concerned that the Chinese workers might have contracted the virus. Samuel Mokhele, Secretary-General of the National Clothing Textile and Allied Workers Union, stated that on learning of the return of Chinese workers to the factories, the union immediately approached the Ministry of Health for clarification and action.

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Featured Image: Lesotho, Source: @fiverlocker, Flickr.com (CC).