Aid to the Southern African periphery: the case of Lesotho

Lesotho receives a disproportionate volume of aid, most of it disbursed on exceedingly generous terms. In recent years, allocations have escalated and sources diversified. Increasingly, projects are being funded multilaterally with the Lesotho Government contributing a proportion and retaining a large measure of control. Hence, many of the now traditional arguments against aid—the creation of debt, tying of expenditure, manipulation of the economy in the interests of foreign capital—cannot be sustained in the case of Lesotho. Theoretically, the objective of the transfer of capital is the development of the indigenous economy and therefore the reduction of dependence on South Africa. However, an analysis of aid disbursements reveals disturbing trends which seriously question this prospectus. First, aid is allowing the Government to divert domestic revenue to projects of dubious developmental value and to the expansion and entrenchment of the state apparatus. Second, allocations to the agricultural sector, the underdevelopment of which constitutes the most serious obstacle to the manufacture of an independent economic future, are being cut back in favour of ventures where the returns are more visible and immediate. Third, a vast percentage of externally derived capital is rerouted to the South African space-economy via Lesotho through a variety of conduits catalogued in this paper. Thus, in this form, aid serves to tighten dependency but, ironically, it helps to guarantee political independence of the Republic by providing within Lesotho an attractive reservoir of foreign exchange which can be readily tapped by South African companies.