Diamond mining contribution to Lesotho GDP

May 29, 2023

Recently Lesotho diamond mining industry presented their performance report by in a collaboration! Lesotho diamond mining industry comprises of, four large-scale commercial operations, Kao Mine, Mothae Mine, Liqhobong Mine and Letšeng Mine; three new companies that were recently granted mineral rights, 10 companies with prospecting licences!

A total of 12 million tons of kimberlite were processed to produce 461,594 carats sold by these four mines for over M5.173 billion Gross Revenue. Below is the breakdown of the contribution made to the Lesotho GDP, excluding the contribution to the community development.

Last year, in 2022, the four operating mines injected M5.1 billion to Lesotho’s economy, in the form of procurement, employees’ earnings, taxes and levies; 1: A total of M3.6 billion was spent on procurement of goods and services, of which M2.9 billion was directly spent on local procurement.

The total local expenditure was 81% vs foreign expenditure of 19%. The foreign spend was mostly on Original Equipment Manufacturers, procuring original parts, service and repairs by manufacturers. 2: M414 million was contributed through employees’ earnings. Mine employees are among the high earners contributing significantly to the economy. 3: Direct contribution to government fiscus through taxes and levies amounted to M1.1 billion!

The industry’s contribution to GDP grew by 30.8% from M3.9 billion in 2021 to M5.1 billion in 2022. Direct contribution to government fiscus through taxes and levies increased from M940 million in 2021 to M1.1 billion in 2022. Liqhobong Mine was placed under care and maintenance during Covid and resumed operations in August 2022, boosting the contribution of the industry.

The contribution of the industry is expected to increase in 2023 with Liqhobong Mine becoming fully operational. This depends on the prices of diamonds in the market and recovery of exceptional stones. The diamond mining industry is a vitally important player in Lesotho’s economic linkages and growth as well as the key contributor to the nation’s GDP.

Although the industry’s performance is positive and encouraging, it is under considerable margin pressure due to market and currency volatility, high inflation that impacts on operating costs, supply chain constraints induced by Covid and the shifting global political landscape.

The mines’ resources are now at increasingly greater depth requiring large capital investment to extend the lives of some mines. The inconsistent and unpredictable legal and tax framework is a significant inhibitor to attracting investment capital into this country.

Lesotho Chamber of Mines remains extremely concerned about the future of mining in Lesotho which is compromised by the proposed introduction of an unpractically heavy tax regime that is likely to cause pre-mature closure of these operating mines and bury forever the dream of exploring the remaining 400 kimberlite bodies to determine the true mineral potential and prospectivity of this country.

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