Business Registration and Licensing Reform

LESOTHO

Chaba MokukuProject ManagerLesotho Private Sector Competitiveness and Economic Diversification ProjectEmail: cmokuku@psc.org.ls

Key Investment Climate Reforms in Lesotho

• Company Registration Reform (Complete).• One Stop Business Facilitate Centre (Complete –

improvements in progress)• Business Licensing Reform (In progress).• Construction Permit Reform (In progress)• Access to Finance (In progress).• Insolvency (In progress).• Customs modernisation (In progress).• Tax reform (In progress).• Financial Sector Reform (In progress).

4/24/2015 2

Business Start Up - Related Reforms

• Company registration reform 2007-2014.

• One Stop Business Facilitation Centre 2007-present.

• Business licensing reform 2014 – 2019.

Doing Business Ranking for Lesotho - 2015

TOPIC

Bo

tsw

ana

Leso

tho

Nam

ibia

Sou

th

Afr

ica

Swaz

ilan

d

Sin

gap

ore

Mau

riti

us

Overall Rank 74

(-8)

128 (0) 88

(-8)

43

(-6)

110

(+1)

1

(0)

28

(+1)

Starting a Business

149 108

(130 in 2010)

156 61 145 6 29

Dealing with

construction permits

93 161 25 32 55 2 117

Getting Electricity 103 117 66 158 140 11 41

Registering property51 93 173 97 129 24 98

Getting credit 61 151 61 52 61 17 36

Protecting Investors106 106 87 17 110 3 28

Paying Taxes 67 109 85 19 74 5 13

Trading Across

Borders

157 147 136 100 127 1 17

Enforcing Contracts 61 115 53 46 173 1 44

Resolving Insolvency 49 120 81 36 80 19 43

Current Licensing in Lesotho• The licensing regime covers all licenses and authorizations in

different Government agencies in addition to trade and industrial Licenses issued by Ministry of Trade and Industry.

• High cost and regulatory burden with limited justifiable benefits.

• Universal licensing regime.

• Absence of clearly stipulated goals and rational for licensing.

• Some common justification for licenses include the following: • Fiscal solvency• Revenue collection• Zoning enforcement• Information collection

Legal Framework – Initial Coverage

Four (4) licensing categories will be establishedfor activities that are currently regulatedthrough licensing in Lesotho in accordancewith the Industrial Licensing Act, TradingEnterprises Act, Agricultural Marketing Act,Betting Control Act, Accommodation, Cateringand Tourism Enterprises Act, and LiquorLicensing Act.

Licensing Categories

• Category 1 includes activities that will be fully deregulated;

• Category 2 includes activities where licensing will be replaced with premises certification. Operating businesses who lease certified premises will also be fully deregulation;

• Category 3 includes activities where licensing is replaced with premises certification + declaration + inspections;

• Category 4 includes activities that will still be licensed.

Examples of CategoriesEXAMPLE Category 1

deregulation

Category 2

Premises

Certification

Category 3

Declaration,

combination

Category 4

Permanent

licensing

Comments

FLORIST

ARRANGEMENTS

No risks

ARTS AND CRAFTS

PRODUCTION

(JEWELLERY AND

POTTERY)

These can be manufactured at

home, and do not pose much

risk. For larger scale

production premises

certification is adequate.

FURNITURE AND

CAPENRTRY

Process has to conform to

minimum standards to avoid

risks. Prior approval will not

address these standards.

CANNERY( FRUITS

AND VEGETABLES)

Food production – sanitary

risks, equipment risk–

especially for larger scale

production. Small scale can be

home based and deregulated.

Compensation for Possible Revenue Losses

• Nominal increase in license fees for activities that will still be licensed, especially for large companies.

• Charging higher fees for licensing socially undesirable activities (trade in alcohol, tobacco, gambling etc.).

• Keep annual license renewals fees for socially undesirable activities.

• Charge once-off fee for issuance premises certificate (category 2).

• Charging once-off fee for declarations when a business operation commences (Category 3).

• Introduction of the pre-emptive tax for various categories of small businesses (Category 1).

E-Licensing PortalCharacteristics and functionalities of the system will include:

1. Integration with business registration portal and business database.

2. Informational: All business activities; licensing requirements; laws and regulations; forms etc.

3. Transactional: Declaration using Unique Identifying Number (UIN); online applications through UIN; Automatic completion of parts of application forms with info from business registration database; and scheduling of interviews, inspections, hearings etc.

4. Functionality of e-licensing should allow verification of a license by a Government Agency or a third party.

Conclusion - Licensing• Activities that pose moderate risks to safety, health and environment

should be regulated with clear conduct rules and inspections rather than licenses.

• A limited number of currently licensed activities will remain to be licensed through a system of permanent licenses.

• “Socially Undesirable” activities such as trade in liquor and gambling will be licensed by annually renewable and expensive licenses.

• It is envisioned that overall decrease of licensing coverage will free Government resources for more efficient and effective regulation of licensed activities.

• Establishment of clear licensing conditions together with risk based approach to licensing and inspections will further improve regulatory regime in Lesotho.

Lessons - Critical Requirements for Investment Climate Reform

• Political will.

• Political stability.

• Sound Institutional Framework and Coordination Mechanism.

• Adequate capacity building within the Public Sector to match the reforms.

• Change Management Strategy.

• Effective Performance Management System.

• Data management capacity and robust M&E framework.

4/24/2015 12