Lesotho Economy Overview

Currency

Lesotho Loti (LSL)

Working hours

45 hours/week

Public/bank holidays

11 public holidays

Capital

Maseru

Languages

Sesotho & English

Population

2.2 million

Minimum hourly salary

Around LSL 5.00 per hour, though it varies depending on the sector

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Employers in Lesotho who misclassify employees as independent contractors may face penalties including back taxes, interest, and fines.

Fun fact

Lesotho is one of the few countries in the world that is entirely above 1,000 meters (3,281 feet) in elevation, earning it the nickname “The Kingdom in the Sky.”

Lesotho is known for its exquisite mountainous regions, and as one of the only countries located more than 3000 ft above sea level, it is known as the “Kingdom of the Sky.” Lesotho is rich in mining, agriculture, and tourism. At least 2.7% of its GDP is attributed to its tourism sector.

Despite the small population of 2.3 million people as of 2023, the government has turned its attention to developing human skills and improving existing infrastructure, from road safety and electricity to information technology. The only natural resources in Lesotho are diamonds and an abundance of water.

The country is currently working on its Highlands Water Project, which aims to improve water transfer and the use of hydroelectricity between Lesotho and South Africa. English and Sesotho are the main languages in the country.

Ranked in the top 25% of affordable African countries, there are many compelling reasons to do business in Lesotho.

Overview of Lesotho's Economy

Lesotho’s GDP per capita totaled $999.7 in 2022 and $950 in 2023. The GDP growth of 2.2% between 2023 and 2024 is largely attributed to the Lesotho Highlands Water Project-II, which includes transportation and logistics services.

Recovery across the mining and manufacturing sectors is predicted to promote economic growth of over 1% in 2024 and more than 2% in 2025. The low-to-middle-income country experienced a decline in its inflation, going from 8.3% in 2022 to 6.4% in 2023.

The fiscal position of Lesotho will improve over the short term due to a rise in tax revenue and support from SACU (South African Customs Union). Lesotho’s economy is divided into primary, secondary, and tertiary sectors.

Economic Sectors Components
Primary Mining, agriculture, and commercialization
Secondary Manufacturing and construction
Tertiary Telecommunications and government (contributing to GDP)

Taxes

Employer Tax: 6%

Social Security

Lesotho does not have a mandatory social security contribution for employers. However, employers may contribute to private pension schemes.

Employee Tax: 22%

Income Tax

Lesotho levies progressive personal income tax. A tax credit of M11,040 per year reduces the final liability. Employees are generally taxed under PAYE, with employers withholding and remitting tax to the Lesotho Revenue Authority.

Gross Income (LSL)

Up to 70,500

More than 70,500

Tax Rate

20%

30%

Business Regulation in Lesotho

The Labor Act 2024 is Lesotho’s new labor law, which came into effect in April 2024. The new labor code governs fair practices concerning all employment regulations and processes in the country and repeals the Labor Code Order of 1992.

In Lesotho, various aspects of employment law are overseen by independent councils. Concerning wages and work conditions, wages are fixed, and the terms and conditions of employment must be stipulated in the employment contract or by collective agreement. Employees in Lesotho work a 45-hour week, which can be distributed over 5 or 6 days. 

The minimum wage in Lesotho is 2242 LSL per month. Employers are required to contribute to a mandatory pension fund. The minimum total contribution is 3.5% of gross pay, with the employer legally required to fund at least 1.5% of that total. Full-time employees must receive benefits such as 12 days of annual leave and overtime compensation.

Termination of an employment contract requires issuing employees with notice based on the period they have been working for the company. A contract can only be terminated if an employee is guilty of misconduct or the company’s operational needs change.

Benefits of Doing Business in Lesotho

Lesotho is focusing its efforts on expanding its use of hydroelectricity to neighboring countries and farms. In addition to investing in solar power, the country is set to provide opportunities for businesses in the generation and distribution of energy. 

The African country offers an investor-friendly business environment owing to its political and economic stability. It has a free market system, which improves investor confidence and encourages sustained business growth.

Businesses can take advantage of Lesotho’s tax incentives, including 10% on corporate tax involving profits in manufacturing. The distribution of dividends in manufacturing to local and international shareholders is tax-exempt.

Lesotho provides investment opportunities in retail, hospitality, franchising, and the commercial agriculture sector. One of the official languages in the country is English, making it easier to communicate and facilitate business processes.

Lesotho has a dynamic labor force in addition to its affordable wage rates. 

Downsides of Doing Business in Lesotho

Currently, Lesotho requires the development of its existing infrastructure, including improvements in national roads and electricity. Fortunately, government initiatives with a focus on attracting US investment and the expansion of its hydroelectricity services provide a positive outlook for investors. 

For businesses to expand into new and international markets, they must go through South African borders and ports, as the country is landlocked. Despite imports and exports processed according to South African customs laws, Lesotho has established areas of free trade with several countries, including Namibia and Botswana. Lesotho is a trade partner of the European Union, China, and the United States. 

Lesotho does not have an established investment law; however, the country has a licensing regime and treaties that oversee foreign investment. 

Business Expansion Options in Lesotho

Businesses considering international expansion into Lesotho have the option of establishing limited liability companies, public limited liability companies, external companies, and non-profit companies. Regulations concerning subsidiary incorporation, branches, and hiring an EOR are as follows: 

Lesotho Employer of Record (EOR)

An EOR has extensive knowledge of Lesotho’s labor law, and because they have an established office in the country, they can act on behalf of the client company.

A Lesotho EOR provides HR services, oversees employment contracts, onboards and offboards employees, and keeps international companies compliant with existing employment regulations. 

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Recruitment Agencies

A Lesotho recruitment agency connects businesses with qualified talent while ensuring compliance with local labor laws. These agencies help streamline hiring processes, from sourcing candidates to managing payroll and contracts.

Many work alongside Professional Employer Organizations (PEOs) or Employers of Record (EORs) to simplify workforce management for both local and international companies.

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Lesotho Professional Employer Organization (PEO)

A PEO (professional employer organization) and an EOR (employer of record) are different entities that can represent businesses in Lesotho. The purpose of these services is to help foreign businesses expand their workforce in the country without having to formally establish a legal entity. 

A PEO can help your business run recruitment and HR tasks following the labor law, including the administration of payroll and employee benefits.

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Subsidiary Incorporation

Before incorporating a subsidiary, it’s important to determine where your business will be operating, as the country’s subsidiary laws differ between regions. Setting up a subsidiary requires a letter of intent that describes why you wish to do business in Lesotho. 

A company representative must be assigned and submit proof of their work permit, resume, and identity. The parent company must issue a letter of appointment and articles of incorporation upon registration.

Branch Registration

Lesotho allows businesses to register an external company, which is known as the registered branch of a foreign company. Businesses must complete the Companies Registry form, which requires the personal details of the company representative, the company name, and an English certificate of incorporation of the parent company. 

You can open a foreign representative office by contacting the Registrar of Companies in Lesotho.

Business Opportunities in Lesotho

Lesotho is a politically stable African country that is abundant in natural beauty, hydropower, and diamonds. The country has made strides in recovering from the economic downturn since the pandemic in 2020, and this includes modest but steady growth in its overall GDP. 

Lesotho does not have strict foreign investment laws; instead, this sector is governed by a licensing regime and various treaties.

Business OpportunitySummary
MiningLesotho’s mining prospects are underpinned by rich deposits of diamonds, coal, and other minerals that remain comparatively untapped. Rising regional and global demand for raw materials, combined with government initiatives to attract foreign investment, creates scope for exploration, responsible extraction, and downstream value creation.
AgricultureA favorable climate and fertile soils support commercial farming, especially high-value fruits and vegetables. There is room to move up the value chain through processing for export, while public programs aimed at modernization and productivity provide additional momentum for scalable agribusiness projects.
Textiles and ApparelCompetitive labor costs, an experienced workforce, and access to quality raw materials such as wool and mohair position Lesotho as a credible manufacturing base. Preferential trade routes to the United States (AGOA) and European Union, along with established international operators, support export-oriented growth.
TourismDistinct natural assets—mountains, waterfalls, and national parks—paired with rich cultural heritage and crafts enable diversified offerings in eco-, adventure-, and cultural tourism. Government efforts to promote the sector and improve infrastructure strengthen the case for investment in accommodation, experiences, and supporting services.
Renewable EnergyAbundant solar, wind, and hydropower resources align with growing demand for clean energy and national targets to expand renewables. Opportunities exist for independent power producers and off-grid solutions, particularly where reliable, sustainable power can unlock productivity for communities and industry.

Lesotho’s ongoing efforts to improve its business environment, attract foreign investment, and promote economic diversification are driving a range of promising business opportunities. Numerous investment opportunities for businesses interested in expansion, including competitive wages and developing industrial and property sectors. The new labor laws break down updated employment regulations to help modern businesses and protect employees.

With continued infrastructure development, enhanced regional integration, and a more supportive climate for private sector growth, the potential for business success in Lesotho is steadily rising. These initiatives aim to unlock new avenues for investors, making the country an increasingly attractive destination for economic ventures.