By Lekhetho Ntsukunyane
Prime Minister Thomas Thabane’s trade adviser, Yan Xie, has publicly voiced his disappointment at government for driving a wool and mohair policy that he argues is not beneficial to Lesotho.
Universally known as “John”, the business tycoon of Chinese origin told amaBhungane in a rare interview in Johannesburg this week that since 2008, he had advised the Lesotho government to bring Chinese state-owned company Ningbo ETDZ Holdings to Lesotho.
This was because Ningbo had the resources to develop a large-scale wool facility that would process the wool and would produce textiles at a single location.
The plant would employ 30 000 Basotho, he said. He conceded that if Ningbo set up in Lesotho, he would have shares in the operation.
“I am very disappointed at the government. The new regulations are not going to benefit the farmers and Basotho enough. There is a better way to do this and both the governments of Ntate (Pakalitha) Mosisili (former prime minister) and Ntate Thabane know about my advice,” Xie said.
His comment comes amid a spiralling war between Lesotho government and the country’s 37 000 wool and mohair farmers that reached new heights last week with the arrest of their association’s outspoken frontman, Khotsang Moshoeshoe.
His arrest came as growers were poised to launch a major Constitutional Court case against the government and had brought their grievances to the notice of the South African Development Community (SADC) mission in Maseru.
Wool and mohair are one of Lesotho’s most import industries, with an annual turnover of more than R800-million. Many poor rural Basotho depend on it.
At issue are regulations issued in August this year that compel all the country’s wool and mohair producers to cut ties with South African-based wool broker BKB and supply their product to a Lesotho-registered company run by Chinese businessman Guohui “Stone” Shi (pictured).
Growers are refusing to supply Shi’s company, Maseru Dawning. They complain they were not consulted; insist that the wool is theirs and they will sell it to whoever they choose; and say the new dispensation amounts to the ambush of state policy by private business interests.
The government defends it as a move to bring the industry under local control, creating jobs for Basotho and benefiting the fiscus.
Xie said he was against both ideas of growers taking their wool to BKB and of government forcing them to work with Shi’s Maseru Dawning, “as both (ideas) are not fully beneficial to farmers and the Basotho at large”.
He said he had personally spent M3-million facilitating meetings between Lesotho government and Ningbo since 2009.
Xie said just when the project was about to finalised during Mosisili’s administration in 2012, Ningbo officials who had visited Lesotho where charged with human trafficking by the state’s Directorate on Corruption and Economic Offences.
He believes the move was a ploy by “some individual government officials” opposed to the Ningbo plan.
“Basotho are bad in one thing; if they are not involved in some things, they destroy them,” Xie said.
But his idea did not die. He said he had approached Premier Thabane in 2014 through former development planning minister Leketekete Ketso.
“The problem with governments in Lesotho is that ministers are very slow. Everything about them is slow. They don’t have powers to make decisions,” he said.
Xie’s remarks will come as a surprise to many Basotho, as Xie is widely believed to be driving the new regulations. Both the association and opposition politicians have alleged Xie is aiming to cash in on the policy.
Issued by Small Business Minister Chalane Phori in August, the regulations ban wool and mohair sales outside Lesotho and require all wool and mohair traders to be licensed by the government.
With most growers continuing to boycott Maseru Dawning, unsold wool is said to be piling up in many areas and the association reports large-scale smuggling of the raw product across the South African border.
Port Elizabeth-based BKB has acted as a broker for Lesotho’s wool and mohair over most of the past 40 years, charging growers a commission to take their wool to auction in PE and paying them individually. Its general manager, Isak Staats, described the new policy as “short-sighted and misinformed”, adding that it “is in no way in the interest of the wool and mohair growers of Lesotho. It will only benefit Maseru Dawning, and … its owners”.
He said BKB “might have to reconsider its labour requirements” if it loses its Lesotho business.
Among those accused of driving the new policy are Premier Thabane and his wife Maesaiah Thabane. Thabane’s office referred amaBhungane to the principal secretary of agriculture, Malefetsane Nchaka, while Maesaiah Thabane’s spokesperson, Silas Monyatsi, said “wool and mohair are not of interest to the First Lady”.
The growers’ association also joined Lesotho’s political opposition in claiming that the new regulations benefit three ministers that recently registered a company whose operations include “the raising of sheep and goats”.
AmaBhungane confirmed from Lesotho’s companies register that Phori, Trade Minister Tefo Mapesela and Energy Minister Mokoto Hloaele incorporated Masimo a Matala in May this year to conduct a range of businesses including the “raising of sheep and goats”.
It is unusual for Lesotho’s cabinet ministers to establish companies while in office.
In an interview before his arrest, Moshoeshoe said “individual ministers are going to benefit from the arrangement, those who recently registered a company that has interests in the wool and mohair industry”.
“The reason Phori and Mapesela are pushing so hard to stop wool producers from taking our product to South Africa is that they know they, as individuals, can benefit immensely from this new arrangement.”
Mapesela postponed a phone interview with amaBhungane, saying he was consulting growers. He could not be reached later, as his phone was turned off.
But Phori denied Masimo a Matala was formed to cash in on the new dispensation, saying it was formed “mainly to grow vegetables in Lesotho and South Africa. We have partnered with farmers in South Africa and we have a land in that country for the project”.
Energy minister Hloaele echoed this, adding that when Masimo a Matala was registered the wool and mohair issue “was not in the picture”.
The association and opposition politicians also pointed at Xie.
They claim that he has used his position in Thabane’s office to promote the new dispensation and advance the business interests of Lesotho’s Chinese community at the expense of indigenous Basotho.
Said Moshoeshoe: “We might not be able to prove this, but we have a strong suspicion that the government is pursuing the new policy in the interests of the Chinese community in Lesotho. In particular, we suspect that the prime minister’s trade adviser [Xie] is behind this.”
But Xie hotly denied any links with the Maseru Dawning, and amaBhungane was unable to find any direct evidence of a connection.
In February, before the regulations were promulgated, the government froze BKB’s Lesotho bank account under a law allowing this if money-laundering or the financing of terrorism are suspected.
BKB approached the Lesotho High Court, which struck down the freezing order. No charges have been laid against the company.
The Lesotho Revenue Authority also notified BKB that it had been assessed as owing unpaid taxes, while Phori was
quoted in a front-page interview in the Lesotho Times as saying the company owed Lesotho taxes of R1.4-billion.
BKB’s Staats said Phori “had never explained, or tried to explain, how he arrived at this number. We did a thorough investigation into our tax liability in Lesotho using South African and Lesotho-based auditors, and came to the conclusion that we are well within any tax laws”.
The tax assessment “was based on laws that don’t exist,” he added.
Pressed on his claim, Phori alleged BKB had deducted taxes from the growers’ payments under the pretext that these would be directed to SARS. “If that was the case, Lesotho should have received a share of the taxes through the customs union, but has not happened,” he said.
Asked why the Lesotho government had not prosecuted the company, Phori said “it is a complicated matter because it involves two countries. That’s why we have decided to localise the industry. We even invited BKB to come and do business in Lesotho but they are refusing to meet me.”
Growers see the freezing order and tax claims as ploys to drive BKB out of Lesotho. BKB said the motive was to discredit the company, “an ongoing effort”.
Hitting back, agriculture principal secretary Nchaka accused the association’s executives of being “agents of BKB”, because the company provides it with financial advances. These loans, for the dipping and dosing of animals and the development of infrastructure, are currently understood to total R24-million.
He also complained that in 2016 the growers’ association entered a partnership agreement with Maseru Dawning, which it now refused to honour.
Nchaka said the growers are influenced by opposition politicians envious of the Thabane administration’s “positive strides” in localising the industry, which former prime minister Pakalitha Mosisili’s government failed to achieve after initiating the policy between 2011 and 2012.
Before his arrest last week, Moshoeshoe, told amaBhungane that the association had voiced its objections to the SADC delegation in Lesotho last month. The delegation had “registered its concern and offered to take steps”.
He dismissed as pro-government propaganda social media claims that the SADC had dismissed the association’s concerns.
Moshoeshoe also said the association was preparing a Constitutional Court challenge for filing in the court this week. “There is no way we’re going to accept the government bullying us,” he said.
“Our main argument will be that we, the producers, were not consulted. If the government is not doing this in our interests, in whose interests is it acting?”
It is unclear whether the association now plans to proceed with the case. Its director, Mokoenihi Thinyane, said legal preparations had been “disrupted” by Moshoeshoe’s arrest and illness.
In his interview with amaBhungane, Moshoeshoe confirmed that association received financial advances from BKB, saying it was able to develop income-generating facilities and employ full-time workers with the company’s help.
He said the association also has about three per cent stake in BKB. This brought in more than R1-million in dividends each year, which was shared among more than 130 woolsheds across Lesotho.
“We won’t get these benefits from the new arrangement. Banks in Lesotho won’t give us loans. The government can’t help us. They want us to part ways with BKB that has always been there for us.”
Asked about the 2016 joint venture agreement between the association and Maseru Dawning, Moshoeshoe said all was going well “until the government interfered last year”.
“Shi was supposed to build four wool stores in Thaba-Bosiu, to be owned by an entity called Lesotho Wool Centre, in which we would have 75% of the shares and Shi the rest.
“We and Maseru Dawning would start doing business from that end. Nowhere did we agree to give all our wool to Maseru Dawning.”
Moshoeshoe said Phori and Mapesela started to interfere in October last year, when “they pressed Shi to instruct the association to give him our wool”.
“The wool does not belong to the association – it belongs to the individual growers, its members. We refuse to give all our wool to Shi, which appears to be what the government wants – that is not in the agreement.”
He said the courts had upheld growers’ right to their own wool. In addition, Shi had started demanding wool from the association after building only one store.
In an interview at the Thaba-Bosiu facility, Shi told amaBhungane he was confused about why the association “suddenly distanced and disassociated themselves from me”.
He said he was a wool technician with 18 years’ experience in the industry in Australia and China. The association and the government had approached him in China to run the business and he invested R41-million in Maseru Dawning, much of it for the building of the Thaba-Bosiu facility.
“After I built the facility with my money, the association wants me to leave. They want to rob me. I am a foreign investor who is being treated like a playing toy,” he said.
He insisted that he had no business relationship with Xie.
Growers are also understood to be worried that the companies Shi will export to in China offer no guaranteed price and only pay after a three-month wait.
However, Shi insisted that growers will receive a better price under the new arrangement because they will not pay such high charges, particularly for the transportation of their wool.
Asked about allegations of state capture, Shi said he had approached the Chinese Embassy in Maseru when the association first refused to supply him last year, and that his first contact with the government had come through the embassy.
He argued that the government only intervened “because I was being robbed of my investment by the association”.
Shi said he has already employed 20 Basotho in Thaba-Bosiu and that if things went well, he would employ 40 more.
He argued that while BKB only auctions wool, his facility would also market the product, both to China and other international markets that he hoped to draw in through an online marketing strategy.
Nchaka said it was not true that Thabane’s administration had introduced the new policy, as the idea of localising the industry and bringing in “an expert from China” was originally conceived under Mosisili.
However, Moshoeshoe contradicted Nchaka, saying the association had first encountered Shi in 2014.
A 2012 draft agreement for the construction of a wool-scouring plant, had been between the association, the development corporation and Ningbo ETDZ Holdings.
He said the proposal had never been implemented because it provided for all wool in Lesotho to be supplied to Ningbo ETDZ. “I, therefore, refused to sign that agreement having consulted with the members,” Moshoeshoe said.
- Lekhetho Ntsukunyane is currently doing a fellowship with the amaBhungane Centre for Investigative Journalism in South Africa.
