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‘Shi exchanged farmers’ wool for machinery’

Central Bank exposes Shi’s ‘flouting’ of financial laws


A parliamentary ad-hoc committee investigating effects of Lesotho government policy localising buying and selling of wool and mohair last week heard how a Chinese firm abused its position and contravened its licensing regulations.

Maseru Dawning Trading (Pty) LTD, owned by Chinese national Stone Shi, was reported by the Central Bank of Lesotho during its appearance before the ad-hoc committee, to have violated its broker-license regulations by “exchanging farmers’ wool for machinery”.

Shi’s company started its contact with Basotho wool and mohair farmers at a time they were seeking to localise the sale of their produce. And following numerous consultations, the two parties entered into a joint-venture to establish the Thaba-Bosiu- based Lesotho Wool Centre. The farmers were being represented by the Lesotho National Wool and Mohair Growers Association (LNWMGA) in the initiative.

However, relations between the partners soured after the construction of one of the first wool-storage units under their master-plan, when Shi allegedly demanded their localisation project should be fast-tracked, which the farmers’ association refused and continued to sell their wool through a South Africa-based broker, BKB.

But with the help of government, a 1974 subordinate law—the Agricultural Marketing (Trading) Regulations—was repealed by the establishment of the Agricultural Marketing (Wool and Mohair licensing) Regulations of 2018 that made it mandatory for Lesotho-produced wool and mohair to be sold locally. Shi was the only licensed wool and mohair broker after this law was drawn.

But since his business took-off, farmers have bitterly complained that Shi was not paying them as much as their South African brokers, while also delaying to give them the money.

Some farmers have told the MNN Centre for Investigative Journalism that late-payments have forced them to sell their sheep and goats at very low prices, to make ends meet.

Now as investigations by the parliamentary ad-hoc committee continue, the Central Bank has shared some of the disturbing ways allegedly taken by Shi in doing business.

Central Bank governor, Retšelisitsoe Matlanyane, told the committee that Shi’s company, Maseru Dawning Trading, instead of receiving payments in line with his brokering license, “bought two wool hydraulic balers in exchange for wool worth USD 61 323.20 (about M797 201.60)”.

Dr Matlanyane indicated that on 2 February 2018, Maseru Dawning Trading authorised its bank, Standard Lesotho Bank to make an attestation that their client was to receive USD 123 936 (about M1 611 169.82).  Shi’s company received the money within the stipulated time.

Matlanyane further told the committee that each and every attested money by a client’s bank to the Central Bank has to be paid to the latter within a period of six months (180 days) from the its external source.

She then told the ad-hoc committee that on 19 March 2018, the same bank attested to the Central Bank that USD 261 572. 88 (about M3 400 473. 44) was expected to be paid by 15 September 2018 to Shi.

“During the month of repayment, we got a message from Standard Lesotho Bank that Maseru Dawning only received the sum of US$ 100 000 (about M1 300 000), and this means US$ 161 572.88 (about 2 100 447.44) was outstanding,” said Dr Matlanyane.

The Governor further said Standard Lesotho Bank then informed the Central Bank that they received a message from Maseru Dawning that the company got two hydraulic baler-machines worth USD 61 323.20 (about M797 201.6).

She emphasised that Maseru Dawning made an agreement with its international buyer that some money would be deducted from the total amount in exchange for these machines.

“The money that we can say was never transferred to Lesotho was US$ 100 249 (about M1 303 237),” she said.

Dr Matlanyane told the committee the Central Bank governs how commercial banks should operate when acting as foreign currency exchange facilities, especially for importing and exporting goods, citing the Central Bank Act of 2000 section 32 and 33.

She added that the Central Bank is also governed under another regulation, the Exchange Control Order 1987, which controls the operation of foreign currency brought into the country through the export of goods.

Dr Matlanyane further explained the processes business follow when trading outside the country and receiving foreign currency for their goods and services.

“After goods have been exported, the money is expected to reflect in the account of the business not later than six months (180 days),” she said.

Meanwhile, also appearing before the inquiry this week was the Ministry of Agriculture and Food Security.

During its testimony, a member of the ad-hoc committee, Advocate Thulo Mahlakeng, raised concern that Maseru Dawning Trading’s license was for brokering only and did not have a trader’s license.

Mahlakeng added: “…but this exchange of wool and mohair done by Shi is regarded as trading which he is not supposed to do”.

But Agriculture minister, Mahala Molapo, responded that what had come to his ministry’s attention was that Shi had been awarded a brokering license and his ministry believed he was operating accordingly. The minister added if he was not, then law-enforcement agencies had to intervene.

Molapo also praised the Wool and Mohair Regulation 2018 despite its widespread. He argued that localising the auction of wool and mohair had contributed to the country’s economic growth since these products are sold directly from Lesotho.

The minister, however, blamed the farmers’ woes on politicians and business-owners, saying failure to deliver the wool and mohair to South Africa for testing cost the Lesotho Wool Centre thousands of maloti as these products were later shipped to New Zealand for analysis.

“Before these products could cross the border, the country should have applied and been awarded a transit permit which takes six months before being awarded and it is produced after an agreement between the two nations.

“It was then that I learnt that some politicians went to South Africa to say the Lesotho Wool Centre had been delivering wool and mohair without this document.

“I say this because they were part of the crowd that crowded the Maseru bridge,” said Mahala.


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