SPECIAL REPORT

FAO/WFP CROP AND FOOD SUPPLY ASSESSMENT

MISSION TO LESOTHO

10 June 2003

• Mission Highlights
• 1. OVERVIEW
• 2. CURRENT SOCIO-ECONOMIC CONDITIONS
• 3. FOOD PRODUCTION IN 2002/03
• 4. FOOD SUPPLY AND DEMAND SITUATION
• 5. FOOD SECURITY AND VULNERABILITY ASSESSMENT
• 6. LONG-TERM STRATEGY FOR SUSTAINABLE AGRICULTURAL DEVELOPMENT

Mission Highlights

1. OVERVIEW

Following two consecutive years of poor harvests, the Government of Lesotho requested FAO and WFP for assistance in reviewing the country's food situation and outlook for the 2003/04 marketing year. Consequently, an FAO/ WFP Crop and Food Supply Assessment Mission was fielded from 22 April to 1 May, 2003 to estimate the current season cereal production, assess the overall food supply situation and forecast import requirements for 2003/04 marketing year (April/March), including food assistance needs.

The Mission received full cooperation from the Ministry of Agriculture and Food Security, the Ministry of Economic Planning, the Disaster Management Authority, the Ministry of Industry, Trade and Marketing, and the Bureau of Statistics. Discussions were also held with relevant UN agencies including UNICEF, WHO, UNDP, as well as donor representatives, NGOs, and grain importers. The Mission split into two groups and was able to cover all the ten districts of the country. Interviews were conducted with each District Agricultural Officer and staff from crops, livestock, extension, disaster management, nutrition, and health divisions to get information and their assessment of the situation within their districts. Interviews were also conducted with Village Chiefs, farmers, households and traders. Overall, more than 120 interviews were conducted during the course of the mission.

The Mission forecasts 2002/03 cereal production at 89 100 tonnes. Maize production is estimated at 61 400 tonnes, wheat at 24 300 tonnes and sorghum at 3 400 tonnes. Other crops such as beans, potatoes and peas were also observed on most farmers' fields and contribute to the diet of families and cash incomes when grown in larger quantities. The Government cereal production figures for the last few years appear to be biased upwards. The Mission therefore uses last year’s FAO/WFP assessment mission figures for comparison. On this basis, production this year will be 66 percent higher than the very low production last year. The Mission estimated the total cropped area at 178 300 hectares, about 84 percent of the area in normal years and 33 percent higher than last year’s figure. Some land was not planted because of the late arrival of subsidised inputs and the lack of tractors and machinery.

With an estimated total domestic cereal supply of 118 200 tonnes, and total utilization requirement of 438 900 tonnes, the country faces a shortfall of about 321 000 tonnes for 2003/04 marketing year. Commercial imports are forecast at 288 700 tonnes, leaving a gap of 32 000 tonnes to be covered as food aid. Against this requirement, WFP food aid in the pipeline for the current marketing year stands at 12 000 tonnes. Thus, there is an uncovered requirement of 20 000 tonnes which needs to be met by additional external food assistance.

A combination of better though below normal domestic cereal production and improved commercial import capacity suggests that there will be no serious cereal shortages at the national level. However, the key issue remains physical and economic access to food for certain segments of the population. High unemployment and inflation rates, particularly in the rural areas, coupled with the impact of HIV/AIDS means that certain segments of the population do not have the purchasing power to access food even if it is available in the market.

Inflationary pressures in 2002 were strong resulting in double-digit inflation for the first time in about 7 years. The food items that contribute about 36 percent of the consumer price index were the main drives of overall inflation. The food items index rose by an average of 26.3 percent during the year compared to an average increase of 6.7 percent in 2001. Timely Government interventions such as the Famine Relief Programme and food assistance from the international community contributed to mitigate the food crisis of last year.

Early this year the price of cereals began to decline as harvest prospects improved. It is expected that cereal prices will continue to decline over the course of the marketing year as millers exhaust their stocks of cereals bought at very high prices last year. Furthermore, a good maize production in South Africa will also contribute to the decline in prices. The maize SAFEX (South Africa Futures Exchange) prices have declined from a high of R2045/tonne in April 2002 to R782/tonne in April 2003. It is likely that the appreciation of the Rand will contribute to lower demand from other regional countries for South African grain as it has become relatively more expensive. Countries that normally import cereals from South Africa may look to international markets elsewhere. Swaziland and Lesotho are the only regional countries that are not impacted by the appreciation of the Rand as their currencies are pegged at par with it.

UNAIDS estimates that the HIV prevalence in Lesotho is about 31 percent. It is likely that the infection rates may be even higher because HIV/AIDS remains a stigmatised disease and there is no real economic or medical incentive for people to disclose their infection. Infection rates are particularly high among young adults who form a large proportion of the economically active population. In addition to its humanitarian and social consequences, HIV/AIDS has severe economic costs, as it constrains output growth, eliminates work skills and knowledge, shrinks the tax base, raises health-related costs, reduces disposable income, and increases financial imbalance in the public pension funds. Serious and immediate interventions need to be designed and implemented to control this disease. In the absence of such measures the overall economic and social conditions in the country will continue to worsen.

The Mission estimates that 38 000 tonnes of mixed food commodities, including 32 000 tonnes of cereals, will need to be distributed as food aid to targeted households. The number of beneficiaries will vary from around 225 000 to about 432 000 during the lean period. The assistance for HIV/AIDS affected households will be implemented in all of the 10 districts. In addition, in some districts there will be emergency assistance targeting households that have lost their crops entirely and have neither livestock nor off-farm income with which to buy food from the market.

Agriculture in Lesotho faces a catastrophic future due to structural rather than seasonal constraints. Severe soil and land degradation, lack of proper land and crop husbandry practices, inefficient use of improved seeds, fertilizers and pesticides, and an ineffective extension service continue to hamper agricultural production and development. If long-term interventions are not introduced as a matter of urgency, it is highly probable that crop production will completely cease on large tracts of agricultural land.

2. CURRENT SOCIO-ECONOMIC CONDITIONS

Lesotho’s economic performance has improved over the last two years but remains below the high growth rates achieved in early to mid 1990s. The real GDP growth rate in 2002/03 was 4 percent compared to 3 percent in 2001/02. It is projected that the growth rate will be around 4.4 percent during the current fiscal year. The key factors for improved growth prospects include successful completion of elections in May 2002 that bolstered confidence and foreign direct investment in the textile and clothing industries as well as in construction and manufacturing sectors. The manufacturing and construction sectoral growth rates are projected at 10 percent each, whereas the agricultural sector is expected to contract by about 1.4 percent reflecting long term depression rather than seasonal constraints.

The budget for fiscal year 2003/04 projects a deficit of Maloti 742.9 million before grants—8.5 percent of GDP. However, after grants the deficit drops to M450.4 million or 5.2 percent of GDP. Major expenditure allocations include 28 percent for education and culture, 12.3 percent for health and social security, and 6.1 percent for agriculture and rural development.

The third review of Lesotho’s economic performance under the three-year Poverty Reduction and Growth Facility (PRGF) programme was completed in September 2002. The review stated that Lesotho observed most of the quantitative and structural performance criteria and completed most structural benchmarks. However, the criterion on domestic financing was breached mainly due to delayed external disbursements. The domestic revenue collections fell below the projections during the year, but the establishment of Lesotho Revenue Authority (LRA) last year is expected to curb revenue leakages. LRA is expected to function as an autonomous self-financing body responsible for tax, sales tax and customs and excise departments.

The dependence on revenue from South African Customs Union (SACU) is being gradually reduced from over 75 percent in the mid 1980s to about 50 percent in recent years. It is expected that revenues from this source will continue to decline as external tariffs come under World Trade Organization rules and in line with other free trade agreements. However, Lesotho may continue to benefit under the new SACU agreement signed in 2002, under which payments to Lesotho will be higher due to its lower per capita income compared with other SACU member countries.

Lesotho has been a major beneficiary of the US Government’s Africa Growth and Opportunities Act (AGOA). At the end of 2002 approximately 44 000 jobs depended on manufactured exports with the expectation that more jobs will be created in the export sector. The Government is committed to follow export-oriented policies and acknowledges that the future of economic growth in Lesotho depends on the success of continuously attracting foreign direct investment (FDI). However, this policy needs to be carefully examined because the main attraction for FDI in Lesotho is not necessarily its comparative advantage or natural resource base for the production of export commodities, but rather because of its preferential access to various international markets.

Lesotho’s current account deficit for 2001/02 is estimated at US$ 72.3 million and capital and financial accounts at US$ 111.5 million. The trade deficit is estimated at US$ 353.8 million with exports accounting for 47 percent of the total imports (Figure 1). The key exports remain textiles, footwear, mohair and some live animals.

Figure 1. Imports and Exports of Lesotho 1997/98 to 2001/02

The external debt for the fiscal year 2002/03 is estimated at US$ 735 million resulting in an external debt to GDP ratio of 69.7 percent and debt service ratio of 9.7 percent. Official foreign exchange reserves are expected to be US$ 381.3 worth five months of imports of goods and services.

Lesotho's currency, the Maloti, (pegged at par with the South African Rand) which had been declining against major world currencies since 1998/99 began to appreciate after hitting a low of US$1 = M11.6 in January 2002. Currently the Maloti is trading at US$1 = M7.4, a 36 percent appreciation since the beginning of last year. Increased global demand for gold from South Africa, considered a safe investment in times of heightened global political and economic uncertainty, has contributed to the appreciation of the Rand and therefore the Maloti. The depreciation of the US dollar against major currencies also made gold relatively cheaper for investors. A stronger Maloti implies cheaper imports for Lesotho, which could improve the balance of payments. However, the downside is that the country’s foreign reserves in other major currencies have declined due to this revaluation.

Average unemployment rate for Lesotho remains around 30 percent, but there have been some significant positive developments in 2002. The unemployment situation for Basotho workers in South African mines stabilized in 2002 after declining for over 10 years and the average annual earnings increased by 10 percent (Table 1). This increase is largely attributed to higher demand for South African gold in an environment of increased global economic and political uncertainty. However, despite these developments the number of Basotho working in South Africa stands at 50 percent of the 1991 level.

Table 1. Number of Basotho Working in the South African Mines (1991-2002)

The Mission observed that the HIV/AIDS pandemic is severely impacting the labour force of the country. UNAIDS estimates that the HIV prevalence in Lesotho is about 31 percent. Lesotho is the fourth most affected country in the world following Botswana (38.8 percent), Zimbabwe (33.7 percent) and Swaziland (33.4 percent). While infections have declined in some countries (Botswana, Namibia and South Africa), infection rates in Lesotho continued to rise over the last decade to the current levels. It is likely that the HIV infection rate may be even higher because HIV/AIDS remains a stigmatised disease and there is no real economic or medical incentive for people to disclose infection. The hospitals in rural Lesotho that the Mission visited had over 90 percent of patients with full-blown AIDS and HIV/AIDS related diseases. Retrovir drugs are not available or they are too expensive for the population.

3. FOOD PRODUCTION IN 2002/03

The agricultural sector in Lesotho continues to face extremely serious structural problems. Severe soil and land degradation, lack of proper land and crop husbandry practices, inefficient use of improved seeds, fertilizers and pesticides, and an extension service without appropriate technical messages hamper agricultural production and development. If long-term interventions are not introduced as a matter of urgency, it is highly probable that crop production will completely cease on large tracts of agricultural land. Lesotho’s last agricultural census (1999/2000) highlighted the fact that the country’s cultivated land has increased from 317 900 to 406 500 hectares between 1989 and 2000, with the increase attributed to extension of cultivation to marginal lands that were previously fallow/grazing land.

Agro-meteorological conditions

In general, this year the distribution of rains was generally better in the north as compared to the south of the country (Figure 2). The onset of the rains was in October in most areas, which facilitated early land preparation where fields had been ploughed during the winter. This ensured that the optimum planting date for maize and sorghum was achieved where machinery and physical inputs were available. November was a dry month throughout the country with most stations receiving only a third of their normal rainfall, and this resulted in delayed planting operations for farmers. The remainder of the rainy season was erratic and the distribution uneven, particularly in southern districts of the country

Figure 2. Lesotho: Actual vs. normal monthly rainfall, October 2002-April 2003

Supply of agricultural inputs

Following two years of poor crop production, the Government declared a state of famine in the country in May 2002. As part of their response, the GoL through its famine relief programme, devised a crop input subsidy scheme with the objective of increasing the purchasing power of the farming community for inputs that would enable them to recover from the crisis. The intention was to ensure that all fields, everywhere in the country, were ploughed, fertilized and planted. Funds amounting to more than US$ 7.5 million were disbursed by GoL for the provision of machinery and the purchase of seed and fertilizer; FAO, UNICEF, Lesotho Red Cross and Care International also provided inputs under this programme.

Various seeds and fertilizer were subsidised at 50 percent and distributed to farmers either for payment in cash or on a credit basis. Field machinery operations such as ploughing, cultivating and planting were also subsidised at 50 percent. All farmers were entitled to seed, fertilizer and machinery at subsidised rates, the quantities being based on the size of their fields as calculated by Extension Officers in the District Agricultural Offices. Quantities of seed and fertilizer distributed per district are shown in Table 2. In addition, the GoL has purchased 60 000 tonnes of lime, which is currently arriving in the country and will be distributed to all districts. Soils are tending to become more acidic and this reduces the yield potential of all crops.

Table 2. Total quantities of subsidised seed and fertilizer by district in 2002/03 (tonnes)

In total, 17 870.3 tonnes of fertilizer were distributed along with 3 227.2 tonnes of seed. In addition, fodder seeds were distributed: 22.6 tonnes of teff, 42.5 tonnes of fodder sorghum, 9.9 tonnes of triticale, and 22.6 tonnes of oats. Unfortunately, the inputs arrived late in most areas which severely delayed planting, in some districts incompatible fertilizers and seeds were delivered and there was also inequitable distribution of these inputs.

Areas planted

Following the 2001/02 cropping season when large areas of arable land lay fallow in all districts because of heavy and widespread rains which interrupted planting, there was a concerted drive to plant as much land as possible during the 2002/03 season. This is presented in Tables 3a and 3b below, the first comparing Government statistics and the second comparing the estimates of the Mission with last year’s Mission estimates.

The area planted to each of the major cereal crops in each district is given in Table 4b. The total national maize area is estimated at 148 400 ha, while the area under sorghum and wheat is estimated at 7 300 ha and 22 600 ha respectively.

Table 3a. Total Cereal Area (‘000 hectares) in 2002/03 compared to 1997/98-2001/02 Average

Table 3b. Total Cereal Area (‘000 hectares) in 2002/03 Compared to 2001/02 FAO/WFP Mission Estimates.

Crop yields

The Mission's estimates of crop yields for the year 2002/03 are based on data provided by the Department of Crops, adjusted on the basis of field assessments. Table 4 a provides the area and yield estimates of cereal production by the Department of Crops and Table 4b gives the Mission estimates of area, yield, and cereal production. Yields per hectare at the national level were higher than last year but remained highly variable between districts. Southern lowland districts of Mafeteng, Mohale’s Hoek and Quthing were worst affected and in many areas will produce no grain at all for the second consecutive year. Northern lowland districts of Berea, Leribe, and Butha-Buthe were relatively less affected and yields were slightly better. All foothill and mountain areas although variable even within districts showed the best potential.

Table 4a. Area and Yield of Cereal Crops in 2002/03, by District

Table 4b. Area and Yield of Cereal Crops in 2002/03, by District

Extensive discussions were held with farmers, extension workers, District Agricultural Officials, the Ministry of Agriculture at Headquarters, and the Disaster Management Authority Officials. It was clearly established that very late planting of the crops due to the late arrival of subsidised seed and fertilizers and the shortage of tractors and machinery were the main constraint to production this year. The most important factor was the late planting of the maize and sorghum crops, for which any delay after the optimum planting date considerably reduces yield. Scattered and generally localised hailstorms also caused some damage in some districts, and cutworms and stalk borers caused further damage to the crops, particularly those planted late.

National average yields of maize and sorghum are estimated at 414 kg/ha and 466 kg/ha, respectively. Combined summer and winter wheat average yields are estimated at around 1 075 kg/ha. Table 5a compares this year’s estimated total cereal production with that of the last five years and Table 5b compares this year’s estimated cereal production with the estimates made by last year’s FAO/WFP Mission.

Table 5a. Total Cereal Production (‘000 tonnes) in 2002/03 Compared to 1997/98-2001/02 Average.