The tangled web of the Lesotho Wool War

wool farmer
Khotsang Moshoeshoe: association strategist and sheep farmer

A spiralling war between the Lesotho government and the country’s 37,000 wool and mohair farmers took an alarming new turn last week with the arrest of their association’s outspoken frontman.

Khotsang Moshoeshoe, 57, is reportedly facing charges of sedition and incitement for stoking resistance among growers to the government’s forced closure of the country’s wool shearing sheds.

His arrest came as producers were poised to launch a Constitutional Court case against the government — after bringing their grievances to the notice of the South African Development Community (SADC) mission in Maseru.

Wool and mohair are among Lesotho’s most important industries, with an annual turnover of more than R800-million. Many poor rural Basotho depend on it.

At issue are regulations issued in August 2018 that compel all the country’s wool and mohair producers to cut ties with South African-based wool brokerage BKB and supply their product to a Lesotho-registered company run by Chinese businessman Guohui “Stone” Shi.

Growers are refusing to supply Guohui’s company, Maseru Dawning.

They complain they were not consulted, insist that the wool is theirs and that 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.

Moshoeshoe, the spokesperson and key strategist of the Lesotho Wool and Mohair Growers’ Association, reportedly clashed with Trade Minister Tefo Mapesela last month when the latter brought in soldiers and policemen to close the shearing shed in Moshoeshoe’s home district of Mokhotlong.
Khotsang Moshoeshoe: association strategist and sheep farmer. Picture: Public Eye

Growers see the closures as designed to bring them to heel.

Moshoeshoe told the minister that the shearing sheds belong to the association, not the government.

He has not yet been charged but is in hospital under police guard.

His lawyer, Letuka Molati, told amaBhungane he is suffering from diabetes and high blood pressure, “which, I believe, has been worsened by his anxiety over his arrest”.

Two weeks ago the conflict between growers and the authorities boiled over when hundreds of growers took to the streets in Maseru to protest against the new regulations.

Issued by Small Business Minister Chalane Phori, these regulations ban wool and mohair sales outside Lesotho and require all wool and mohair traders to be licensed by government.

With most growers continuing to boycott Maseru Dawning, unsold wool is said to be piling up in many areas. 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”.
Khotsang Moshoeshoe: “Three ministers stand to benefit.’ Picture: The Post

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 Tom Thabane and his wife Maesaiah. The premier’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 who recently registered a company whose operations include “the raising of wool and mohair”.

AmaBhungane confirmed from the Lesotho companies register that Phori himself, 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, Moshoshoe 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”.
Stone Shie: ‘Why are they distancing themselves?’ Picture: The Post

“The reason Phori and Mapesela are pushing so hard to stop wool producers from taking our product to South Africa is because 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 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 point a finger at local business tycoon Yan Xie, the Prime Minister’s personal trade adviser.

They claim that Yan — universally known as “John” in Lesotho — 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.
Yan Xie: “Very disappointed with government”. Picture: The Post

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 (Yan) is behind this.”

But Yan hotly denied any links with Maseru Dawning or involvement in the current arrangement, adding that he was “very disappointed” with the government.

In a rare interview in Johannesburg this week, he told amaBhungane that he was both against growers taking their wool to BKB and the government forcing them to work with Guohui.

He said that since 2008 he had advised the government to bring Chinese state-owned company Ningbo ETDZ Holdings to Lesotho, as it had the resources develop a large-scale wool centre that would process the wool and produce textiles at a single location.

The Ningbo plant would employ 30,000 Basotho, he said. He conceded that if Ningbo set up in Lesotho, he would have shares in the operation.

AmaBhungane was unable to find any direct evidence of a connection between Yan and Maseru Dawning.

In February this year, 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 that Phori had never explained 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 that 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 growers association of being “agents of BKB”, because the company provides the association with financial advances. These loans, for the dipping and dosing of animals and the development of infrastructure, are understood to total R24-million.

Nchaka also complained that in 2016 the growers’ association entered a partnership agreement with Maseru Dawning, which it now refused to honour.

He 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 Ntinyane, said their legal preparations had been “disrupted” by Moshoeshoe’s arrest and illness.

In his interview with amaBhungane, Moshoeshoe confirmed that the 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 an about three percent stake in BKB. This brought in more than R1-million in dividends each year, which was shared among more than 130 wool sheds 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”.

“Guohui 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 Guohui 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 Guohui 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 Guohui, 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, Guohui had started demanding wool from the association after building only one store.

In an interview at the Thaba-Bosiu facility, Guohui 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 Yan.

Growers are also understood to be worried that the companies Guohui will export to in China offer no guaranteed price and pay only after a three-month wait.

However, Guohui 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, Guohui 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 intervened only “because I was being robbed of my investment by the association”.

Guohui 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 auctions only 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 former premier Pakalitha Mosisili.

“Guohui was approached and invited by the former head of the Lesotho National Development Corporation, Joshua Setipa, and Lesotho’s ambassador to China, Lebohang Ntšinyi. It makes no sense to claim the current administration has a private vendetta,” he said.

However, Moshoeshoe contradicted Nchaka, saying the association had first encountered Guohui 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.