Corporate governance has increasingly emerged as a cornerstone of economic growth, investor confidence, and institutional stability in developing economies. In Lesotho’s expanding corporate sector, the importance of sound governance practices cannot be overstated. Corporate governance determines how companies are directed and controlled, balancing the interests of shareholders with those of creditors, employees, regulators, and the public. As Lesotho positions itself as a viable investment destination in the Southern African region, the establishment and entrenchment of strong governance norms are vital to securing capital, ensuring sustainability, and promoting long-term corporate value.
The legislative foundation of corporate governance in Lesotho is primarily the Companies Act 18 of 2011, which provides the statutory framework for incorporation, management, and director obligations. The Act sets out key fiduciary duties, requiring directors to act with care, skill and diligence and to exercise their powers in good faith and in the best interests of the company. Companies are required to maintain proper accounting records, file annual returns, and comply with disclosure obligations. However, while the Act imposes important baseline requirements, it is largely procedural and does not provide comprehensive guidance on governance structures, board independence, or sustainability-related reporting.
In this context, the Mohlomi Corporate Governance Code, developed as Lesotho’s emerging soft-law governance framework, is a welcome development. Named after Chief Mohlomi, a revered traditional leader known for his ethical leadership and wisdom, the Mohlomi Code seeks to foster a values-based approach to governance in line with Lesotho’s unique political, economic, and social realities. The Code encourages companies to adopt principles of accountability, transparency, ethical conduct, and stakeholder inclusiveness, principles that align with international best practices such as the OECD Guidelines and South Africa’s King IV Report.
The Mohlomi Code is voluntary in application but is gaining traction among larger companies, particularly those seeking regional partnerships or finance. It advocates for the inclusion of independent non-executive directors, the establishment of board subcommittees (such as audit and remuneration committees), regular board evaluations, and the implementation of conflict-of-interest policies. Importantly, it also recognises the need to align corporate strategy with social and environmental imperatives, supporting the broader agenda of sustainable development.
The benefits of sound corporate governance in Lesotho are multifaceted. Firstly, companies that demonstrate adherence to governance standards are better positioned to attract investment. Institutional investors and development finance institutions increasingly rely on governance assessments in making funding decisions. In a context where many businesses seek to access cross-border financing or list on exchanges such as the Johannesburg Stock Exchange, credible governance practices are a prerequisite.
Secondly, governance improves regulatory compliance and operational resilience. While the Ministry of Trade and the One-Stop Business Facilitation Centre have made company registration more efficient, compliance with ongoing obligations such as filing returns, maintaining registers, and updating shareholder information, remains inconsistent across sectors. Companies with clear governance processes are more likely to meet statutory requirements and avoid regulatory sanctions.
Thirdly, corporate governance is instrumental in resolving internal disputes and maintaining organisational cohesion. Lesotho’s courts and arbitration bodies have seen an uptick in shareholder litigation, often arising from ambiguities in decision-making processes, absence of shareholder agreements, and lack of transparency. Governance instruments such as board charters, shareholder agreements, and voting protocols offer clarity, legal certainty, and recourse in the event of disputes.
From a broader perspective, effective corporate governance contributes to national development. In a small and open economy like Lesotho’s, where the private sector is poised to be a key driver of employment and innovation, governance standards are critical to curbing corruption, ensuring fair market competition, and supporting institutional integrity. Conversely, governance failures can lead to reputational damage, capital flight, and economic stagnation.
Local professional bodies, notably the Lesotho Institute of Accountants (LIA), are playing a growing role in advancing corporate governance by offering training and advisory services to directors and company officers. Legal practitioners and company secretaries are also increasingly involved in guiding businesses on compliance with the Companies Act and voluntary adherence to the Mohlomi Code. Over time, the development of sector-specific governance guidelines and possible regulatory endorsement of the Mohlomi Code may catalyse broader implementation.
In conclusion, corporate governance in Lesotho has moved beyond mere statutory compliance to encompass a values-based approach rooted in ethical leadership and sustainable business practices. The Mohlomi Code, while not yet binding, represents an important step in codifying governance expectations tailored to Lesotho’s corporate environment. As businesses in Lesotho seek to expand, attract capital, and gain competitive advantage, those that embrace governance as a strategic asset, not just a legal obligation, will be best positioned to thrive in a dynamic and accountable corporate future.
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