Economic growth in Lesotho has been sluggish, reflecting the impact of external shocks and continued widespread poverty. GDP growth is estimated to have declined to 1.3% in 2005, slowing from 3.6% in 2002. Agricultural production was hit by drought in 2002-05 and then excessive rainfall in 2006. The manufacturing sector was hit by appreciation of the local currency in 2002-04 (the loti is pegged to South Africa’s rand, which strengthened over this period) and the removal of textile quotas by industrial countries in early 2005. This proved a difficult banking environment, reflected in the 13.4% drop in net profits reported by Standard Bank Lesotho.
The emphasis for 2005 was cost containment, which Standard Bank has pursued aggressively. In the first quarter of 2005, the bank initiated a merger with Lesotho Bank, in which it had a 70% stake with the government of Lesotho holding the balance. This was aimed at eliminating duplicate cost structures and improving overall efficiency.
“The merger of the two banks was the biggest imperative for us to extract efficiencies. This was successfully implemented in mid-July and the results are already meaningful, freeing up management time and allowing us to concentrate more on business development and focus on the more profitable market segments,” says Standard Bank Lesotho managing director Colin Addis.
Despite the challenging operating environment, the judges noted Standard Bank’s ongoing commitment to corporate social investment.
