Tables of Modern Monetary Systems by Kurt Schuler ( Return to home page )


Lesotho

Political sketch

Formerly Basutoland. Independent from the United Kingdom on 4 October 1966.

Lesotho was probably first inhabited by the San people, also known as bushmen. About the 1700s, Bantu-speaking farmers began to settle the area. In the 1820s there was a series of conflicts among local groups. The most powerful chief who emerged at the time was Moshoeshoe. Until his death in 1870 he was the undisputed leader of the Basotho people. In 1843 he negotiated British protection to prevent Lesotho from falling into the orbit of the South African Boers (descendants of Dutch settlers, who migrated into the interior to establish states independent of British influence). Lesotho became a British territory in 1868 and was annexed by the British Cape Colony in 1871. Lack of attention to local customs caused dissatisfaction, and in 1880 revolt erupted when the government attempted to disarm the people. In 1884 Lesotho became a British High Commission Territory and ceased being part of the Cape Colony. Lesotho remained under British control when the four British South African colonies became the Union of South Africa.

South Africa assumed that it would ultimately annex Lesotho, but Lesotho became independent as a constitutional monarchy on 4 October 1966. The first prime minister, Chief Leabua Jonathan, won election in 1965 and remained in office for 20 years. In 1970 Jonathan retained power by a coup after his party had apparently lost a general election. Jonathan and his party criticized South Africa's apartheid policies in the 1970s and 1980s and gave refuge to members of South Africa's outlawed African National Congress. In response, South Africa undertook an economic blockade of Lesotho in early 1986, and Jonathan was soon overthrown in a military coup. The new government agreed not to let its territory be used as a base for activity against South Africa. Further coups occurred in May 1991 and August 1994. After divisive elections of May 1998, riots occurred in August and a military mutiny in September. Troops from neighboring countries helped suppress the mutiny. Peaceful elections were held in May 2002. Clothing and other manufactures are the biggest exports.

Wars since 1500

Basuto War, 1865-1868 (against Orange Free State); Basuto Gun War, 1880-1881 (against United Kingdom); Lesotho Mutiny of 1998.

Convertibility

The sterling area:

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914 gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925 the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. On that date, Botswana, Lesotho, South Africa, and Swaziland ceased being members of the sterling area; so did Namibia (then South West Africa), since it was subject to South African exchange controls. By January 1973 the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong had abandoned sterling as its anchor currency. The United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.

The Rand Monetary Area (later Common Monetary Area):

Initially, Bechuanaland (now Botswana), Basutoland (now Lesotho), and Swaziland used South African currency and had no separate domestic units of account. Until 13 February 1961, South Africa's currency was called the pound; since 14 February 1961 it has been called the rand. In Namibia, then called South West Africa, three South African commercial bank issued notes from 1915 to 1961, but the unit of account was the South African pound; the other countries used notes issued by the South African Reserve Bank after it began issuing notes in 1922. These countries had a customs union and, by informal agreement, common exchange controls. Initially, South Africa paid no seigniorage to the other countries for using the rand. The Rand Monetary Area, established in 1974 (and renamed the Common Monetary Area from 1986) joined South Africa, Lesotho, Namibia, and Swaziland in a formal agreement. Botswana decided not to join, though it remained a member of the rand zone for purposes of exchange control until 1976. All the other countries now have their own currencies, equal to the South African rand, but South Africa still makes seigniorage payments to the other members of the zone based on estimated circulation of rand notes and coins within their territory.

South Africa imposed exchange controls for all countries outside the sterling area on 9 September 1939, shortly after the Second World War began. On 1 July 1949 it established a licensing system that restricted imports from the sterling area other than Northern and Southern Rhodesia (Zambia and Zimbabwe). Compulsory surrender of sterling area currencies existed from 21 February 1956-27 February 1957, and was reintroduced 8 May 1958. Exchange controls intensified during 1961 (the legislative basis for subsequent exchange control being South Africa, "Exchange Control Regulations, Orders and Rules 1961," Government Notices R1111 and R1112 of 1 December 1961, issued in terms of South Africa, Currency and Exchanges Act, Act No. 9 of 1933). South Africa has been liberalizing exchange controls since 1995, but some persist today (2005).

South Africa established a dual exchange rate on 2 February 1976 as part of a liberalization of its foreign-exchange market announced on 5 December 1975. Some former "blocked rand" became "securities rand" tradable at market rates. As a dollarized country using the rand, Swaziland shared this arrangement.

Other

Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): None.

Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): Moderate problems 1988-1990s at one bank.

Frankel and Rose (1996) list of currency crashes: 1984.

References

Primary sources:

--Laws and decrees:

Basutoland. Gazette. 1963-1966. Official Gazette of the High Commissioner Being the Basutoland Government Gazette; later Official Gazette of the Resident Commissioner being the Basutoland Government Gazette; later Basutoland Government Gazette. Mbabane. (Successor to Great Britain, High Commissioner's gazette.)

Cape of Good Hope. Gazette. 1800-1910. The Cape Town Gazette and African Advertiser (Kaapsche stads courant en afrikaansche berigter), later Government Gazette. Cape Town. (Published proclamations for British Basutoland, as Lesotho was then known, until 1910; succeeded by South African gazette.)

Lesotho. Gazette. 1966-present. Lesotho Government Gazette. Maseru: Government Printer. (Successor to Bautoland gazette.)

Great Britain (United Kingdom). Gazette. 1665-present. Oxford Gazette (1996-1666); London Gazette (1666-present). Oxford (1665-1666); London (1666-present): His/Her Majesty's Stationery Office from 1903. Online at <http://www.gazettes.online.co.uk>; as of September 2005, gazettes since 1900 are available.

Great Britain (United Kingdom). High Commissioner for Basutoland, the Bechuanaland Protectorate and Swaziland. Gazette. 1910?-1963. Official Gazette of the High Commissioner for Basutoland, the Bechuanaland Protectorate and Swaziland. Pretorio: Government Printer. (Successor to South African gazette; succeeded by Basutoland gazette.)

South Africa. Gazette. 1901-1909. Official Gazette of the High Commissioner for South Africa. Pretoria: Government Printer. (Successsor to Cape of Good Hope gazette; succeeded by Great Britain, High Commissioner's gazette.)

--Publications of monetary authorities:

Central Bank of Lesotho. Annual report. 1982-present. Annual Report for ... (1982-2001); Annual Report (2002-present). Maseru: Central Bank of Lesotho.

Central Bank of Lesotho. Bulletin. 1982-present. Quarterly Bulletin. Maseru: Central Bank of Lesotho.

Lesotho Monetary Authority. Annual report. 1980-1981. Annual Report. Maseru: Lesotho Monetary Authority.

South African Reserve Bank. Annual report. 1920/1921-present. Report of the First [etc.] Ordinary General Meeting (1920/1921-1981/1982); Report of the Sixty-Second [etc.] Ordinary General Meeting of Stockholders (1982/1983-1986/1987); Report of the Sixty-Eighth [etc.] Ordinary General Meeting of Shareholders (1987/1988-present). Pretoria: South African Reserve Bank. (Some years also in Afrikaans.)

South African Reserve Bank. Bulletin. 1946-present. Quarterly Bulletin of Statistics / Statistiese Kwartaalblad (1946-1965); Quarterly Bulletin / Kwartaalblad (1966-1999); Quarterly Bulletin (no Afrikaans text) (1999-pressent). Pretoria: South African Reserve Bank.

South African Reserve Bank. Economic report. 1960/1961-present (annual). Annual Economic Report. Pretoria: South African Reserve Bank.

--Web site of the current monetary authority (viewed 20 September 2005):

<http://www.centralbank.org.ls>

--Other publications or Web sites:

South Africa. Official yearbook. 1917-1960, 1974-present. Union Office of Census and Statistics (1917-1949); Bureau of Census and Statistics (1950-1960): Department of Information (1974-1993); South African Communication Service (1994-present). Official Year Book of the Union (1917-1918); Official Year Book of the Union and of Basutoland, Bechuanaland Protectorate and Swaziland (1919-1960); South Africa 1974 [etc.]: Official Yearbook of the Republic of South Africa (1974-1993); South Africa Yearbook (1994-present). Pretoria: Government Printing and Stationery Office (1917-1960); South African State Department of Information (1974-1993); South African Communication Service (1994-present).

Main secondary sources:

Arndt, E[rnst] H[einrich] D[aniel]. 1928. Banking and Currency Development in South Africa (1652-1927) with an Appendix on the Rise of Savings Banking in South Africa. Cape Town: Juta and Company. (Little direct information on Lesotho, but quite detailed on South Africa, to which Lesotho has long been connected monetarily.)

Chalmers, [Sir] Robert. 1893. A History of Currency in the British Colonies. London: Eyre and Spottiswoode for Her Majesty's Stationery Office.

Collings, Francis d'A., and others. 1978. "The Rand and the Monetary Systems of Botswana, Lesotho and Swaziland." Journal of Modern African Studies, v. 16, no. 1, March: 97-121.

De Kock, Gerhard [Petrus Christiaan]. 1954. A History of the South African Reserve Bank (1920-1954). Pretoria: J. L. van Schalk.

Crossley, [Sir] Julian [Stanley], and John Blandford. 1975. The DCO Story: A History of Banking in Many Countries 1925-71. London: Barclays Bank International. (Concerns Barclays Bank Dominion, Colonial and Overseas.)

Henry, J[ames] A., and H. A. Siepmann. 1963. The First Hundred Years of the Standard Bank. London: Oxford University Press. (The Standard Bank operated widely in Africa.)

IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)

Maruping, A. M. 1989. "Some Thoughts on Some Options Open to Lesotho in the Rationalisation of the Financial Infrastructure and Its Functioning." Paper, Central Bank of Lesotho, November, viewed March 2003, <http://www.centralbank.org.ls/publications/paper_3.htm>.

Monetary authorities: Lesotho

Exchange rate arrangements: Lesotho