Lesotho – a small, landlocked country – is surrounded entirely by South Africa. Known as the Kingdom in the Sky, it is renowned for its mountainous landscapes, rich cultural heritage and historical significance. With a population of approximately 2 million people, the country stands out for its unique geography, being the only independent state in the world entirely above 1 000m in elevation.
Lesotho covers an area of about 30 355 km2 and its terrain is mostly mountainous, with the Maloti mountains running across the country. The Malotis’ highest peak – Thabana Ntlenyana – reaches 3 482m above sea level, the tallest mountain in Southern Africa.
Lesotho’s history is shaped by its strategic location and interactions with neighbouring tribes and colonial powers. The area now known as Lesotho was originally inhabited by the Basotho people, who established a powerful kingdom in the 19th century under the leadership of King Moshoeshoe I. The kingdom’s stronghold was primarily located in the mountainous region, which provided natural protection from invading forces.
During the colonial era, Lesotho was a British protectorate known as Basutoland. The British took control of the region in the mid-19th century, after a series of conflicts with Boer settlers from South Africa. Lesotho gained independence from the UK in 1966, becoming the Kingdom of Lesotho. However, the country’s post-independence history has been marked by political instability, including military coups and contested elections.
Lesotho is a constitutional monarchy, with a king serving as the head of state. The current king, Letsie III, ascended the throne in 1996 when his father, King Moshoeshoe II, was killed in a car accident after his return from exile.
The country has a parliamentary democracy, with Prime Minister Sam Matekane as the head of government. Despite several attempts at democratic reforms, Lesotho continues to face political challenges, including a coup in 2014 and three national elections in five years.
Lesotho has a mixed economy. According to IMF estimates, real GDP saw modest growth in FY23/24 to 2.2%, up from 1.6% in the previous year. ‘In large part, this reflects accelerated construction from the Lesotho Highlands Water Project [LHWP]. However, a decline in competitiveness in the apparel sector and lower diamond prices have depressed exports.’
In operation since 2004, the LHWP provides water to approximately one-fifth of South Africa’s population.
‘The recently renegotiated water royalty rates under the treaty with South Africa on the LHWP-II represent an additional and significant source of revenue – with total royalties now projected at around 6.5% of GDP in FY24/25 (compared to 3.5% of GDP before), even with a scheduled outage in deliveries, rising to over 12.5% of GDP in FY25/26 and then settling at around 9.5% of GDP every year over the medium term,’ according to the IMF.
Despite its small size, Lesotho’s economy is influenced by a variety of sectors. While heavily dependent on remittances from workers employed in neighbouring South Africa, its manufacturing and agriculture sectors are among the most important, with Lesotho’s notable and rapidly growing diamond industry playing an increasingly crucial role.
Lesotho is rich in diamond deposits and its diamond sector has become a key player in the country’s economic development. The country’s diamonds are known for their high quality, particularly large, gem-quality stones, which are highly sought after globally.
Diamonds were first discovered in Lesotho in the early 1950s, when alluvial diamond mining began. The country’s diamond resources, however, are mainly located in kimberlite pipes, which are deep and require more advanced extraction techniques.
Lesotho currently has four operational diamond mines – Storm Mountain Diamonds’ Kao mine; Firestone Diamonds’ Liqhobong mine; and Mothae, formerly owned by Lucapa before selling its 70% stake to local company, Lephema Executive Transport. However, the largest (and the world’s highest diamond mine, at an elevation of 3 100m), is Letšeng, jointly owned by Gem Diamonds (70%) and the Lesotho government (30%).
The establishment of the Letšeng mine in the 1960s marked a turning point in Lesotho’s diamond sector. Located in the highlands of the country, Letšeng is known for producing large, high-quality diamonds, and it consistently ranks as one of the top diamond mines globally for the quality of its output.
The mine has yielded a variety of coloured diamonds, including rare pink and blue stones, but is best known for its Type IIa white diamonds. These exceptional diamonds, characterised by minimal or no impurities (a highly rare trait), command the highest price per carat globally.
The 603 ct Lesotho Promise, recovered at Letšeng in August 2006, is ranked in the top 20 of the world’s largest white diamonds on record. It sold for US$12.4 million in October of that year, and was subsequently polished into 26 D flawless and internally flawless diamonds.
However, the largest diamond ever to be recovered at Letšeng – and the fifth-largest gem-quality diamond ever found – is the 910 ct Lesotho Legend. This exceptional top-quality D colour, Type IIa rough diamond sold for US$40 million. In September 2024 alone, two Type II white diamonds were recovered – 126.21 ct and 212.91ct respectively – the latter being the thirteenth diamond greater than 100 ct recovered from the Letšeng in 2024.
The diamond sector in Lesotho plays an important role in the country’s economy, generating substantial revenue for the government through royalties and taxes. According to Mohlomi Moleko, Lesotho’s Minister of Natural Resources, mining contributes between 6% and 10% to GDP, and more than 3 000 people are employed in each of Lesotho’s four commercial diamond mines.
Yet while Lesotho’s diamond sector has brought significant economic benefits, the industry is highly dependent on global demand and prices, which can be volatile. Fluctuations in diamond prices can have a direct impact on the country’s economic stability and growth prospects. Furthermore, environmental concerns related to mining activities, such as the disruption of local ecosystems and water resources, are an ongoing issue.
Lesotho’s government has made some strides towards improving its infrastructure, governance and investment climate to attract more foreign investment and diversify the economy. In April 2024, for instance, the country hosted its inaugural Lesotho Mining Indaba Khotla in Maseru, under the theme ‘the future of mining in the global landscape’.
At 22%, diamonds are Lesotho’s second-biggest export, according to Trading Economics. The top spot in terms of exports goes to garments and textiles. Lesotho is among the top four producers of textiles and garments in Africa, and it has a well-established footwear industry.
The country benefits from preferential trade agreements with the US and the EU, such as the African Growth and Opportunity Act (AGOA), which provides duty-free access to US markets for goods produced in the country. Trading Economics notes that the US accounts for 35% of Lesotho exports, second to South Africa at 30%.
Yet President Donald Trump’s return to the White House has created uncertainty over the future of AGOA. ‘Ending the trade preference programme, which has consistently enjoyed bipartisan support in the US Congress, seems unlikely,’ according to an Agence Ecofin report in December. ‘However, the next US administration may choose to expand or restrict the programme based on its economic and strategic priorities.’
Agriculture, too, plays a significant role in Lesotho’s economy, providing food and income to about 80% of the population. The country produces crops such as maize, wheat and beans, and livestock farming is an important activity.
However, the country’s mountainous terrain limits the amount of arable land available and the agricultural sector faces numerous challenges. According to a Reliefweb report, ‘El Niño-induced conditions – including erratic rainfall patterns and prolonged dry spells – during the 2023/24 rainy season resulted in the lowest crop yields since the 2018/19 agricultural season, increasing reliance on markets and prompting households to deplete their food stocks atypically early’.
The Kingdom in the Sky certainly has challenges to overcome, including the need for economic diversification, infrastructure development, and socio-political stability. However, with continued investment in its most crucial sectors and strategic planning, the country can leverage its resources to build a more sustainable and prosperous future.
