Chapter two: Country background and context The era of relatively stable democracy: 2002–to date 65. Today, Lesotho is a relatively stable and liberal democracy. The four successive elections held since the return to multiparty democracy symbolise the deepening of the democratic dispensation. 66. The general acceptance of the new electoral model as inclusive and representative of all shades of political opinion has been one of the main achievements since 2002. This model also won Lesotho credibility regionally and internationally as a way of deepening democracy and ensuring political legitimacy. Key institutions of democracy are increasingly becoming vibrant, even if their capacity remains wanting. These include the three main arms of government (the executive, the legislature and the judiciary), political parties, civil society organisations (CSOs) and statutory watchdog institutions such as the Independent Electoral Commission (IEC), the Office of the Auditor General (OAG) and the Office of the Ombudsman. The media (print and electronic) has also become more vibrant and continuously keeps government in check. Local government structures have been revamped and restructured in order to provide an organic linkage between central and local governance and development efforts. 2.3 The economic context 67. Lesotho’s economy has historically been based on subsistence agriculture and remittances from migrant labour. However, this picture began to change slowly in the recent past as a result of declining agricultural output, mostly due to land degradation and low investment in the sector. Remittances from mine workers have also continued to reduce owing to restructuring of the sector as well as retrenchments resulting from the current global economic crisis. 68. Water is Lesotho’s most significant natural resource and is being exploited through the multibilliondollar Lesotho Highlands Water Project (LHWP). Initiated in 1986, the project is designed to capture, store and transfer water from the main Lesotho river systems to South Africa’s Free State and greater Johannesburg area, which has a large concentration of South Africa’s industry, population and agriculture. In addition, electricity is generated to meet Lesotho’s domestic demand, as well as for export to South Africa. Lesotho has generated approximately $24 million annually from the sale of electricity and water to South Africa. 69. Lesotho has taken advantage of the African Growth and Opportunity Act (AGOA). Under this arrangement, Lesotho’s textiles are allowed unfettered access to the United States (US) market. Consequently, in 2002, Lesotho recorded a 40 per cent increase in its commodity exports. While this export-led garment industry has been helpful in creating the needed jobs in the country, where unemployment is estimated at 40 per cent, its prospects are not encouraging. As the minister of finance and development planning pointed out in the 2009 budget speech, the global and regional economy has impacted negatively on Lesotho, and will continue to do so. Lesotho textile exports to the United States of America (USA) fell by 11 per cent between December 2007 and December 2008, and are continuing to fall. Furthermore, although Lesotho has been exporting textiles for the last 20 years, it has no institutions that maximise the benefits from this trade. Moreover, dependence on footloose investors may not be sustainable. 35