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Who should and should not be bailed out?

OUR headline story this week reveals that the Lesotho National Development Corporation (LNDC) is mulling a M15 million bailout for Enrich Stores. The company closed two weeks ago due to what insiders say were bad business decisions by the management and board. In principle, we agree with the bailout. It is important to save troubled companies for the sake of jobs and the entire economy.

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Our point of departure is the absence of a cogent justification for the LNDC bailing out Enrich.
This is critical because Enrich is not the only locally-owned company that has shut down in recent months.

We can bet that in the same week that Enrich closed, some company somewhere in Lesotho shut its doors. Indeed, more have closed since then.
This country has a huge cemetery of companies. True, some succumbed to self-inflicted wounds. Others euthanised themselves due to mismanagement (Enrich could be one of those).

Yet some were victims of a tough economic environment and could not withstand the vagaries stacked against them. There is no doubt that Lesotho is a tough place for businesses.
Some have closed because the government failed to pay them on time.

We know from experience that while there is a push for youths to start businesses, the reality is that once they start they are on their own.
While there are obviously no incentives or help from the state, businesses also have to contend with hostile regulations and a treacherous business environment.
Sooner or later most will upend.

Yet we don’t hear calls for them to be bailed out. Nor has the LNDC jumped to their rescue.
Bear in mind we are not talking of companies that require M15 million to be revived. Many just need a few thousands of maloti to get back on their feet.
A lot are viable businesses that require only a little cash injection to get through rough patches.
Key questions arise.

Who should and should not be bailed out?
What makes Enrich an ideal candidate for a rescue package?
These are probably uncomfortable but critical questions that should be answered.

Clearly, it is not about saving jobs because bigger companies employing more people have been allowed to die. It surely has nothing to do with contributions to the economy because there is no evidence of Enrich being a mover and shaker.
It’s certainly not about empowering Basotho because many other Basotho have lost their businesses and have been left to either wallow in misery or pick up the pieces on their own.

It is therefore urgent for the LNDC and the government to explain why Enrich is being bailed out. Anything short of a clear explanation leaves room for toxic speculation.
The LNDC should state if it’s now part of its mission to bail out troubled companies.
The government should also say if such an intervention is now national policy.

We would be the first to applaud if this is the new thinking in the government and at the LNDC.
If that is the new direction then the rules and criteria should be clear because many companies are also in dire need of such help.

They are not asking for millions like Enrich but something modest to plug holes. The LNDC could have opened floodgates by throwing a lifeline to Enrich.
It is up to the corporation to now set the rules on who is rescued and who is allowed to sink.
Basotho will be watching.

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