Over the past few months, headlines warning of an impending clampdown on “foreign-owned businesses” have caused understandable anxiety among investors and operators in Lesotho. Much of the public debate, however, has been shaped by half-understood rules, recycled media lists, and assumptions imported from other jurisdictions. The legal position is both narrower and stricter than many realise and it turns on who controls the business, not how much equity is held.
The legal trigger: reserved activities, not nationality alone
At the centre of the current enforcement drive is Regulation 34 of the Business Licensing and Registration Regulations, read together with Schedule 16. These provisions do not impose a general prohibition on foreign nationals trading in Lesotho. Instead, they reserve specific categories of economic activity exclusively for indigenous citizens.
Once an activity falls within the reserved list, the consequences are stark:
if any proprietor, shareholder, partner or director of the business is not an indigenous citizen, the relevant trading licence will simply run its course and will not be renewed on expiry. There is no minimum foreign shareholding threshold that is tolerated, and no “local participation percentage” that cures the defect.
This is why the oft-repeated idea that a foreign investor can “retain 70% or 80% and be safe” is legally misplaced. In reserved sectors, the test is binary, either the enterprise is wholly indigenous-controlled, or it is not.
Who qualifies as an indigenous citizen?
The regulations adopt a deliberately narrow definition. An indigenous citizen is a person whose lineage can be traced back at least three generations as citizens of Lesotho. Citizenship by registration or naturalisation, on its own, does not meet this standard.
This definition is central to enforcement and explains why some businesses that appear “local” on paper may still be non-compliant once ownership and control are examined closely.
Timing: why this matters now
Although the enabling Act and Regulations have been in force since 1 August 2022, Regulation 34 was always intended to be phased in. For several years, implementation lagged behind the law.
That period is now ending. The Ministry has publicly indicated that it is moving toward full enforcement, with recent reports suggesting that from January 2026, licences in reserved sectors will no longer be issued or renewed where the business is not indigenous-owned and controlled. In practice, the impact will be felt as existing licences reach their expiry dates.
It is not just about tuck shops
Public discussion has tended to focus on small retail outlets, particularly convenience and grocery stores. While these are indeed included, the reserved list is far broader than popular commentary suggests.
Schedule 16 extends to a range of activities that many foreign-owned enterprises participate in, including (among others):
- logistics, clearing and warehousing;
- business agents and brokers;
- cleaning services;
- printing and photocopying;
- certain installation and trade services;
- scrap metal operations; and
- retail pharmacies.
This breadth often comes as a surprise, particularly to service-sector businesses that do not regard themselves as “retail” in the ordinary sense.
Beware outdated lists and assumptions
Adding to the confusion is the circulation of outdated versions of Schedule 16. The 2021 amendment materially altered the scope of the reserved activities by, among other things:
- removing “motor dealers” from the list entirely;
- replacing the broad category of “retail sale in non-specialised stores” with the narrower concept of convenience and grocery stores; and
- confining pharmaceutical and medical goods to retail only, excluding wholesale trade.
Media summaries that still reflect the pre-2021 wording risk overstating or misstating the current legal position.
Joint ventures: a narrow escape hatch
The regulations do recognise a limited exception for joint ventures or partnerships with enterprises that are wholly owned by indigenous citizens. This is not, however, a loophole. Where such structures are found to be artificial, cosmetic, or designed purely to bypass the regulations, licences may be revoked notwithstanding formal compliance.
Control, substance, and economic reality matter.
What foreign investors should be doing now
For foreign investors and multinational groups, the immediate task is not panic. It is precision.
Every enterprise should conduct a line-by-line mapping of its actual business activities against the current version of Schedule 16, as amended in 2021. Any overlap with a reserved activity should be treated as a regulatory red flag, triggering early legal and commercial advice.
The key risk is not sudden closure, but silent non-renewal. Businesses that wait until a licence expires may find that restructuring options are already foreclosed.
In short, Lesotho’s licensing regime is not hostile to foreign investment as such but in reserved sectors, it is uncompromising. Understanding that distinction now may be the difference between continuity and forced exit later.