(3 Minutes Read)
The Lesotho Electricity Company (LEC) is currently in a critical financial situation, with its liabilities surpassing its assets by M98.6 million, as revealed in an external audit report. The report indicated that LEC’s cash reserves have dropped by M145.8 million, jeopardising the country’s power supply project.
At present, LEC is dependent on electricity imports from South Africa’s Eskom and Mozambique’s EDM due to the closure of the Muela Hydropower Station, which usually generates 72 megawatts for LEC. This station has been offline for maintenance since October 1, 2024, and is expected to remain so until the end of the month.
Acting Minister of Energy, Mohlomi Moleko, attributed LEC’s financial troubles to alleged severe financial mismanagement, governance issues, and low energy tariffs. He stated that LEC now relies on government bailouts, with a recent injection of M300 million to facilitate electricity purchases.
Moleko emphasised that external audit reports reveal significant governance failures, fraudulent practices, and operational inefficiencies threatening both the company and the national power supply. He noted that LEC has consistently failed to produce accurate financial statements during audits. The external report pointed out LEC’s non-compliance with International Financial Reporting Standards (IFRS), leading to a disclaimer due to unverifiable accounts. It also indicated a failure to follow corporate governance policies, including the King IV Code, and reliance on manual financial entries without proper documentation, raising the risk of fraud.
Moleko highlighted that LEC’s financial struggles are worsened by its practice of buying electricity at high prices from Eskom and EDM, then selling it at lower rates, resulting in substantial losses. He called for an urgent reassessment of electricity tariffs to ensure financial viability. To tackle these issues, the Ministry of Energy is reviewing the Energy Bill, which will propose sustainable tariff increases and establish criteria for electricity subsidies aimed at vulnerable populations. He stressed that LEC has reached a critical point where it can no longer afford to purchase electricity or cover operational costs.
Moleko pointed to the high electricity costs from Eskom and EDM as the root cause of the problem, emphasising the need for tariffs that align more closely with South Africa’s rates. He also criticised LEC for inefficiencies in service delivery, slow responses to technical issues, and failure to maintain essential infrastructure, all of which heighten the risk of system failures. Additionally, he addressed allegations of unfair labour practices within LEC, including wrongful terminations and favoritism in hiring. He claimed that the company has been influenced by political interests and assured that the government is actively working to restore effective management.
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To facilitate investigations, the entire LEC executive has been suspended for three months. Those suspended include the Managing Director and several department heads. LEC Board Chairperson Ntsie Maphathe, who is also acting as the MD, stated that appropriate actions would be taken against anyone found guilty of fraud or financial mismanagement, with penalties varying by case severity. However, LEC has not disclosed details about its current electricity purchases from Eskom and EDM, related costs, or selling prices to consumers to substantiate its claims of financial losses and the need for tariff increases.
