Lesotho is an agricultural country, with modest industrial, tourism and labor-remittance incomes. Its economic policy is closely tied to that of South Africa and the South African Rand is accepted as legal tender. Remittances from miners employed in South Africa plunged by half between 1990 and 1996. As 35% of male wage earners are employed in South Africa, 54% of households in Lesotho are headed by women. There is an illicit but thriving trade in marijuana grown in Lesotho for sale in South Africa. Land is controlled by the Chiefs of the Kingdom and cannot be privately owned. Textile/garment and agro-industrial enterprises dominate the industrial sector and tend to be state-owned, although privatization has increased. Manufacturing and construction businesses, however, are mostly privately owned.
Future economic growth is tied to the massive Lesotho Highlands Water Project (LHWP) completed in 1998. The project captures, stores, and transfers the headwaters of the Orange River system to industry clustered around Johannesburg, South Africa. Ancillary dams provide electricity.
Civil unrest in 1998 destroyed 80% of the commercial infrastructure in Maseru and two other towns. GDP was down by 3.6% in 1998, but was up to 2.6% in 2001. Lesotho has a large trade deficit, and is a recipient of aid from the World Bank and Western countries. In 2001, the IMF approved a $32-million Poverty Reduction and Growth Facility program for Lesotho.