External affairs will always be dominated by Lesotho's relationship with the Republic of South Africa. Geography alone requires this domination as the country is surrounded on all sides by the Republic. Still poorly developed in transportation infrastructure, Lesotho has relied heavily on South African road and railway outlets. The Lesotho Highlands Water Project, negotiated in 1980 and officially signed in 1986, has drawn the two countries closer together. Diplomatic relations at the ambassadorial level were established in May 1992. During the South African apartheid era, sharp tensions were inevitable. This situation ended when the apartheid system was dismantled in 1994 with the election of Nelson Mandela to the South African presidency. Problems continue over cross-border cattle thefts and unresolved land claims in South Africa's Orange Free State.
In late 1995, South Africa announced a new policy of granting permanent residency rights to migrant workers. This policy change could have a very negative impact on Lesotho's revenue figures. The compulsory Lesotho Deferred Payment Scheme, set up in 1974, initially gave the Lesotho government access to 60% of migrant laborers' wages (this was reduced to 20% in 1990) in a general account deposited every month in Lesotho Bank. This money is then available for the government's short-term use until the worker returns. The scheme is currently under study, with the National Union of Miners calling for its abolition, and will in all likelihood be phased out in the near future, a further blow to Lesotho government revenues.
Lesotho is a member of the Southern African Development Community (SADC), the Southern African Customs Union (SACU), the United Nations, the Organization of African Unity, the Nonaligned Movement, and many other international organizations.