German solar company sues assets of tiny kingdom of Lesotho

A German solar company is stepping up efforts to seize assets in Lesotho as it sues the tiny mountain kingdom for damages after reneging on its contract to build a power plant.

Frazer Solar has started to seize Lesotho’s assets abroad to demand 50 million euros in contractual damages.

It has already taken control of the charges Lesotho collects on South Africa’s water and electricity supplies, after a US court gave it the green light last month to employ tactics similar to those used by creditors to drive out defaulting countries.

International asset seizures are increasingly a part of the enforcement of contracts against governments, including in Africa. Earlier this year, a construction company seized an international bank account of the Republic of Congo’s state-owned oil group over a contractual dispute with the government.

Lesotho, one of the poorest countries in southern Africa, denied an “exceptional opportunity” to acquire renewable energy assets, including a 20 megawatt solar power plant, when it abandoned a deal to finance the project in 2018, said Frazer Solar. This despite the approval of the Prime Minister’s office at the time, he added. A South African arbitrator said this year the company is expected to have around half of the 100 million euros in damages claimed.

Moeketsi Majoro, the Prime Minister of Lesotho, said he was not aware of Frazer Solar’s claim for damages until it was published in South African newspapers. “Lesotho’s properties in Lesotho and abroad are protected and we do not believe that the action they are proposing will be successful,” Majoro said last month.

But Frazer Solar said he informed the government more than two dozen times about his lawsuit and the seizures. The group also decided to seize the Lesotho shares in the Mauritius-based West Indian Ocean Cable Company, one of Africa’s largest internet infrastructure providers.

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For Lesotho, which has few major industries and a small tax base, foreclosures are a big blow. Public spending represents half of the country’s gross domestic product. More than half of the 2 million inhabitants are subsistence farmers and many people are forced to find work across the border in South Africa. Remittances are equivalent to about a fifth of GDP.

The collapse of the Frazer Solar project is also linked to the legacy of political instability in Lesotho, where institutions have been weakened by a history of corruption and fragile coalition governments.

The arbitration concluded that the deal failed because Majoro, then Lesotho’s finance minister, was in favor of a competing renewable energy project backed by Chinese investors.

The case “was left unanswered by the government of Lesotho”, which did not attend the proceedings, he added. The prime minister did not respond to a request for comment.

Majoro took power last year after octogenarian Tom Thabane resigned following a police investigation into the murder of his ex-wife. Thabane denies any wrongdoing. Thabane’s post as prime minister has been marred by scandals over alleged looting of public markets. Thabane has always denied corruption.

Frazer Solar “skipped a lot of steps – they also had a role to play in this matter,” said Kanono Thabane, managing director of Arbitrage, a renewable energy company in Lesotho.

The German company said it adhered to Lesotho government guidelines on approving the deal “at every stage leading up to the signing of the contract” and that it “was provided by the prime minister’s office that the project had received all the necessary approvals “.

About Norma Wade

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