Date first published: 16/06/2026
Key sectors: technology; renewables
Key risks: frustration of process; economic risks; business risks; political instability
Risk development
On 4 June Maseru signed an agreement with US company Convalt Energy to build the 1,200-megawatt (MW) Kobong Hydropower Plant and artificial intelligence (AI) Data Centre in Mokhotlong district. Worth a total of LSL98bln (US$6.2bln), this was the largest ever investment in the country, worth nearly 200 per cent of total GDP in Lesotho in 2025. The energy provided will significantly expand energy availability in the country, once completed, providing 1,200MW of hydro and 4,600MW of solar energy within the total planned energy portfolio.
Why it matters
The agreement is effectively a test trial of the economic viability of smaller states capitalising on the growing demand for data centres and associated energy production for AI companies. Maseru will seek to capitalise on its renewable energy potential to secure the investment, providing large amounts of energy to the economy and creating a model for future AI investment, tapping into a rapidly growing, globally strategic sector.
By pairing with renewable companies and creating an investment environment for AI companies, Maseru can turn the country into an energy exporter and reduce the cost of domestic energy. With the country currently importing energy from neighbouring South Africa and Mozambique, increases in energy will likely make the country a regional energy hub. Lower long-term energy costs will make investments into sectors like manufacturing and services more enticing, creating second and third-order effects in the long-term.
However, locals have raised concerns over the length of potential feasibility studies and environmental concerns, reflecting previous opposition seen in the development of Phases 1 and 2 of the Lesotho Highland Water Project. This precedent could expose the project to localised protests and wider civil society activity. Additionally, the scale of investment may increase the reliance on majority-private-owned energy assets, potentially heightening the government’s exposure to undue influence and external pressure.
Background
Lesotho’s energy production, entirely driven by renewables, fails to meet national demand. This has led to energy import deals with neighbouring South Africa and Mozambique. Alongside energy imports, disruptions to the textile sector due to US tariffs in Q1 2025 and falls in global diamond demands have slowed down economic performance. With two of the largest sectors facing economic trouble, creating issues with labour unions, reducing operating costs and improving conditions for further foreign investment will remain key priorities for Maseru.
Lesotho has faced previous setbacks to investment programmes for the country. Lingering political stability risks linked with military involvement in the political space and political polarisation make the political space potentially volatile. Reports of financial mismanagement, including a 13 June audit by the Public Accounts Committee that found LSL6.58bln (US$407.5m) in unreported finances between 2022 and 2024 also raise concerns of corruption and management quality over the project. Financial opacity and political instability will pose longer-term concerns for investors.
Risk outlook
The project will likely face implementation delays due to weak regulatory enforcement, lengthy feasibility studies and construction delays, similar issues seen with other major energy infrastructure projects. Additionally, construction to expand grid capacity to incorporate potential energy production will also create barriers to project completion.
While the government may prioritise and expedite approvals for Convalt Energy and associated domestic partners, given the scale of the investment, this could increase governance and process risks over time. As a result, frustration of process risks will likely be high in the medium to long term.