World Report

US free trade move offers unlimited access to Lesotho’s textile manufacturers

he industrial sector is gearing up to compete in the globalised economy in response to moves by developed countries to open up their markets to imports from Lesotho.
Industry contributes almost 40 per cent of the gross domestic product (GDP) and employs a quarter of the workforce. Future development of the manufacturing sector is seen as vital for bringing down the unemployment rate.
The key to developing industry has always been access to export markets: with a population not much higher than two million, Lesotho is too small to sustain a manufacturing sector on its own. Gaining a foothold in the overseas markets is all-important for boosting the economy.

Like most former colonies, Lesotho has enjoyed preferential trade access to markets in the European Union (EU) under the Lome Convention. “The EU member states have clearly come out to say that they are going to open up completely to the least-developed countries, in which category we are included,” says Mpho Malie, minister of industry, trade and marketing.

Malie
‘EU member states are opening up to the least developed countries’

However, quotas limit access to EU markets and Lesotho has to compete with other small developing countries.
The most significant move came in April last year, when the US government officially certified that Lesotho had met the requirements of the African Growth and Opportunities Act (AGOA); a trade initiative introduced by former US president Bill Clinton.

Washington’s decision goes significantly further towards an open market than might have been possible under any trade deal negotiated under the Lome Convention with the EU. In contrast to the pre-determined volume of exports set out under Lome, products made in Lesotho which are eligible under the terms of
the AGOA have unlimited access to US markets and are free of both excise duties and quotas on the volume of shipments.
The AGOA ruling applies specifically to clothing and textiles, for which Lesotho has established a growing presence in the US market. About a third of Lesotho’s exports are sold there, and 90 per cent of those sales are of jeans and T-shirts. Since last April, apparel and textile exports to the US from Lesotho have risen by nearly 40 per cent.

Lesotho was the fifth country in sub-Saharan Africa to qualify for AGOA status. To become eligible, the government had to convince Washington that it had implemented measures to conform with US import procedures, mainly to prevent the shipment of counterfeit goods – in other words, to ensure the products in question were actually made in Lesotho.
In reflection of its position as one of the least-developed countries in the region, the US is allowing Lesotho to export clothing made with some material from another country for the first four years of the eight-year deal. The Lesotho government has set the wheels in motion to comply with what it views as a unique marketing opportunity by sending customs officials to the US for training and being the first country to invite American AGOA training teams.

Lesotho has set great store by gaining entry into the AGOA scheme. “It provides the necessary tools to sustain long-term economic growth and allow the country to survive the competitive forces unleashed by globalisation,” says one senior official.
Minister of industry, trade and marketing Mpho Malie says that since the law was enacted the number of workers in the industry has risen from 17,000 in 1999 to the current level of 40,000.
In January, a delegation from the US visited Lesotho to explore opportunities, with a view to encouraging American businesses to invest in the region.

Lesotho’s qualification for AGOA – and the free access it implies to one of the richest markets in the world – has attracted interest already, particularly from investors in Asia interested in raising sales to the US.
Last year Taiwanese textile firm Nien Hsign started building a $100 million clothing factory outside Maseru, providing 5,000 jobs. It will be the largest denim mill in Africa when it opens in 2004, producing 200,000 metres of fabric a month.
The planned expansion of Moshoeshoe I International Airport in Maseru could generate significant foreign exchange earnings both for Lesotho itself and for the southern African region as a whole.