TRALAC - Trade Law Centre

New Industrial Expansion to Create 18,000 Jobs, Thanks to AGOA

Friday, 30 May 2003

Source: Mopheme / The Survivor (Maseru)

Employment rate in the textile and clothing industry has risen by 36 percent from 29,000 to 45,000. The Lesotho Fancy Garments Group's new factory at the new Mohale's Hoek Industrial Estate will generate 18,000 new jobs when completed.

While Foreign direct investment flow into the African continent is declining, Lesotho has emerged as one of the top four in sub-regional group of countries that have experienced heightened levels of inward investment flows.

Investors are reported to be coming into Lesotho not only from the traditional target areas of the Far East and South Africa, but also from the United States of America, India, Australia and Pakistan.

"All these potential investors intend to manufacture apparel for export to the United states of America, mainly due to Lesotho's widely publicized reputation as Africa's leading garment exporter to the United States of America," said the Chief Executive of the Lesotho National Development Corporation (LNDC), Sophia Mohapi at the sod-turning ceremony for the Mohale's Hoek Industrial estate and the construction of the Lesotho Fancy Garments Project on May 23, 2003.

Mohapi said Lesotho's success in attracting investments was further demonstrated by the growing of the portfolio of operating countries. Over 60 active companies in the manufacturing sector with a workforce of close 45,000 are in operation in the country.

"Manufacturing activities are concentrated mainly in the clothing, textiles and footwear sectors. Due to their labour intensive nature, these sectors absorb a larger percentage of the labour force than any others. This constitutes a significant reduction in the growing unemployment situation. Eighty (80) percent of the industrial labour force comprises female employees, indicating a clear emergence of women bread winners," the Chief Executive of the LNDC stated.

The high productivity levels of Lesotho's labour force, according to Mohapi, contributed to the unprecedented growth performance registered by the clothing sector since the advent of the African Growth and Opportunity Act (AGOA) which afforded Lesotho-made products duty and quota-free access into the United States market.

"However competition is very high and in order to retain the top position, further improvements in the overall investment incentive regime are necessary to enhanceLesotho's competitiveness. The high demand for factory buildings to accommodate expansions and new projects is a requirement that needs to be afforded the highest priority to ensure successful implementation of those projects," she stated.

Lesotho's Prime Minister Pakalitha Mosisili echoed the sentiments of the LNDC Chief Executive by stating that, since the certification of AGOA, thirteen new companies have established operations in Lesotho, "resulting in a 36 percent employment growth from 29,000 to approximately 45, 000."

"The demand for Lesotho's garment products survived the recessionary conditions in the United States as consequence of the September 11 events. Currently, Lesotho ranks among the top ten exporters of garments into the United States through AGOA, outranking Madagascar, Mauritius and South Africa," Mosisili added.

The Prime Minister indicated that Lesotho's continuous prominence as one of Africa's leading garment exporters to the United States was receiving world-wide recognition and the publicity has generated renewed focus on Lesotho as a "fertile ground for investment, especially those in the textile and clothing sector."

However, Mosisili indicated that while the textile and clothing sectors were the best export performer and largest contributor to employment, diversification into other more value-added sectors such as assembly and manufacture of electronics, as well as other labour intensive industries, would also continue to be of paramount importance.

Lesotho Fancy Garments Project has the potential of creating 8,000 new jobs and additional investment flow of about M264 million. The 8,000 square metres of factory space was financed entirely by LNDC's internal resources to the tune of about M15.60 million. The Lesotho Fancy Garments Group intends to expand the current 8,000 square metres building to 40, 000 square metres using their own financial resources.

Since Lesotho's textile and clothing industry was certified by AGOA in the last two years by the United States government, statistics issued by the United States Customs authorities during the first half of 2002 placed Lesotho as the leading garment exporter in sub-Saharan Africa at US$143 million worth of apparel products compared to US$86 million for the first six months of 2001.