TRALAC - Trade Law Centre

Textile Industry Provides Skein of Jobs

Monday, 18 August 2003

Source: Business Report

While South Africa has shunned the Asian low-wage path to development through textile and garment manufacture, Lesotho is embracing it wholeheartedly.

It's becoming Africa's Singapore or Bangladesh, says Luigi Malvestio, the director of Taiwanese garment manufacturer Lesotho Fancy Garments Group in Maseru.

Taiwanese investors - mostly in the rag trade - already employ between one-fifth and one-quarter of Lesotho's workforce.

Malvestio told an UN Conference on Trade and Development (Unctad) earlier this year that with the right government policies and investor decisions, the textile industry could expand its labour force to 1 million in a few years - employing nearly half of Lesotho's population.

Already Lesotho is the largest exporter in sub-Saharan Africa to the US under the African Growth and Opportunity Act (Agoa), which gives African exporters preferential access to the US, especially for textiles. Lesotho is producing about half of the garments sold to the US from sub-Saharan Africa.

Nearly 3 million pairs of jeans or chinos and even more T-shirts and other knitted garments are being manufactured a month, mainly in Taiwanese factories in Lesotho, destined for famous US chainstores such as Gap, Walmart, Target and Sears Roebuck, or bearing labels such as Levi's.

Though there are Taiwanese garment factories in South Africa, most investors say they prefer Lesotho for three main reasons.

The labour unions are much less aggressive and, officialdom is much more helpful about providing investors with work permits to bring in Taiwanese.

Thirdly, Lesotho is classified as a least developed country, so garment manufacturers based there are allowed to source their fabric from anywhere in the world and still enjoy duty-free access to the US under Agoa.

In South Africa manufacturers have to source higher-priced fabric from the US or from Africa.

In about 60 Taiwanese factories in Lesotho, about 50 000 Basotho are earning an average of R600 to R900 a month - about the same as a South African domestic worker. But at least they have jobs.

Even though many of the Taiwanese entrepreneurs lost their factories and even their homes when they were targeted during political riots in 1991 and 1998, most have stayed on.

Like Tony Yen, the chairman of the Africa Taiwanese Chamber of Commerce, almost all live across the border in Ladybrand and commute to their Maseru factories.

Taiwan's chief representative in South Africa, Du Ling, says the big difference with Lesotho is that the government is far readier to give investors work permits to bring in skilled foreign workers.

"That's why many companies are moving to Lesotho," Ling says.

But if Lesotho is attracting investment now because of its favourable position under Agoa, that will end in September next year, when it will also have to source its fabric from the rest of Africa or from the US.

However, several major Taiwanese garment manufacturers are gearing themselves up for that change by embarking on what they call "vertical integration operations". In laymen's terms, they are building factories that will spin, weave and die denim and other fabrics, supplying their own garment factories with African fabric and thereby qualifying for Agoa benefits.

For example, Lesotho Fancy Garments Group, which already has an investment of nearly $7 million in Lesotho, employing over 3 000 workers and producing 1.38 million garments a month, is now planning to increase the investment to $50 million, mainly by building its own fabric mill.

The Nien-Shing Group, the largest investor in Lesotho, which concentrates on jeans and employs 7 000 people, is also going the vertical integration route by making its own denim.

It now has three factories, producing more than 1 million pairs of jeans a month. It is building a fourth and fifth, eventually boosting its total investment in Lesotho to $2 billion in an operation that will employ 15 000 people, says Eric Chao, who is in charge of the company's Lesotho garment operation.

In Malvestio's report to Unctad he said Lesotho was at the crossroads.

If it made the right decisions and went fully into vertical integration, it could reach $2 billion a year in exports to the US - up from the present $400 million - and create a total of 1 million jobs - half of Lesotho's population.

These workers and entrepreneurs would not only be directly involved in garment manufacture but also associated industries such as packaging.

"This will also open the door to the Basotho people to become entrepreneurs as the large firms subcontract work to smaller businesses to make buttons and other accessories. That's how Bangladesh did it," he says.

He says the Lesotho government has already played a part by relaxing the granting of work and residence permits for foreign technicians, by cutting down on red tape for exporting samples, leasing land free or for big discounts, and allowing investors to open foreign exchange accounts to level out fluctuations in the exchange rate.

"I believe that the textile industry in Lesotho can create a Lesotho free of unemployment," he says. - Independent Foreign Service