- African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/Southern Africa: Textile Industries in Turmoil

Southern Africa: Textile Industries in Turmoil

Published date:
Monday, 24 January 2005

A few years ago, the tiny kingdom of Lesotho appeared to have a lot on offer for investors: cheap labour, generous tax incentives and proximity to the regional powerhouse, South Africa.

Textile manufacturers certainly seemed to like what they saw.

LesothoTaiwanese entrepreneurs started arriving in Lesotho in 2000. By investing in the country, they were also able to take advantage of the African Growth and Opportunity Act (AGOA). This U.S. programme was set up to allow duty-free access to the American market for a wide selection of exports from countries in sub-Saharan Africa that met certain conditions, such as respect for human rights and the rule of law.

After the Taiwanese, came Chinese, Mauritian and Malaysian textile firms.

By 2003, Lesotho had become a major textile manufacturer in Africa, producing 31 percent of textiles exported to the United States under AGOA. According to official statistics, some 50,000 people depended on Lesotho's textile industry for their livelihood in 2004, compared to 20,000 two years before.

During a four-day visit to Lesotho in December 2004, U.S. Trade Representative Robert Zoellick told journalists that his country had "a great respect for what Lesotho is accomplishing".

But even as Zoellick was lavishing praise on the country's textile sector, its prospects looked grim.

Towards the end of last year, six textile factories shut down - leaving 6,650 employees without work. Enraged union leader Billy Macaefa blamed the closures on the expiry of the Multi-Fibre Agreement (MFA), which was introduced by the World Trade Organisation (WTO) about 30 years ago.

The initial aim of the MFA was to protect the textile industries of developed nations which were facing competition from low-cost producers in poorer states. Thanks to the MFA, nations were allowed to impose quotas on textile imports; this gave countries like Lesotho the proverbial "foot in the door" in markets that might otherwise have been dominated by manufacturing behemoths such as China.

The MFA expired on Jan. 1.

A WTO study released in September last year showed that China and India would probably come to dominate about 80 percent of the global textile market in a post-MFA era, while the remaining 20 percent would be shared by the rest of the world.

Lesotho still has the advantage of duty-free access to U.S. markets under AGOA, (other producers are subject to tariffs). However, the six company owners who closed shop last year clearly believed that the low wages, economies of scale and efficient engineering of factories in China and India would eventually crowd them out of the market.

In a new report entitled 'Rags to Riches to Rags', the United Kingdom-based Christian Aid quotes statistics indicating that 27 million workers around the world could lose their jobs as a result of the MFA's expiry.

Across Lesotho's border with South Africa, the situation is scarcely better. Some 300,000 textile workers in South Africa have lost their jobs in the past two years - this due to the influx of Chinese goods.

"We need some sort of quota placed on China. It will be a short-term solution, but it will give the textile industry a breathing space to re-organise itself," Walter Simeoni, president of the South African Textile Federation, told IPS.

"Chinese clothing now represents 86 percent of the total garments imported into South Africa. Items like towels, blankets and curtains represent 60 percent. All this was achieved within the past three years," he added.

Simeoni rejects the argument that slapping quotas on Chinese textile imports would violate WTO rules.

"Brazil, Turkey and the United States have introduced some quotas on some of their products. The EU (European Union) is also looking at it," he notes. "I think the (South African) authorities have not been convinced of the urgency of the problem. And, I think they are reluctant to upset the Chinese." This, adds Simeoni, stems from the fact that China supported the struggle to end apartheid in South Africa.

Currency fluctuations have worsened the crisis in the textile industry. In recent months, the South African rand has strengthened from the historic low it reached in December 2001, when one dollar traded for 13.85 rand. The dollar is now around the six rand mark.

"No textile firm in the world can compete in an environment where the currency appreciated against the U.S. dollar and the Chinese currency by 30 percent in 2002 and a further 25 percent between January 2003 and October 2003," says Simeoni.

"In fact, all our competitors in the East depreciated their currency...against the rand, as they linked themselves to the U.S. dollar in order to stay competitive. This is one of the reasons they create jobs, while we destroy them," he notes. An exchange rate of nine rand to the dollar is apparently needed for South African textile exports to regain their competitive edge.

Manufacturers also complain that labour costs in the country are pricing them out of the market.

Simeoni claims that monthly salaries for the industry have increased from an average of about 215 dollars per month in January 2002 (excluding overtime and shift allowances) to 500 dollars in September last year. South Africa's competitors in the Far East, he adds, pay between 40 and 100 dollars per month.

Christian Aid says WTO intervention is needed to prevent the textile industries in several developing countries from being gutted.

"The scrapping of the MFA was undertaken without proper weight being given to the impact on those people most likely to be affected. Changes in global trade policies, especially those as seismic as the MFA phase-out, should put the interests of poor people first - rather than simply aiming to liberalise markets at any cost," said Andrew Pendleton, Christian Aid's head of trade policy, in a statement.

Elsewhere in Africa, Mauritius, Uganda, Kenya and Madagascar are also bracing themselves to compete in an environment stripped of quota protections.

While some parts of the developing world will undoubtedly reap benefits from the expiry of the MFA, this is cold comfort to a continent struggling to find its place in global markets.

“AGOA Latest AGOA Trade Data currently available on

Click here to view a sector profile of Lesotho’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.

Other regularly updated trade statistics on include: (click each link to view)

  • AGOA-beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.

  • You are here: Home/News/Article/Southern Africa: Textile Industries in Turmoil