- African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/Lesotho makes AGOA work for textile industry

Lesotho makes AGOA work for textile industry

Lesotho makes AGOA work for textile industry
Published date:
Sunday, 10 August 2014

A factory in Maseru, the capital of Lesotho, is buzzing with activity.

On one side, men load box after box of ladies' hooded sweatshirts destined for the US. Elsewhere, hundreds of workers cut and sew cloth, iron the finished products and put them on hangers. Even the price tag and Walmart logo are included.

When the clothing got to the US, shops just had to hang them up and start to sell them, said David Cheng, managing director of TZICC Clothing Manufactures, which runs the factory.

The scene is common at clothing plants across Lesotho, a small, landlocked country that has taken advantage of a US trade agreement to build one of Africa's leading textile industries.

The growth of Lesotho's US exports, worth about $321-million (about R34-billion) last year, was made possible by the African Growth and Opportunity Act, or Agoa, a piece of legislation crafted under the presidency of Bill Clinton in 2000 and extended under his successor, George W Bush.

Aimed at boosting African trade by offering duty-free access to lucrative US markets, Lesotho is one of the best examples of Agoa's success. From a handful of factories in the 1990s, Lesotho now has 40 textile producers employing about 40000 people - the largest private sector employer in the country. John Kerry, US secretary of state, recently hailed Agoa as a key driver of trade with and investment in Africa.

"Whether it is cocoa and cashews from Ghana, textiles from Mauritius or petrochemical products from Angola, Agoa has served as a catalyst for greater trade and prosperity," he said.

But the Agoa initiative is due to expire next year, threatening a US-Africa economic relationship worth nearly $60-billion for businesses on both sides of the Atlantic. The renewal of Agoa was a priority as President Barack Obama brought nearly 50 African leaders to Washington this week for the first-ever US-Africa summit.

Although a renewal of Agoa is expected, the White House is pushing for broader measures to boost African trade. Obama said this week that although tariff preferences provided by Agoa were important, they alone were not sufficient to promote transformational growth in trade and investment.

"For beneficiary countries to be able to utilise Agoa to its fullest, this programme must be linked to a comprehensive, co-ordinated trade and investment capacity-building approach with clearly stated goals and benchmarks," he said.

African apparel exports to the US have surged from $264-million in 2001 to more than $900-million last year, but few other industries have taken advantage of the trade agreement to grow on such a scale.

Agoa-related trade is dominated by oil. Last year, $22-billion of the $27-billion exports to the US under the deal came from oil and gas, along with petroleum products and coal.

With the exception of South Africa, the continent's most industrialised country, which exports high-end goods to the US, including cars, the main beneficiaries of Agoa are oil-producing nations, notably Nigeria, Angola, Chad and Gabon.

Indeed, total Agoa imports have slipped from a high of $67-billion in 2008, partly because of a slowdown in the US economy, but also because of a fall in US imports of African oil and gas. US officials note that non-oil exports under Agoa have increased from less than $1-billion in 2001 to about $5-billion last year. But they cite constraints ranging from a dearth of infrastructure in many nations to productivity issues and a lack of skills that act as a brake on African trade. "Is there room for improvement? Absolutely," said a US trade official.

Lesotho offers a glimpse of where more could be achieved.

The creation of 40000 jobs - about the same as the kingdom's entire public sector employment - has been critical to the impoverished nation. But its garments industry has remained under the control of foreigners, mostly Taiwanese, who could pack up easily and move elsewhere if Washington did not renew the legislation.

Officials also believe Agoa has made Lesotho too dependent on the US. The country has largely failed to tap Europe, where it also enjoys duty-free access. "We are trying to look for a second buyer, but it is a bit difficult," said Cheng, who also chairs the Lesotho Textile Exporters' Association.

"We have tried Canada and Europe, but their orders are much smaller than those of the US."

Uncertainty about the time frame for renewing Agoa and key elements of the agreement have also hurt investment in new production facilities in Lesotho. That fear has continued to play on the minds of the industry, even though Agoa has enjoyed support from Democrat and Republican administrations since its inception.

Ricky Chang at Formosa Textile, a denim mill set up by Taiwan's Nien Hsing Group as part of a $150-million investment in Lesotho, said his company was committed to the country, but "if the environment changes we would have to adjust to it".

"We might scale down or relocate," he said.


Read related news articles

'Changing jeans sourcing scene has these countries coming up roses'

The sourcing landscape for denim jeans is slowly but certainly shifting, while overall U.S. blue denim apparel imports continue to decline. Imports of jeans fell 7.43 percent in the first two months of the year compared to the same period in 2020 to a value of $460.25 million, expanding on a 5.36 percent year-over-year falloff in January, according to the Commerce Department’s Office of Textiles & Apparel (OTEXA). Coming off...

09 April 2021

Lesotho: '45,000 textile jobs at severe risk'

With only about a week left, the United States government says it is "disheartened" by Lesotho's failure to address its human trafficking concerns. This puts the country on the brink, with the real risk of losing billions of maloti in funding under the second compact and about 45 000 textiles jobs facing serious jeopardy. The US had given Prime Minister Moeketsi Majoro's government a 1 February 2021 deadline to address an array of human...

28 January 2021

Kingdom of Lesotho must seize textile manufacturing crown

The country has the right skills in place — now it just needs co-ordination and capacity. The health and economic crisis brought on by Covid-19 has had a global economic effect. From disrupted supply chains to restrictions on the free movement of people and their skills, goods and capital, the world has had to adjust to a “new normal”. A question on the lips of those contemplating filling the void left by the forced rethink of the...

25 September 2020

Lesotho: Economy set to grow 3% thanks to AGOA

Lesotho is expected to register three percent economic growth in the current fiscal year. But the International Monetary Fund (IMF) has warned that the government needs to aggressively control spending and address the fragile political situation in the country. The warnings are part of the IMF findings which were released this week after an IMF staff team, led by Christine Dieterich, visited Maseru from 2 to 15 November 2017 for...

24 November 2017

'Letting down Lesotho'

For much of her childhood, Ntaoleng Moloi’s father was like a ghost. He missed birthdays and first days of school, family jokes and first snows. Months and then whole seasons passed without his presence. It felt, at times, like he was thousands of feet below the surface of her life, somewhere dark and unreachable.  That’s because, for much of the time, he was. Moloi’s father was a gold miner, and like many men of his generation in...

30 December 2016

Workers in Lesotho demonstrate to 'save AGOA'

An estimated 20,000 workers have taken part in demonstrations in Lesotho in a bid to end political instability that threatens the southern African nation's duty free access to the US through the African Growth and Opportunity Act (AGOA). The demonstrators are calling on the government to restore democracy and the rule of law after a coup in 2014. The US has already threatened Lesotho's access to AGOA if this does not happen, and the regional...

07 December 2016

Lesotho: 'The US finally did something right in Africa - and it's about to stop?'

For much of her childhood, Ntaoleng Moloi's father was like a ghost. He missed birthdays and first days of school, family jokes and first snows. Months and then whole seasons passed without his presence. It felt, at times, like he was thousands of feet below the surface of her life, somewhere dark and unreachable. That's because, for much of the time, he was. Moloi's father was a gold miner, and like many men of his generation in Lesotho -...

05 December 2016

Lesotho’s textile sector reaps big rewards from AGOA

The textiles and garments industry in Lesotho, exported at least $330 million worth of products to the U.S. last year, making it the country’s largest private-sector employer as the nation reaps big from the African and Growth and Opportunity Act (AGOA). The tiny Southern African nation is one of the African nations benefiting from the trade pact signed in 2000, allowing at least 6,000 products from 38 sub-Saharan African to enter the U.S....

09 November 2016

Lesotho: Bracing for the post-AGOA period

Next time you pick up sporting gear or a pair of jeans in a US mall, do check the label. It may have been made in Lesotho, a small, mountainous and land-locked country completely surrounded by South Africa, with a population of around two million. Lesotho is a beneficiary of the Africa Growth and Opportunity Act (AGOA), which allows over 6,400 products from eligible sub-Saharan African countries to enter the US market duty-free. The country...

14 October 2016

Why AGOA remains critical to Lesotho’s development

The US- Africa African Growth and Opportunity Act (AGOA) Forum, which took place from September 22-26, 2016, in Washington DC, USA, was an opportunity for both African countries and the US to reflect on the gains made under AGOA to date. This was especially important as indications point to the current iteration of AGOA being the last one ahead of a new trade dispensation between the US and Africa from 2025 onwards, punctuated by reciprocal...

03 October 2016

In Lesotho, evidence of US trade deal's success, and its limits

Most months, Mamoleboheng Mopooane’s paycheck passes through her hands like water. There are her children’s school fees and groceries, rent, winter jackets, and the open palms of unemployed relatives back home asking again and again if she can spare just a little something, anything, to help them get by. All of that is a lot to ask of the $100 she earns every month stitching seams into American bluejeans at a garment factory here, and...

11 September 2016

You are here: Home/News/Article/Lesotho makes AGOA work for textile industry