MASERU – Lesotho is sitting on a time bomb, with the textile industry, the leading private sector employer, currently in the hands of the Foreign Direct Investors (FDI) while not much is being done to stimulate domestic participation in the industry.
This is according to the Managing Director of Afri-Expo Textiles Teboho Kobeli, who further warned that the FDI dominance means more money is lost to the foreign world. Afri-Expo is a privately held, 100 percent Basotho-owned textile manufacturing company. The company is the only local manufacturer that has taken a bold step to venture into the textile industry with specific focus to export market.
The company is a CTM (cut, trim and make) operation currently producing for the SADC market. While FDI is important for the country, Mr Kobeli said more efforts should be directed towards encouraging and capacitating more Basotho to participate in the industry to bridge the gap that might arise if foreign investors were to leave.
In Lesotho, the economy depends for growth, employment and export revenues on a manufacturing sector that is almost entirely driven by export oriented FDI in the apparel industry. But such investment is traditionally “footloose” and could relocate if trade privileges were to be phased out.
“We are sitting on a time bomb here. The sector is totally in the hands of the FDI. They just come here, take the money and leave without even a single domestic investment,” Kobeli said on Monday during round table discussions that were organised by the Ministry of Small Business Development, Cooperatives and Marketing.
The discussions were aimed at gathering views and opinions as the country moves towards the development of the small businesses policy. The policy will subsequently turn into a law that regulates the Micro, Small and Medium Enterprise (MSME) industry. In his contribution, Kobeli further showed that procurement processes in the apparel industry are also not clear and need to be looked into.
“There is a lot we can do in the sector but we need a political will. More Basotho should be encouraged to participate because it is frustrating to see money that could otherwise be circulating in the country, going elsewhere for so many years. I am a living testimony that Basotho can succeed in the industry with enough support.
“There is potential to indigenise the sector,” he added. During the discussions, issues of skills development and access to finance were highlighted as major challenges prohibiting local players to jump on to the apparel industry.
“Skills development is key. We have to look at it holistically. Let us effectively address these issues and that of access to finance. Furthermore, these big businesses should be forced to source some material locally to boost domestic participation,” said Chaba Mokuku from the Delivery Unit in the Prime Minister’s Office.
The office has been tasked to work hand in hand with the Ministry of Small Business Development, Cooperatives and Marketing and other stakeholders to develop the small business policy.
Lesotho is one of the African nations benefiting from the African Growth and Opportunity Act (AGOA), a trade pact signed in 2000 allowing at least 6 000 products from 38 sub-Saharan countries to enter the US market duty free. About 80 percent of the country’s textiles and garment exports go to the United States.
The textile and apparel industry in Lesotho grew from having just a handful of factories in the 1990s to becoming the largest private sector employer, providing over 40 000 jobs and benefiting around 13 percent of the country’s population, according to the World Bank.
Between 2001 and 2004, textile and apparel exports from Lesotho to the United States increased from US$140 million (M6.3 billion) to $450 million, representing a 22 percent increase.
The foreign investment that poured into Lesotho during this time facilitated structural transformation and boosted the long-term competitiveness of the sector.
The manufacturing sector grew by 34 percent between 2014 and 2019, owing largely to a tripling of textile and apparel exports to South Africa, which has helped offset the decline in exports to the United States.
The country is facing a tough fiscal outlook as the Southern African Customs Union (SACU) transfers, private investments and exports are declining.