We are not maximizing on AGOA benefit: Shelile

RETHABILE MOHONO

MASERU – Lesotho experienced a 10 percent decline in its clothing exports to the United States of America (US) under the African Growth and Opportunity Act (AGOA).  Additionally, four years ago, it lost its position as the foremost textile exporter in the sub-Saharan Africa. This is according to Mokhethi Shelile, the Minister of Trade, Industry, Business Development and Tourism. He was speaking during the post budget gala dinner  on Wednesday this week.

AGOA, which is a component of US trade legislation, grants specific privileges to Sub-Saharan African beneficiary countries by allowing them special access to the American market for their exports. Although most products that are eligible under the US Generalized System of Preferences (GSP) also qualify under AGOA, the coverage provided by AGOA is considerably broader.

AGOA is currently the only preferential market access arrangement that grants qualifying Sub-Saharan African countries duty-free access to the US market for various products, including textiles, clothing, motor vehicles, agricultural products, and more. Over the years Lesotho, which has been very successful in exporting garments to the United States, has experienced fluctuations in its exports under AGOA. Lesotho is one of 35 Sub-Saharan African countries that benefit from preferential access to the United States market through AGOA.

According to reports by AGOA, about 6,700 products from Lesotho enjoy duty-free status when imported into the US. These preferences are currently available until end September 2025, unless AGOA legislation is extended or is replaced by another arrangement beyond that date.

Lesotho’s preferential market access to the United States includes: 39 percent duty-free under general US tariff rules (MFN – Normal Tariff Relations), 46 percent duty-free under AGOA/GSP general preferences, and 12 percent duty-free under AGOA’s textile provisions. However, over the years Lesotho has enjoyed high but gradually declining exports to the United States under AGOA. In 2015, Lesotho’s exports under AGOA were over US$299.3 million which is equivalent  to M5,679,846,030 billion, which decreased to about US$289.1 million (M5,495,791,000 billion) in 2017 and till today the graph keeps going down.

Shelile said that the textile sector in Lesotho requires rejuvenation in order to thrive once again. “Lots of jobs have been lost in the textile industry over the years, thus, we are embarking in Textile Revitalization Programme, because we want to do it differently,” he said. He added that there has been a prevailing notion that Americans are purchasing less since the onset of COVID-19. Nevertheless, he emphasized that they have now uncovered evidence to refute this claim.

“The fact is Americans continue to purchase clothing, with several countries, including Ethiopia, Kenya, and Madagascar, experiencing significant increases in exports to the US in 2021/2022. Ethiopia saw a 33 percent increase, Kenya 21 percent, and Madagascar 43 percent,” he said. However, he said Lesotho exports decreased by 10%.

Shelile said Lesotho held the top position as a textile exporter four years ago but, unfortunately, it has since lost that ranking. “We currently on number three and that indicates that we are not putting in enough effort,”  he said adding that Ethiopia managed to achieve an increase even without AGOA , since it was removed from it, but still managed to obtain growth. “The issue with Lesotho lies in their focus on simple tasks like cutting, sewing, and shipping products, and they need to introduce the concept of Free on Board (FOB) to bring about transformation,” he said explaining Free on Board as doing everything from scratch, from designing, cutting, sowing to shipping.

Through FOB, he said Lesotho will receive the entire sum of money, unlike the current situation where Taiwan receives approximately 60 percent, while Lesotho only receives funds for labor, electricity, and transportation. Nevertheless, he emphasized that the transformation necessitates financial resources. During the Budget Speech Dr Ret’selisitsoe  Matlanyane  said the textile and apparel sector is a cornerstone of Lesotho’s economy, accounting for one-third of GDP and 43 percent exports in 2021, and employing over 40,000 workforce.

“Plans to further bolster employment include the creation of 8,000 to 10,000 new jobs by 2024-2025, facilitated by the completion of 16 factory shells in Ha Belo and enhancements to laundry facilities,” she said. Additionally, the sector’s growth initiatives, such as supporting FOB operations, are expected to generate an additional 5,000 jobs through the establishment of two new factories in 2024.