‘Govt fail­ing to lobby for AGOA’

Lesotho Times - - Jobs & Tenders -

LON­DON –– An es­ti­mated onethird of Le­sotho’s tex­tile and cloth­ing pro­duc­tion will be dec­i­mated if the African Growth and Op­por­tu­nity Act (AGOA) is not re­newed in Septem­ber, a se­nior South African tex­tile and cloth­ing sec­tor con­sul­tant has warned.

How­ever, Andy Salm, who works for mar­kets-based devel­op­ment or­gan­i­sa­tion Com­mark Trust, claims that the small land­locked coun­try – en­tirely sur­rounded by South Africa –– is fail­ing to lobby for an ex­ten­sion.

AGOA is a non­re­cip­ro­cal trade pref­er­ence pro­gram that pro­vides duty-free treat­ment to U.S. im­ports of cer­tain prod­ucts from el­i­gi­ble sub-sa­ha­ran African coun­tries.

This is de­spite Le­sotho be­ing the largest sub-sa­ha­ran African gar­ment ex­porter to the US, ac­count­ing for 30 per­cent by value and 28 per­cent by vol­ume of ex­ports from the re­gion to Amer­ica, ac­cord­ing to Le­sotho Tex­tile Ex­porters As­so­ci­a­tion (LTEA) fig­ures. It says 80 per­cent of the coun­try’s tex­tile and gar­ment ex­ports are Us-bound.

The For­mosa Tex­tiles Yarn Spin­ning Mill, based in the cap­i­tal Maseru, is one such key ex­porter, pro­duc­ing more than 1.3 mil­lion yards of denim fab­ric an­nu­ally and 900 tonnes of cot­ton and cot­ton blend yarns, ac­cord­ing to the LTEA.

With Le­sotho be­ing a low-in­come coun­try ranked 162 out of 187 on the United Na­tions Hu­man Devel­op­ment In­dex, Le­sotho work­ers earn an av­er­age US$570 an­nu­ally with around 42 per­cent of the eco­nom­i­cally-ac­tive pop­u­la­tion be­ing un­em­ployed. The em­ployee de­pen­dency ra­tio is around ten to one, says Mr Salm.

Le­sotho, a con­sti­tu­tional monar­chy, op­er­ates a com­plex po­lit­i­cal sys­tem com­bin­ing the elec­toral prin­ci­ples of first-past-the-post and pro­por­tional rep­re­sen­ta­tion, lead­ing to frag­ile coali­tion gov­ern­ments.

That trans­lates into prob­lems when de­vel­op­ing long-term, co­or­di­nated strate­gies. Le­sotho went to the polls on 28 Fe­bru­ary, and on 17 March Prime Min­is­ter Pakalitha Mo­sisili was sworn into of­fice hav­ing formed an­other coali­tion gov­ern­ment to lead the coun­try.

The po­lit­i­cal up­heaval puts into per­spec­tive why Le­sotho has put AGOA on the back­burner. Yet, Mr Salm says, or­ders de­mand at least four-month lead times and, with the dead­line loom­ing, the pos­si­bil­ity of those dry­ing up and em­ploy­ers lay­ing off work­ers is be­com­ing in­creas- in­gly real.

Be­fore AGOA, the Le­sotho tex­tile and cloth­ing in­dus­try em­ployed around 20 000 peo­ple, with South Africa and Europe be­ing the prin­ci­ple ex­port mar­kets. In the years fol­low­ing the estab­lish­ment of AGOA in 2000, the fo­cus shifted to the US and em­ploy­ment in the sec­tor rose to 55 000. This has fallen back to 44 000 since the abo­li­tion of the World Trade Or­gan­i­sa­tion’s Mul­ti­Fi­bre Ar­range­ment (MFA), which sparked more in­tense com­pe­ti­tion from Asia.

“While the mar­ket is now more ro­bust, AGOA’S dis­ap­pear­ance would still slash 15,000 jobs,” says Mr Salm.

United Na­tions fig­ures show that since AGOA’S in­tro­duc­tion, Le­sotho’s gar­ment in­dus­try has grown to con­trib­ute 20 per­cent of gross do­mes­tic prod­uct –– with 80 per­cent of the man­u­fac­tur­ing for US mega-brands like Gap, Levi’s, and Wal­mart.

Ac­cord­ing to the LTEA, Le­sotho cloth­ing and tex­tile man­u­fac­tur­ers have made sig­nif­i­cant moves to boost com­pet­i­tive­ness on price, de­liv­ery times, qual­ity and work­ing con­di­tions.

Le­sotho is the “jeans cap­i­tal of Af- rica”, pro­duc­ing 26 mil­lion pairs of denim jeans an­nu­ally. It also makes 70 mil­lion knit­ted gar­ments a year.

Cur­rently around 75 per­cent of in­dus­try in­vest­ment is from China, Tai­wan and Southeast Asia, and Mr Salm says while the early days of AGOA saw the devel­op­ment of poor qual­ity tem­po­rary busi­nesses, MFA abo­li­tion saw many of those play­ers elim­i­nated.

More solid busi­nesses, many with 25 years’ man­u­fac­tur­ing in Le­sotho, re­mained.

“How­ever, the ques­tion now is whether or not they would stay should AGOA dis­solve, with many of those com­pa­nies tak­ing di­rec­tion from par­ent com­pa­nies in the East,” says Salm.

As other coun­tries in­clud­ing Kenya, Ethiopia, Tan­za­nia, Mozam­bique and Ghana pro­mote in­vestor-friendly poli­cies and of­fer op­por­tu­ni­ties for ef­fi­ciency and labour com­pe­ti­tion, Salm ar­gues Le­sothobased man­u­fac­tur­ers may con­sider re­lo­ca­tion.

A Septem­ber 2014 re­port re­leased by Bet­ter Work Le­sotho, a part­ner­ship pro­gramme of the In­ter­na­tional Labour Or­ga­ni­za­tion (ILO) and the World Bank’s In­ter­na­tional Fi­nance Cor­po­ra­tion, posed three sce- nar­ios for AGOA’S fu­ture –– a full re­newal, a re­newal with­out South Africa, and an eco­nomic part­ner­ship agree­ment-type deal.

The or­gan­i­sa­tion sug­gested full re­newal is most likely, with 40 el­i­gi­ble coun­tries main­tain­ing duty-free ac­cess to the US mar­ket on 1,800 tar­iff lines, ef­fec­tively safe­guard­ing the gains AGOA has al­ready made in boost­ing over­all trade by 78 per­cent.

Bet­ter Work Le­sotho would like the trade agree­ment to be ex­tended for longer than 10 to 15 years to pro­vide cer­tainty in­vestors re­quire. An AGOA with­out South Africa should not dam­age Le­sotho’s prospects.

And un­der an eco­nomic part­ner­ship agree­ment deal, the AGOA would be­come a two-way trade agree­ment where African coun­tries, in­clud­ing Le­sotho, would open their mar­kets to US ex­porters, which may not im­pact the king­dom’s sec­tor ei­ther.

“In re­new­ing AGOA, the US can score a ma­jor win in the battle for hearts and minds in Africa. It is an in­vest­ment that will rise in value as the con­ti­nent does,” South African In­sti­tute of In­ter­na­tional Af­fairs re­search fel­low Christo­pher Wood said in the re­port.

–– Just-style

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