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Covid-19 exposes Lesotho’s lack of diversification- Seleke

Bereng Mpaki

THE chief executive officer of Lesotho National Development Corporation (LNDC), Mohato Seleke says the Covid-19 pandemic has badly exposed Lesotho’s limited market destination options for its products.

Mr Seleke said this in an interview with the Lesotho Times on Monday adding that the country’s textile industry was feeling the economic impact of Covid-19 because of its overreliance on United States (US) and South African markets.

Lesotho takes advantage of the African Growth and Opportunity Act (AGOA) to access the US market duty and quota free, while it uses its membership of the South African Customs Union (SACU) to export duty free to South Africa.

Mr Seleke said both the US and South African economies had been hit hard by Covid-19 resulting in job losses and the eventual reduction of disposable income. This in turn, has reduced the amount of those markets’ imports from Lesotho.

He attributed this to the redundancy obtaining in the country’s manufacturing industry.

The dynamics have resulted in job losses in Lesotho with one of the biggest employers in the textile industry, the Nien Hsing Group, which employs over 12 000 of the country’s nearly 50 000 factory workers, laying off 1 300 workers from its Glory International factory in Ha-Tikoe.

The company has told its workers that its operations were no longer profitable under the Covid-19 pandemic.

And Mr Seleke attributes this to the lack of diversity in terms of markets.

“For us to begin appreciating the impact of Covid-19 on Lesotho, we must consider the demand side of our industrial output, which goes to primary market destinations like the US and South Africa,” Mr Seleke said.

He said about 38 million Americans have lost jobs as a result of Covid-19, which has reduced in the country’s reduced buying power.

“This impact we are experiencing points to the issue of lack of diversification that I identified as a major risk area when I came into the LNDC.

“It is an unfortunate fulfilment of the prophecy I made in the past. It only tells us how urgent the issue of diversification is and policy makers should understand what this actually means. This is more urgent as it can lead to an implosion…,” Mr Seleke said.

To mitigate this challenge, the LNDC has embarked on a drive to diversify its market and products.

“The LNDC has commissioned a study with the Commonwealth Secretariat titled: ‘New Products New Market’. The study has formed the blueprint for the LNDC’s new strategic plan because it is a study about Lesotho’s trade profile.

“The study has revealed that we are producing too few products and we are exporting them to a few markets such that market shocks on either the demand or the supply side, the country will be in a tail spin.

“Covid-19 has proven to be that kind of shock because we have not diversified from an industrial and market destination point of view…

“Imagine what would happen if China was one of our market destinations, which has as big a market as US as it has recovered from Covid-19 right now. We would therefore have an alternative market destination for our products, but we are instead trapped in the US and SA markets, the worst performers in terms of Covid-19,” Mr Seleke said.

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