Ignoring AGOA renewal at Lesotho’s peril

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AgoaELSEWHERE in this edition, a senior South African textile and clothing sector consultant has warned that Lesotho’s textile and clothing production will be decimated if the African Growth and Opportunity Act (AGOA) is not renewed in September

AGOA is a nonreciprocal trade preference programme that provides duty-free treatment to United States imports of certain products from eligible sub-Saharan African countries of which Lesotho is a major beneficiary.

While this issue is not new, its conspicuous absence in the manifestos of the parties that contested in the 28 February 2015 National Assembly elections was disconcerting to say the least. After all, Lesotho is 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 figures.

The Mountain Kingdom stands to lose the most among all the countries in Africa if the deal falls through. The country cannot just hope that the facility will be renewed but, rather, take a more proactive approach as far as lobbying is concerned.

Once again, however, it seems outsiders are more concerned about the consequences of AGOA’s failure to be renewed than Basotho who will be directly affected by it.

According to Andy Salm, who works for South African-based development organisation ComMark Trust, the issue has taken a backburner in Lesotho particularly in the period leading to the polls and the period after.

However, he warned that orders from the US require at least four-month lead times and, with the September deadline looming, the possibility of those drying up and employers laying off workers is becoming increasingly real.

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.

Around 44 000 Basotho earn their living as a result of AGOA with its disappearance leading to the immediate slashing of 15 000 jobs according to Mr Salm. This would be coupled with Lesotho-based foreign manufacturers considering relocation to more investor-friendly nations that offer better opportunities for efficiency and labour competition.

The warning is particularly ominous considering that textile firm, Precious Garments, recently announced the closure of its Mafeteng subsidiary, P and T, next month, leaving 407 breadwinners in the cold.

The closure was in part a result of government’s failure to honour its promise to inject money into the firm, which had been shut down in 2010 due to viability challenges.

While former Trade Minister Sekhulumi Ntsoaole worked tirelessly to have AGOA renewed before September, he seemed to be fighting a lone battle with the rest of his previous government colleagues seemingly unperturbed by such an important issue.

The new government needs to list this issue among its first and foremost priorities since the economy can ill-afford the devastation a withdrawal of the facility would bring.

If ever there was a time to press the panic button, now would be the time.

Prime Minister Pakalitha Mosisili will need to appoint a capable Trade minister with the competence to hit the ground running in coming up with more sustainable options for trade that will boost Lesotho’s capital inflows. The government will need to chart a new course for the diversification of the economy since, even if renewed, AGOA remains susceptible to economic shocks like recessions and decline in demand.

Critical competitiveness elements such as productivity, cost effectiveness and logistics also need to be put in place before Lesotho can look to other export markets beyond the US.

Ultimately, it is in the new government’s interests to lobby for AGOA’s early renewal since the demise of Lesotho’s fledgling industries would result in unemployment rising to new proportions, with the attendant political instability, civil strife and runaway poverty.

 

 

 

 

 

 

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