Lesotho could be on the verge of losing its ranking as the second largest exporter to the United States (US) under the African Growth and Opportunity Act (AGOA).
This comes as a result of lack of product diversification and a decrease in production. This is contained in the Lesotho National Development Corporation (LNDC)’s Manufacturing Industry Status report for the period up to March 2021.
The US remains the biggest market for Lesotho’s clothing and textile exports in terms of value under AGOA. However, this will not last long as other competing countries are fast catching up, the report says.
Lesotho’s clothing and textiles sector, which directly employs about 45 000 people according to the report, is anchored on the U.S.’s unilateral trade concession, AGOA.
In terms of value, the report says Kenya ranks the top African apparel exporter to the U.S. followed by Lesotho, Ethiopia and Madagascar, while in volumes, Kenya still ranks top followed by Ethiopia, Lesotho, and Madagascar.
“Lesotho will soon lose its ranking as the second largest exporter in value terms to the U.S. under AGOA,” the report says.
“The potential loss in rankings will be due to the increase in exports by the competitor’s economies and Lesotho’s non-diversification of its product range, and the continued decrease in exports within the existing export product lines.”
The report highlights that Lesotho participates in only 13 of the over 6 000 product lines available under AGOA while Ethiopia and Kenya export in 24 and 20 product lines respectively.
“Lesotho exported 13 product lines, same as December 2019. While Kenya and Madagascar exported in 20 product categories. Ethiopia exported in 24 product categories. Ethiopia has increased product lines from nine since December 2017 to 24, thus increasing its export range massively.”
The report further noted that in 2014 Madagascar was the sixth largest Sub-Saharan Africa exporter to the U.S. but it has gone up to be the fourth largest exporter under AGOA in value terms after Lesotho in 2020.
“Since 2014, in volume and value terms, Lesotho and Madagascar exports to the U.S. under AGOA have been declining at an alarming rate. Within a short period, Lesotho will lose its status as the second largest exporter in Sub-Saharan Africa.
The report shows that Lesotho’s value of exports to the U.S. during 2020 were US$257 517 million (about M3, 6 billion), a decline from 295 562 million (about M4, 14 billion) in 2016.
“Both Ethiopia and Madagascar are catching up with Lesotho in value terms. Ethiopia has surpassed Lesotho and Madagascar in volume terms in the current year, although the value remains comparatively lower.”
To address the slide, the report has recommended Lesotho to emulate other African countries in diversifying its export product range.
“Lesotho should take advantage of the product categories tapped into by Kenya and Ethiopia to expand its portfolio of exports and to compete with its regional competitors in that market or take advantage of the high-value products.”