Bereng Mpaki
LESOTHO and other southern African states have been urged to consider switching from secondary to tertiary sector reliance in order to leapfrog the global development cycle.
The call was made by the Head of Strategic Research at Nedbank Group, Mohammed Nalla during Tuesday’s corporate breakfast meeting organised by Nedbank Lesotho.
The annual event, which was attended by captains of industry and representatives from the public sector is meant to provide an opportunity to deliberate on the latest business and economic issues affecting Lesotho and the region.
Lesotho is heavily dependent on its manufacturing industry to produce textiles and garments for export. The industry is the second largest employer after the public service.
The textile and garment industry is mostly anchored on the African Growth and Opportunity Act (AGOA), which is a preferential trade concession by the United States.
AGOA provides for duty-free and quota free entry of goods into the US from designated sub-Saharan African countries, including Lesotho, and applies to both textile and non-textile goods.
The legislation, which was approved by the US Congress in May 2000 is meant to incentivise African countries to open their economies and build free markets.
“We (the region) tend to fixate too much in terms of trying to be goods or commodity exporters. I recently read an interesting report which indicated that if you are a commodities exporter you are fighting for just three percent of global value chains,” Mr Nalla said.
“But if you want to develop your economy you have to go for the tertiary sector because it accounts for 45 percent of global value chains. So, I am saying as the region, we need to re-think where we play in global value chains,” he added.
He said although AGOA had helped create many jobs in the region, it had however failed to attract domestic investment for the development of the industry.
Lesotho’s textile and garment industry employs an estimated 40 000 people but the investment comes from Taiwanese and Chinese investors.
“There has been a lot of investment attracted from the Chinese and Taiwanese. They build the industry, but likewise the profits that accrue are repatriated to their home destinations as one potential loss.
“The other issue is that we have not built sustainability in the industry and so the industries that have been built are not necessarily sustainable in the absence of the preferential access to the US market,” Mr Nalla said.
He also said that utilisation rates of AGOA by the region had been very low given the impressive variety of products that are eligible to the US market under the trade concession.
A total of 6421 product lines are granted AGOA duty-free preference into the US market.
Former Finance Minister Thimothy Thahane, who also attended the event, said while the region could benefit from focusing on the tertiary sector, it could only be sustainable through investment in technical skills development.
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