Textile industry on the brink
Lesotho’s textile industry faces collapse unless foreign buyers resume doing business with local firms as a matter of urgency, trade union leaders warned this week.
The warning comes amid massive retrenchments by companies due to dwindling orders from the American market, which has traditionally been the preferred destination for Lesotho’s textile products because of concessions provided by the African Growth and Opportunity Act (AGOA).
Under AGOA, which was enacted by the American Congress in May 2000, virtually all goods produced in eligible sub-Saharan countries enter the United States (US) market duty-free.
However, the US President each year determines whether a country still qualifies for AGOA benefits based on a number of issues, among them its respect for the rule of law, economic policies to reduce poverty, and efforts to combat corruption.
AGOA was expected to expire in September last year but on 25 June 2015, the US Congress extended the legislation to 2025 “as a strong signal that businesses can and should invest with confidence in Africa”.
But despite this assurance, Lesotho’s textile companies are struggling to secure orders from the US, leaving management with no choice but to downsize operations or temporarily close shop until they get business.
The textile industry is Lesotho’s biggest private sector employer with an estimated 35 000 workers, most of them women who are sole breadwinners for their families.
According to Lentsoe la Sechaba Trade Union general secretary, Monaheng Mokaoane, the textile industry is in “real danger” of going under if the order situation does not improve “as a matter of urgency”.
“We are very concerned with this situation as our workers are in real danger of losing their jobs for good if the current shortage of orders persists. It would be a disaster if our textile industry was to collapse because of the sheer numbers the factories employ, and how Basotho have become so dependent on this sector,” Mr Mokaoane told the Lesotho Times this week.
“Some of the factories have been quietly retrenching workers simply because there is no work, while others temporarily suspend operations with the hope that the situation is going to improve soon. This means their workers are sent home and if they get orders, recall them. But if they don’t get the orders, the workers lose their jobs for good.”
United Textile Workers Union (UNITE) secretary general Bahlakoana Lebakae echoed Mr Mokaoane’s sentiments and said the dire situation was due to a combination of factors.
“The situation is very serious for our textile sector and I suspect it could be because of a number of reasons, among them delays in extending the AGOA legislation when it was about to expire in 2015. This created uncertainty among US buyers, leading to delays in placing orders with our companies,” Mr Lebakae said.
Initially, AGOA was set to expire in 2008, but the United States Congress passed the AGOA Acceleration Act of 2004, which extended the legislation to 2015. The Act’s apparel special provision, which permits lesser-developed countries like Lesotho to use foreign fabric for their garment exports but still benefit from the duty-free provision, was to expire in September 2007, but Congress extended it to 2012, and then 2025 as part of the general AGOA extension last year.
According to Mr Lebakae, the other possible reason for the drop in demand for Lesotho products by the US market is the country’s prevailing political unrest.
Mr Lebakae said: “You will recall that orders are placed nine months ahead of production, so because AGOA’s renewal was problematic last year, this led to delays in the placement of orders from the US.
“The issue of lack of orders is also influenced by the country’s political and security situation which some buyers could have seen as unstable and therefore a threat to business.”
The government and opposition remain divided over the state of the country’s security, which saw three opposition leaders—Thomas Thabane, Thesele ‘Maseribane and Keketso Rantšo of the All Basotho Convention, Basotho National Party and Reformed Congress of Lesotho respectively—fleeing the country for South Africa in May last year. The three leaders claimed they had been alerted of an alleged plot to assassinate them by some members of the Lesotho Defence Force (LDF) and still live in exile in South Africa. The military rejects these claims.
Meanwhile, Mr Lebakae also revealed the retrenchments had brought with them “a unique challenge” to employers.
“These layoffs are actually against the law because they are not recognized under the Labour Code due to the way they are being done. For instance, some employers retrench workers and within four weeks, recall them and according to the law, this means they were never released from work and should therefore be paid for the time they spent at home,” Mr Lebakae said.
“So what this basically means is if a worker has been instructed by his employer to go home because there are no orders, the company is supposed to pay that person for that month according to Section 85 and 86 of the Labour Code.
“So employers who have tried to resist paying such workers have been made to pay after their cases had been taken to the authorities, but as you can see, this is presenting the industry with a unique challenge.”
Independent Democratic Union of Lesotho (IDUL) deputy general secretary, Seabata Likoti, also said the textile industry was experiencing one of its worst periods in recent years.
“Our members have been told by their employers to return to work this week, so we don’t know what will happen once they are back,” Mr Likoti said.
“However, the situation is not looking good for the industry as a whole.”
Lesotho Textiles Exporters Association vice-chairman Ricky Chang did not immediately respond to questions emailed to him this week regarding the situation, while an economic expert said Lesotho should look for alternative markets before it’s too late.
The analyst, who requested anonymity, said: “There is more competition for the US market especially by countries that have comparative advantage over Lesotho.
“For instance, there is no modernization in our textile industry, where the machinery is very old and organisational systems have not improved despite the changing times.
“This means Lesotho’s productivity and quality have remained static while the other competing countries continue to improve.
“Again, there is no promotion of local ownership of the factories, which could help in the takeover of the companies when their foreign operators relocate.
“Another challenge Lesotho faces is its current political and social climate, which does not encourage new investment.
‘That’s why I am saying the situation is not looking good for Lesotho as far as the textile sector is concerned.”