A LONGTIME Chinese investor in the local textile and garment industry says vertical integration is the way to go for Lesotho to remain globally competitive.
Feng Fu Lung is the president of the Thetsane Industrial Area-based Sun Textiles (Pty) Limited which has been operating in Lesotho since 1995.
Sun Textiles manufactures t-shirts and other garment products. It employs 1 000 employees and produces 200 000 units per month for export to the United States under the African Growth and Opportunity Act (AGOA) trade preferences.
AGOA gives duty-free and quota-free access to the US market to eligible Sub-Saharan African countries including Lesotho. The legislation, which was renewed for 10 years by US lawmakers last June, is meant to incentivise African countries to open their economies and build free markets.
Mr Lung told the Lesotho Times in an interview this week that the country had been stuck in the cut, make and trim (CMT) mode for a long time, while ignoring the opportunities that lay in vertical integration.
Vertical integration describes a company’s control over several or all of the production and/or distribution steps involved in the creation of its product or service.
Mr Lung said Lesotho needed to establish a knit fabric mill to improve the country’s competitive edge among other textile manufacturing nations. He said a knit fabric mill would enable local textile firms to avoid the expense of importing their raw materials.
“A knit fabric mill would make Lesotho more competitive globally, and in a way guarantees the jobs of the thousands of people employed in the textile factories,” the 92-year old entrepreneur said.
The Lesotho National Development Corporation (LNDC) has committed to establishing a knit fabric mill by the 2017/18 financial year in its strategic plan for 2015-2017.
He said other challenges factory operators encountered in Lesotho included lack of reliable water and electricity supplies. Mr Lung, however, pointed out that the situation had markedly improved in recent years.
He also touched on concerns that Lesotho could lose its eligibility for AGOA after the Americans expressed “serious concerns” about the government’s alleged failure to adhere to AGOA governance criteria, saying they would monitor the implementation of reforms ahead of the next eligibility review process.
Among the main eligibility criteria for the facility are a market-based economy, rule of law, systems to combat corruption, and not engaging in gross violations of internationally-recognised human rights.
Mr Lung said Lesotho needed to safeguard the multitudes of jobs that are stake.
“From a governmental point of view, there is need for some kind of plan to retain AGOA eligibility for the sake of people who are employed in the factories and their dependents,” he said.
“We all know that AGOA was extended by 10 more years last year, and already about one and half years have gone. If a viable system is not set up now, it means after eight and half years, Lesotho’s textile industry will lose the competitiveness it currently enjoys.”
For his company’s part, Mr Lung said he intends to continue investing in Lesotho.
“When I decided to invest in Lesotho 20 years ago, the production costs were lower than in other countries. Although things have changed a bit, it is still cost effective to manufacture our products in Lesotho compared to some Asian countries,” he said.
“The fact that I am the first investor to acquire land and construct a factory shell here in Lesotho indicates that I am here for the long-term. Therefore, I have no immediate plans of relocating the business.”
Mr Lung also urged Basotho entrepreneurs to have more tenacity in the cutthroat business world.
“Local entrepreneurs need to be more resilient and show more determination in order to succeed in business,” he said.
“They need to have the belief that they can make it. When I came here many years ago, I did not know anybody in this country but I still succeeded in establishing a sustainable business.”