TRALAC - Trade Law Centre

Lesotho's textile industry reaps the job creation benefits of AGOA

Monday, 03 June 2002

Source: Business Report

Maseru - The inside of the giant warehouse on the outskirts of Maseru sounds like a giant beehive.

Hundreds of women are sitting in rows between chattering sewing machines, turning out jeans and sportswear.

"A million of our jeans go for export every year, mostly to the US," said Adrian Chang. The manager of the CGM textile group is one of a band of entrepreneurs who have contributed to an investment boom in recent years in the mountain kingdom of Lesotho.

The "sky kingdom" of Africa was on the front line during the apartheid era of racial discrimination. Then it lived on the remittances of workers who left home to toil in South Africa's mines.

Now it earns its money with textiles. It produces 25 million pairs of jeans a year.

"In 1999 we had 19 000 people working in the textile industry," said industry minister Mpho Malie. "Today we have 40 000, or more than twice as many."

It's an upward trend.

Currently being built in Lesotho is the largest jeans-weaving factory south of the Sahara desert, an investment project worth $100 million.

Other schemes are in the pipeline and the demand for building plots is strong.

"Taiwan is by far the biggest investor," said Malie. But the People's Republic of China has been pumping a lot of investment money into Lesotho.

The frequently low wages in such a labour-intensive sector are only one reason for this.

The key factor is the magic acronym Agoa. It stands for Africa Growth and Opportunity Act, a US-Africa initiative designed to jump-start the continent's economic growth.

Agoa permits 12 African states to export textiles to the US tariff-free for eight years. Initially set at a maximum of 1.5 percent of the US textile market, that quota has been upped to 3 percent.

The African countries found it hard to live up to the benchmark, notching up 17 percent in the first year and 50 percent in the second, said Malie.

Trade union accusations that workers in the textile factories were being forced to work like slaves were dismissed by Malie as unfair and without foundation.

"A committee made up of workers, employers and government officials sets the minimum wages," he said.

Apart from that, US inspectors had around-the-clock access to ensure that proper working practices and environmental standards were adhered to.

He seemed a bit uncomfortable when asked about what would happen in six years' time when Agoa runs out. After all, 90 percent of exports are bound for the US.

Malie put his hopes in a possible free trade agreement with the US incorporating all the countries in the customs union of southern Africa.

He was thrilled that DaimlerChrysler boss Juergen Schrempp had discovered the investment potential of his country, "even if it is only for car seat covers".