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Dark cloud hangs over textile industry

. . . as uncertainty over US trade concession continues

Ntsebeng Motsoeli

Minister of Trade and Industry, Cooperatives and Marketing Sekhulumi Ntsaole (3)The Minister of Trade and Industry, Co-operatives and Marketing, Mr Skh’ulumi Ntsoaole, has said there is hope the American government could extend the African Growth and Opportunity Act (AGOA), which expires next year.

Mr Ntsoaole said an American representative at last week’s extraordinary meeting of trade ministers from African Union member-states, which was held in Ethiopia, gave an indication that the United States could extend AGOA.

AGOA, an instrument which provides for trade and investment relations between Sub-Saharan Africa and the United States (US), is set to expire in September 2015 after its signing in 2000.
Lesotho benefits by exporting textile products to the US duty-free, which has encouraged massive foreign investment, particularly from Chinese businesses, in the country’s clothing industry.

Initially, AGOA was set to expire in 2008, but the US Congress passed the AGOA Acceleration Act of 2004, which extended the legislation to 2015.
However, the pending expiry has discouraged further investment in Lesotho’s textile industry, and there are fears the sector could collapse should AGOA not be renewed as the legislation has enabled companies to operate profitably, which would otherwise, not be the case.
Speaking at a news conference held in Maseru on Friday, Mr Ntsoaole said: “A representative of the US government gave some hope that there was a possibility of an extension of AGOA.

However, the American government has not yet given a concrete signal, whether it will extend the legislation.”
The Minister further said there was consensus by many African countries who are beneficiaries of AGOA, to plead with the US to extend the facility by another 15 years.

According to Mr Ntsoaole, studies have been undertaken which assessed AGOA’s achievements, failures, and the nature of the future framework beyond its expiry next year.
“The main recommendation following these studies was that AGOA be reauthorised for the next 15 years and that the Third Country Fabric Rule exception be part of the dispensation,” he said.

The Third Country Fabric Rule essentially enables lesser-developed countries, such as Lesotho, to source yarn and fabric globally, assemble garments using the local workforce, and export them to the US duty-free.
This allows poorer developing countries with limited capacity to spin or manufacture fabric, to get a foothold in the apparel value chains, without having to source the raw material locally.

The Deputy Director in the Ministry of Trade, Ms ‘Mabafokeng Ncholu, said Lesotho’s textile industry, and the country as a whole, would be in a very difficult situation should the US decline to extend AGOA. Since 2001, the textile industry has become Lesotho’s second biggest formal employer after government, and employs about 45 000 workers, most of them women.
“Exporters would have to pay duty in order to continue supplying the US with our products. Most of the textile companies (which are run from Asia) would have to withdraw their business if they do not afford tariffs,” Ms Ncholu said.

Ms Ncholu further said should the US decide to end AGOA, a national response strategy has been formulated to encourage diversification in trade and allow locals to produce different goods to explore other world markets.
The African Development Bank has since said the uncertainty surrounding AGOA called for Lesotho’s intensified product and market diversification outside the United States, as well as taking advantage of its natural resources such as water and diamonds.

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