MASERU — About 40 000 jobs in Lesotho’s textile factories have been saved after the United States Congress extended its duty waiver provision on apparel products from poor countries on Thursday.
The Third Country Provision is part of the Africa Growth Opportunities Act (Agoa) passed in 2000 to allow eligible sub-Saharan African countries to export goods to the US duty-free.
The provision has been extended to the end of 2015 in line with Agoa.
The provision was set to expire on September 30.
Poor countries like Lesotho had warned of an “Armageddon” in the textile sector, the main beneficiary of the Agoa, if the provision was not extended.
In Lesotho, the entire textile sector would have collapsed, taking down with it 40 000 jobs on its payroll.
The collapse would have a serious impact on Lesotho’s fragile economy and cranked up the unemployment rate which is currently at 45 percent.
Other sectors and companies that rely on the textile industry would also have suffered.
The textile industry is the biggest employer in Lesotho after the government.
According to the Central Bank of Lesotho’s Economy Review last year 91 percent of Lesotho’s textile products were sold to the US because of the provision.
Its expiry would have compelled Lesotho to source fabric from US companies or other sub-Saharan countries if it wanted to avoid paying duty on its exports to the US.
The problem is that fabric from the US costs double the price of material from Asia where Lesotho is currently getting its fabric.
That would have meant that apparel produced in Lesotho would be repulsively expensive and US buyers would shift to Asian suppliers who produce at a lower cost and make their own fabric.
Lesotho’s Trade Minister Temeki Tšolo hailed the US Congress’s decision as “a timely intervention against massive job losses that faced the continent”.
Tšolo said under the Third Country Provision African firms exporting their goods to the US have hired about
150 000 people.
“There was a possibility of instant loss of 40 000 jobs, which would have been a blow to Lesotho as it already has an almost 50 percent unemployment rate,” Tsolo said.
Tšolo said the government will work hard to ensure that by 2015 when Agoa ends Lesotho’s products and markets will have been diversified.
“Agoa offers us the opportunity to export 600 different products to the US market but we have been exporting textiles only,” he said.
“We have to diversify our markets.”
He said that he had invited a German company to explore the possibility of setting up a tyre manufacturing firm in Lesotho.
“Our duty will be to find the market for the Lesotho-produced tyres,” he said.
The general secretary of the Lesotho Congress of Democratic Unions, Daniel Maraisane, said the extension of the provision comes at a time when both workers and employers were beginning to panic.
“It was not easy for us to negotiate for better wages with employers. Even though they were not expressing it in words the employers were not sure about the industry’s future and were reluctant to negotiate,” Maraisane said.
He applauded the Lesotho Textile Exporters Association vice president Nkopane Monyane for “selflessly working hard to push the new coalition government to urgently talk to their American counterpart about the situation”.
“Nkopane Monyane did not give Prime Minister Tom Thabane a moment to rest after his appointment. I am sure the Lesotho government played its role well in this,” he said.