(MENAFN- The Post) MASERU -TRADE Minister Halebonoe Setšabi says as the clock ticks towards the end of AGOA Lesotho's textile factories should be in a hurry to look for new markets.
The future of the textile sector, Setšabi says, lies in regional markets.
AGOA, the trade facility for poor countries to export textiles to the United States duty-free, is set to end in 2024 and its renewal is uncertain.
So is the future of Lesotho's factories it has kept humming for nearly two decades and the 40 000 jobs it has sustained.
Without AGOA Lesotho's apparels will be more expensive than those from Asian countries that have sustained their burgeoning factories with incentives like generous incentives.
So far only the duty-free facility keeps United States companies hooked to Lesotho's textiles. Yet the galloping costs of labour, energy and transport have already aggressively whittled down Lesotho's competitive advantage.
The impending end of AGOA is likely to be the last straw for a sector already in decline. There is a strong possibility that factories, most of which are owned by Taiwanese companies, might leave Lesotho and empty thousands of people onto the streets.
But Setšabi says there is no need for panic.
He says he believes the regional and local market is a viable option 'for serious investors that want to remain in the textile business'.
His worry, he says, is that some companies might be too late to diversify from the AGOA market.
'That is why the battle to enter the domestic market should start now,' Setšabi says.
'We have been telling them to look for other markets for years but they don't seem to have the stomach for the battle that comes with such efforts.'
He says the government is working on a post-AGOA strategy whose focus is to 'quickly wean Lesotho off the US market'.
Research, he says, shows that the domestic and regional markets should be able to fill the void if AGOA is not renewed. He cites companies like Jonsson Manufacturing and CGM Industries that he says were already thriving in the local and regional markets.
The minister however admits that most textile factories remain beholden to the AGOA because 'it is a ready market'.
'The prices in the AGOA market are strictly set by the buyers. The truth is that we don't have negotiating power when dealing with those buyers.'
'All indications are that we should therefore be pushing our share of the regional market.'
Setšabi says research has also shown that there are huge advantages in the regional market.
'The first is that Lesotho is closer to the buyers. The second is that if your clients are in the Southern African Customs Union (SACU) it means you are using the same currency.'
But the minister says he is aware that even those obvious advantages might not be enough to persuade some companies to remain in Lesotho if AGOA is not renewed.
He says it will take monumental efforts to push the sector to start focusing on the regional market.
The structure of the sector could explain why reorientation towards regional markets will not be easy. For years the sector has been anchored on AGOA.
Twenty-nine of the 65 factories sell their products to AGOA and they have 30 000 of the 47 000 jobs in the sector. The 33 companies in the regional market have 17 000 jobs.
The three factories in the domestic market have 100 jobs. Export figures also reveal the same overreliance on AGOA. Three factories owned by Nien Hsing, a Taiwanese company, dominate the denim exports to the US market.
In 2017 the companies contributed nearly 17 million of the 23.3 million of Lesotho's annual export of jeans to the US. AGOA factories also dominate knit garment manufacturing, with 18 600 of 24 500 jobs shared among 21 of the 33 firms in the subsector.
The same bias is also reflected in the annual production figures, with the United States importing about 94 million of the 115 million pieces Lesotho produced in 2017.
South Africa bought 21 million.
But the minister says he believes circumstances will force most companies into the regional market.
'Just because AGOA has ended doesn't mean companies have lost their capacity to make jeans. They will have to look for new markets. We are only saying they should start now because it will be tougher when AGOA is gone.'
Staff Reporter
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