Lesotho built up a textile and apparel industry from one that was marginally small in the 1980s to a well developed and competitive industry. More garments are exported by Lesotho to the United States than any other sub-Saharan country379. As mentioned above, the industry overtook the government as the largest employer in the country380. This feat in itself is very impressive as Lesotho’s economy has now become largely privatised putting less pressure on the government to create jobs. The AGOA agreement in this case has helped to develop the Lesotho economy, as the increased privatised economic structure is more in line with developed economies.
374
Lesotho US Embassy: Lesotho and AGOA,
http://maseru.usembassy.gov/commercial_section.html#top 375
MCC, Lesotho Investment, http://www.mcc.gov/mcc/countries/lesotho/index.shtml 376
Ibid pg 1 377
OSISA: AGOA hurts Africans, Argue Critics, 2008 http://www.osisa.org/node/10816 378
Ibid pg1 379
Delia Robertson, Lesotho Textile Industry faces bleak future, 2005 http://www.voanews.com/english/archive/2005-02/2005-02-09-voa29.cfm 380
Lesotho textile industries have extended their production and are now creating denim fabric and yarn, denim garments, knitted garments, woven garments (with two firms producing dual products-woven and knitted garments), embroidery and screen printing381. Diversification of the industry is therefore evident. The textile industry is presently able to create a garment from start to finish. While most companies imported yarn and materials from Asia, two companies (as mentioned above) have invested in the industry and thus can import materials regionally. This knowledge cannot be taken away from the Lesotho economy, thus causing a concrete development within the country’s present and future growth.
While AGOA has created many jobs (most being 53,000 in a population of 2.1 million), many of the jobs in this industry are low skilled, with very few people advancing or being trained on the job382. Most of the foreign-owned companies fly in their own management, and other top and middle management are recruited in China and India, for example383. Therefore, like Namibia, AGOA has not ensured that labourers become proficient in skills. Whilst one cannot take away the knowledge that is gained by these workers within the textile industry, outside management will always be needed in order to supervise production of textiles. This means that essentially Lesotho has a shell of an industry without the essential education to utilize it. Many have argued that this is one of the main reasons for the lack of development in African countries. While the AGOA agreement allows for the education and training of workers, it is the investors themselves that do not train the local workers, causing a vicious circle in terms of development in Africa. Even though perhaps it is the government that should enforce restrictions on foreign investors, African nations such as Lesotho cannot afford to be particular in the kind of investors entering Africa.
It was estimated that in mid-2005 the approximate 40,000 workers engaged in Lesotho’s textile and garment industry earned about M306 million (US $ 48m US- Dollars [at an exchange rate of US $ 1 US-Dollar = M6.40]) per annum384. According to Lesotho’s Clothing and Allied Workers Union (LECAWU), textile workers (even
381 Bennet, M: op cit pg169 382 Gibbon, P: op cit pg 320 383 Loc cit 384 Bennet, M: op cit pg 167
those in foreign companies) earn an average minimum wage of M35 a day385. This is lower than the average worker in the manufacturing sector who works for an average of M39 a day386. Thus, although there has been an increase in employment due to the AGOA agreement, this industry is still not combating poverty as workers are paid less than the average minimum wage. The union claimed that companies arbitrarily dismissed workers and many refused to recognise trade unions387. It also stated that many employees worked a seven day week and were often required to work overtime to meet company production targets and failure to do so, resulted in wage cuts388. However, it is important to note that even though the union has requested the U.S to investigate this, it is not the AGOA agreement itself that has exploited these workers but rather the foreign Multi-National Corporations. Thus, to a large extent, it is the implementation of the agreement that has caused the lack of development and not the agreement itself.
Under the MFA, major Asian textile companies, limited in exporting directly to the EU and the US, set up subsidiaries in less developed countries, including Lesotho389. As mentioned above, the MFA came to an end in 2005. Mr. Daniel Maraisane, head of the main Clothing Workers’ Union claimed that with the end of the quota system, those investors “say it’s now easier and cheaper to manufacture in China and India”390. By the end of 2004, six of the country’s fifty clothing factories closed, leaving 6,600 workers without jobs or termination benefits391. The surviving companies, faced with shortfalls in export orders, placed 10,000 workers on short- term work, using them only when needed392.
This is combined with the fact that the Loti – which is tied to the South African currency at par (SACU’s Common Monetary Area (CMA)) – has significantly strengthened in value393. The strengthening of the local currency has meant that
385
LECAWU: Highlights of Current Labour Market conditions in Lesotho, LNDC Centre, 2006
http://www.gpn.org/data/lesotho/lesotho-analysis.doc. 386
Ibid pg 1 387
BBC: U.S trade ‘exploits’ Lesotho workers, 2002 http://news.bbc.co.uk/2/hi/business/1875088.stm 388
Ibid. pg 1 389
Mutume, G: Loss of Textile market costs African jobs, Journal of African Renewal, Vol. 20, No.1, 2006 390 Ibid pg 18 391 Loc cit 392 Loc cit 393 Bennet, M: op citpg171
Lesotho’s garment exports have become too expensive394. What is interesting to note is that most countries that have invested in African countries are from Asia rather than other parts of the world. Thus, it can be seen that the AGOA agreement is inherently linked to the MFA. This is especially a problem for Lesotho as 77% of its exports are from the textile and apparel industry and 98% of those exports are under AGOA. If the Asian companies therefore decide to go home, the Lesotho economy could be crippled. However, in Lesotho’s case they have managed to reopen all its factories and rehire 7,000 workers395. According to Andy Salm, Regional Textile and Apparel Specialist at ComMark Trust, the textile industry has been significantly picking up and more orders are now being placed in Lesotho again396. He argues that one of the reasons large retailers and brands have returned to Lesotho is that the government has been working hard to become a destination of ethical choice, and this has started to pay off397.
However the relationship that was created between Lesotho and the United States under AGOA has spilled over into other investments such as the MCC investment in infrastructure. This venture has helped strengthen Lesotho’s economy and investment in other sectors. I do not think this would have occurred had it not been for the positive response the United States received from Lesotho through AGOA. AGOA has in that sense helped to strengthen bi-lateral trade and investment with United States, which hopefully in the future, will eradicate poverty in Lesotho.