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Lesotho garment industry subsector study
Andrew Salm, William J. Grant , Thuso J. Green, John R. Haycock, Dr. John Raimondo
January 2002
SARPN acknowledges permission from Helena McLeod, trade advisor DFID(SA), for permission to post this report.
It was commissioned by the Government of Lesotho and funded by DFID.
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Executive Summary
This is the report of the findings of a study of the Lesotho Garment Industry subsector commissioned by the Department for International Development. The garment industry was chosen as a subsector of special interest as it has grown at an extraordinary pace over the past few years and is now the largest private sector employer of labour in Lesotho.
The consultants found that the industry is robust and is continuing to grow strongly with exports of Maloti 1.8 billion in 2000. There are, however, a number of significant threats to the industry that may constrain this growth unless addressed.
The garment industry is export driven with the majority of garments exported to the USA, which absorbs 93% of Lesotho's production. Although already the most important market prior to 2001, the Africa Growth Opportunities Act (AGOA) is currently driving the increased investment and growth. Exports into Southern Africa, while not insignificant, have been relatively stagnant over the last four years while exports into Europe are now at minimal levels despite the importance of this market in the early 1990s. There is enormous scope to increase exports into Europe but at this stage the industrialists do not appear to be particularly interested in pursuing this market.
Ownership and management of the garment industry is dominated by South East Asians who started to move into the country in the late 1980s. They now control in the region of 90% of the industry in Lesotho and employ 97% of the labour.
These industrialists operate in a global context, well able to service the requirements of the USA market while sourcing their raw materials in the Far East. Many of them are subsidiaries of public companies with sister plants in other garment manufacturing countries throughout the world. They are attracted to Lesotho by the success of the companies already operating there, the advantages accorded Lesotho as an LDC under AGOA, the low level of wages, an available, compliant, well educated workforce, reasonable infrastructure and an enabling legislative environment.
The consultants found that employment in the industry grew in excess of 50% to 32,000 workers in 2001. Further new start-ups and expansions are being processed and the upward trend in employment will continue.
Construction has recently started on a US$100 million denim mill that will help to consolidate the industry and provide additional 5,000 jobs by 2004.
The consultants found that there are a number of constraints on the growth of the industry. While the majority of these constraints are potentially serious, the GoL, the donor community and the industrialists themselves can circumvent them all through interventions.
The principal constraints were identified as:
- Lack of pre-built factory shells
- Lack of serviced industrial land
- Inadequate water supply
- Lack of waste water treatment facilities
- Poor container handling facilities
- The HIV/AIDS Pandemic
- Poor industrial relations
- Inadequate training of supervisors and labour
- Poor productivity
- Cross cultural misunderstanding
- Poor Public Relations
The increased awareness of consumers, activists, foreign governments and international labour movements has focused attention on the working conditions in third world countries. This has led to the development of Codes of Conduct by the larger international clothing brands. All Lesotho factories exporting to the USA must comply with these Codes of Conduct.
The compliance requirement provides a unique opportunity to intervene to assist the industrialists to restructure their industrial relations policies. Through this restructuring process opportunities will arise for the industrialists to develop, in partnership with organised labour, a programme for prosperity and industrial peace. Such a programme could address many of the constraints such as training, productivity, environmental degradation and lead to a coherent social responsibility programme that could incorporate elements of HIV/AIDS education, prevention and mitigation. The aim of all stakeholders should be to make Lesotho a destination of choice for garment purchasers and new investors.
Infrastructural problems such as the provision of services to industrial estates and the building of factory shells are constrained by access to finance. The LNDC maintains that the return on investment when providing services to industrial land is insufficient to service the debt and it requires concessional loans to proceed. Selling some of its factory shells to investors has provided the LNDC with limited financial resources for building new shells.
As a country ranked as one of the poorest in the world, Lesotho has done extraordinarily well to develop its garment industry as far as it has. It has recently become Africa's largest exporter of clothing to the USA. It is important that the country now consolidates its position and looks for ways that this burgeoning industry can effectively contribute to poverty reduction in the country as a whole.
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