Report on Government Responses to New post-MFA realities in Lesotho

Morris, Mike; Sedowski, Leanne

Report on Government Responses to New post-MFA realities in Lesotho

Working Paper

2006

Publisher

University of Cape Town

Department

Centre for Social Science Research(CSSR)

Faculty

Faculty of Humanities

License

http://creativecommons.org/licenses/by-nc-nd/4.0/

Abstract

Since 2000, Lesotho along with Kenya, Madagascar and Swaziland, has seen year-toyear doubling of clothing exports to the United States under the AGOA program. These SSA countries have experienced tremendous growth in the clothing industry mainly because of AGOA duty-free benefits, but also due to advantageous exchange rates with the US dollar. However, on 31 December 2004, the Multifibre Arrangement (MFA), the quota system that restricted Chinese exports to developed countries ended, freeing China and other large producers from binding quotas. Dire predictions were made about the end of the clothing industry in SSA, which accounted for 3% of global garment exports in 2004. The winners would be China, Vietnam, and Cambodia, where global garment production would concentrate. Indeed, eight factories in Lesotho have closed, leaving 5,800 unemployed. Their closure has been attributed to a lack of orders as retailers source their garments elsewhere and to the appreciation of the Rand against the dollar. With layoffs at other factories, the total number of jobs lost is 10,700. The objectives of this study are to investigate and analyse policy and other responses of the Lesotho government to the liberalisation of the clothing and textile industry, with a focus on the end of the Multi-Fibre Arrangement. Included should be an examination of whether the utilisation of preferential measures (AGOA, ‘Everything but Arms’, Cotonou) will have any ameliorating effects.” The primary focus therefore of the paper is addressing the policy issue of what can be done to assist the firms remaining in Lesotho. This project investigates what the government in Lesotho has done in the build up to the end of the MFA as well as what strategies are available to the government to cement the industry in Lesotho for the future. In order to do this we conducted a number of interviews with firms, stakeholders and government officials in Lesotho.