Textile industries in turmoil
2005-01-25 10:49
Johannesburg - A few years ago, the tiny kingdom of Lesotho appeared to have a lot on offer for investors: cheap labour, generous tax incentives and proximity to the regional powerhouse, South Africa.
Textile manufacturers certainly seemed to like what they saw.
Taiwanese entrepreneurs started arriving in Lesotho in 2000. By investing in the country, they were also able to take advantage of the African Growth and Opportunity Act (AGOA). This United States programme was set up to allow duty-free access to the American market for a wide selection of exports from countries in sub-Saharan Africa that met certain conditions, such as respect for human rights and the rule of law.
After the Taiwanese, came Chinese, Mauritian and Malaysian textile firms. By 2003, Lesotho had become a major textile manufacturer in Africa, producing 31% of textiles exported to the United States under AGOA.
Prospects looked grim
According to official statistics, about 50 000 people depended on Lesotho's textile industry for their livelihood in 2004, compared to 20 000 two years before.
During a four-day visit to Lesotho in December 2004, US Trade Representative Robert Zoellick told journalists that his country had "a great respect for what Lesotho had accomplishing".
But even as Zoellick was lavishing praise on the country's textile sector, its prospects looked grim.
Towards the end of last year, six textile factories shut down - leaving 6 650 employees without work. Enraged union leader Billy Macaefa blamed the closures on the expiry of the Multi-Fibre Agreement (MFA), which was introduced by the World Trade Organisation (WTO) about 30 years ago.
The initial aim of the MFA was to protect the textile industries of developed nations which were facing competition from low-cost producers in poorer states.
Thanks to the MFA, nations were allowed to impose quotas on
textile imports; this gave countries like Lesotho the proverbial "foot in the door" in markets that might otherwise have been dominated by manufacturing behemoths such as China.
The MFA expired on January 1. A WTO study released in September last year showed that China and India would probably come to dominate about 80% of the global textile market in a post-MFA era, while the remaining 20% would be shared by the rest of the world.
Lesotho still has the advantage of duty-free access to US markets under AGOA, (other producers are subject to tariffs). However, the six company owners who closed shop last year clearly believed that the low wages, economies of scale and efficient engineering of factories in China.
About 300 000 textile workers in South Africa have lost their jobs in the past two years - this due to the influx of Chinese goods.
In recent months, the South African rand has strengthened from the historic low it reached in December 2001, when one dollar traded for 13.85 rand. The dollar is now around the R6 mark. - IPS
- SAPA