Monday, Sep 13, 2004
Every weekday, whatever the weather, hundreds of people flock to the factory gates of Ha Thetsane in search of work. The congested industrial zone in Maseru, Lesotho's capital, houses one of Africa's biggest clusters of textile and garment factories. Nearly all are Taiwanese-owned and export their wares to the US.
Some labour and environmental activists have complained about the plants' pollution levels and labour practices. But for most people in this small, landlocked kingdom, a job cutting or sewing denim destined for Americanstores is a prized position.
"I'm happy with my job," says Makananelo Mokotoi, a 32-year-old mother of three who earns just over $100 (?82, GBP56) a month sewing together some 200 panels an hour for overalls.
The textile industry has transformed Lesotho in just a few years. The country benefits from the US's African Growth and Opportunity Act (Agoa), a law that exempts some clothing made in the continent's poorest countries from strict duties and quotas.
Tough Asian competitors could easily undercut even dirt-poor Lesotho on price, but Agoa's preferential US market access gives its manufacturers an edge.
So Asia has come to Lesotho instead. Taiwanese investors, who have been in neighbouring South Africa since the apartheid era, have crossed the border for cheaper wages.
Taiwan is now Lesotho's biggest foreign investor and, according to one estimate, a quarter of employed people work in Taiwanese factories. The textile industry has helped replace jobs lost elsewhere, such as migrant work in South Africa's downsizing mines. Asian expatriates are now visible everywhere in Maseru, including at the Lesotho Sun Hotel, where the grill restaurant serves a Chinese menu.
CGM, the Taiwanese-owned factory where Ms Mokotoi works, offers a striking tableau of globalisation. The chief executive is Indian and the factory employs 8,000 people in Lesotho. It uses cheap fabric from China, India and Pakistan to produce jeans and gabardine trousers destined for Levi Strauss, Gap, Wal-Mart and other US chains.
"This is a small place where [there isn't] much hassle," M.V. Dalvi, CGM's chief executive for Africa, says of Lesotho's appeal as a place to do business.
A few streets away in Ha Thetsane, another Taiwanese company, Nien Hsing, is expanding its operations. The company opened its first factory in Lesotho three decades ago. It has expanded quickly since Agoa's launch, and 18 months ago opened its third local factory with about 8,000 employees.
Nien Hsing has 13 factories around the world and claims its jeans factory, which supplies top US buyers, is Africa's largest. The production and quality of its Made in Lesotho clothes are about the same as those it makes in Nicaragua but better than those made in Mexico, where workers come and go more quickly, according to its director. Nien Hsing recently integrated its operations, building a textile mill that will bring its total investment in Lesotho to $150m-$200m.
That is significant in a labour-intensive and notoriously unsentimental industry where investors have been known to vacate factories virtually overnight in search of cheaper wages. In July the US extended Agoa's preferential import access until 2015 and the third-country fabric provision - which allows producers in Lesotho to use cheap Asian cloth - until the end of September 2007.
However, with its textile mill now in operation, Nien Hsing says it is prepared to produce cloth competitively in Lesotho, regardless of Agoa's future.
"We assume that if Agoa is not extended, we can use the material made here to reduce costs," says Chiu Chien Min, Nien Hsing's director for Lesotho.
South Africa's strengthening rand is nonetheless squeezing producers' margins. Lesotho's loti is pegged to the rand, which has climbed sharply against the US dollar since last year. "Two years ago [our] wages were only $100-$120," says Mr Chiu. "Now they're about $170 because of rand appreciation."
Higher costs and intense Asian competition have already driven many textile and garment companies out of South Africa. Several Taiwanese investors have closed down in Botshabelo, an industrial zone across the border where industry wages are about four times Lesotho's.
Investors in Lesotho warn that the industry there could follow suit if the currency remains strong. New investment in the industry has come to a halt since the rand's rally.
Agoa still gives African producers an edge by exempting them from 17 per cent duty on jeans. That translates into a roughly $1 difference per unit between the price Lesotho-based CGM, for example, and Chinese manufacturers can quote to US buyers.
But Asia competes fiercely on wages: while the industry pays workers in Lesotho about $130 a month, industry wages are just $70 in China and $65 in Pakistan or Bangladesh. "Even with a 17 per cent [advantage], we're trying to compete with $65 a month," says Mr Dalvi. "We are trying to hope the currency will depreciate."
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