Lesotho actively participates in the activities of regional organisations, including the Southern African Customs Union (SACU), the Common Monetary Area (CMA) and the Southern African Development Community (SADC), which work to address common issues through regional integration, cooperation and coordination.

Lesotho is a signatory to the Cotonou Agreement, which is being renegotiated with the aim of creating Free Trade Agreements between the Africa Caribbean Pacific (ACP) region and the EU. Known as Economic Partnership Agreements (EPAs), these new arrangements are essential for reciprocal free trade arrangements and are compatible with the multilateral trade rules of the WTO.

Three members of the Southern African Development Community (SADC) - Lesotho, Swaziland, and Botswana - signed an interim economic partnership agreement, or EPA, with the European Union on 4 June 2009. The deal will give the SADC countries access to EU markets while the parties negotiate a permanent EPA. The revised rules of origin in the EPA's improve the terms on which Lesotho can trade important exports like textiles to Europe. Lesotho producers also benefit from selling products duty and quota free to the United States of America under AGOA (African Growth and Opportunity Act) an American initiative that has created preferential terms of trade on a range of products manufactured in Africa for the US market.

European Union (EU) Economic Partnership Agreement (EPA) with the Southern African Development Community (SADC) to Increase Trade between the Two Regions from 2016

 Introduction to SADC EPA Group:

 1.      The European Union (EU) concluded negotiations for an Economic Partnership Agreement (EPA) with a group of Six States of the Southern African Development Community (SADC EPA Group) in July 2014, after 10 years of negotiations.

1. The Southern African Development Community (SADC) was established in 1992 and has 15 member states. The EPA with the EU currently only includes Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland. Angola has an option to join the EPA on a later date.
2. The other six members of the SADC region – the Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, Zambia and Zimbabwe – are negotiating an EPA with the EU as part of other regional groups.
3. Of the 6 SADC EPA States:
   1. All are members of the World Trade Organisation (WTO)
   2. Botswana, Lesotho, Namibia, South Africa and Swaziland are members of the  Southern African Customs Union (SACU)
   3. The EU already had the Trade, Development and Cooperation Agreement (TDCA) with South Africa, whose terms – by extension – applied to the other SACU members.
   4. An interim EPA had been signed with the SADC states in June 2009, and will be replaced by the final one once ascended legally in 2016.
   5. While the other 5 SADC EPA members are consider middle income countries, Lesotho and Mozambique are Least Developed Countries (LDCs).
   6. South Africa, Lesotho, Namibia, and Swaziland also form a Common Monetary Area (CMA) where the currencies of the other states are pegged to the South African Rand (ZAR) i.e. they are on a 1:1 exchange with the ZAR.
4. In 2013, EU exports to the SADC EPA region were valued at €33 billion; imports of the EU from the region were €31 billion.

Key elements of the EU SADC EPA Agreement are the following:

 1)      Duty-Free and quota-free access will be granted to the EU markets for imports from the SADC EPA (except South Africa);

1. South Africa will have market access better than the TDCA; Up to 32 agricultural productsThe EU member states will get new access to the SACU markets for agricultural products including products of wheat, barley, meat, milk, etc.
2. The EPA has a Development Support Component in which:
   1. The SADC EPA countries will not have to reciprocate the 100% tariff free access (95% for South Africa) offered by the EU for the products imported into their countries.
   2. Provision will be made for funding up to €32 million to address issues related to the implementation of the EPA in the SADC EPA countries.
   3. The EU will provide aid for trade related areas require development in the LDCs.
3. The EPA will be made to be compatible with the SACU operations, and will provide assistance to harmonise the import trade regime in the region.
4. The EPA will not be time limited, and will be legally binding once ratified by the member states.
5. The EPA provides opportunities not just in goods and commodities but also in the service sector.
6. The Rules of Origin are relaxed under the EPA to include ‘Cumulation Origin’ to include good where only the final value-addition is made in the exporting country.

What Opportunities does the EPA provide for European Businesses into Lesotho

• The EPA is meant to open up opportunities for increased trade between EU member states and SADC EPA member states such as Lesotho.
• The experience from a similar trade concession made by the United States Government called the Africa  Growth and Opportunities Act (AGOA) dating back 15 years, is one that match and even surpass the benefits both sides of the agreement.
• The AGOA provided opportunities for the location of third country investors in Lesotho, to manufacture apparel (clothing, textures, leather works etc) in Lesotho and provide jobs to up to 50,000 people and contributing about 15% to the country’s GDP. US retailers are able to access hand-stitched, custom-made clothing at a much lower cost.

 

• It has been the wish of the government of Lesotho to diversify the manufacturing sector and provide opportunity for service sector investment such as telecommunications, renewable energy, financial services and education. This is the opportunity that remains to be fully exploited.

---

 

http://www.trade.gov.ls

http://www.europa.eu/

Lesotho’s key growth sectors over the medium term are manufacturing, tourism, textiles and apparel, services, mining, high-value agriculture and small/medium and micro enterprises.

Lesotho has undergone significant industrial expansion in the past years, with numerous international textile and garment firms having successfully established their manufacturing concerns in the country. Further development in this sector has been prioritised due to its ability to create sustainable employment opportunities, thereby contributing substantially to poverty alleviation.

While Lesotho is very strong in the clothing, textile and footwear sector, there are also investment opportunities in the following emerging sectors:

• Knitted Fabric Mill, Accessories and Packaging
• Leather and Footwear
• Assembly of consumer electrical and electronic appliances
• Food Processing
• Water Bottling
• Plastic Products
• Resources-based Projects e.g. ceramic ware, brick-making, sandstone and mining of minerals
• Environmental Projects e.g. Waste Recycling
• Development infrastructure in the tourism sector including amongst others: accommodation and hospitality facilities, tour operation and guiding, boating and water related recreational activities, health retreats, and high altitude sports training facilities.

 

Please click here for further details on Lesotho priority sector for investment opportunities.

Please click here for a copy of 'The ABC of Doing Business in Lesotho'.

 

Top

 

 

 

Textile and Apparel Industry

 

Lesotho is a country paving a new path for development, one that successfully takes into account social as well as economic factors. With duty and quota free access to regional and global markets, the successful development of its apparel and textile industry and an upcoming branding initiative to make 'Made in Lesotho' a global trademark, Lesotho is fast becoming an African investment destination of choice, while still maintaining fair and ethical labour standards.

 

Lesotho garment firms specialise in the production of denim garments (mainly jeans and garments made from cotton knit fabrics, such as t-shirts and leisure wear). It is estimated that Lesotho's 42 apparel firms each year make 90 million knitted garments, 26 million pairs of jeans per year! The Formosa denim mill uses African cotton to make a minimum of 6,300 tons of denim fabric a year, and about 10,800 tons of cotton (and cotton blends) yarns which is suitable to make knit fabrics.

The industry is now the largest formal sector employer in the country, employing more than 38,000 people.

 

Lesotho continues to remain the largest sub-saharan exporter of garments to the USA, with an estimated 85% of total exports going there. Purchasers of Lesotho's garments include well known brands such as: GAP, Reebok, Levi Strauss, Ralph Lauren, Walmart, Calvin Klein Jeanswear and J.C. Penney, amongst others.

 

The Edun clothing line, a socially conscious clothing company created by Ali Hewson, Bono and New York clothing designer, Rogan Gregory, operates in Lesotho. Hewson's goal is to build a business that makes beautiful clothing in developing countries, giving sustainable employment and providing trade potential.

 

A good news story for consumers in Ireland is that denim products manufactured in Lesotho are now on the shelves in Penneys (Primark) stores in Ireland. Check out the shelves the next time you are shopping there.

Please click here for a concise listing of Lesotho Manufacturing Companies.

 

Top

 

Water

 

Water is Lesotho's most important natural assest as well as being the country's largest single source of foreign exchange earnings and otherwise known as 'White Gold'. Lesotho is one of the most important catchment areas in southern Africa. Rainfall together with winter snowfalls provides an estimated 5.5 billion cubic metres of water annually, and renewable groundwater resources some 340 million cubic metres a year.

Since 1984, efforts have been focused on developing these resources for export through the Lesotho Highlands Water Project, which today, provides the country with a steady stream of royalties.

Supplying the Republic of South Africa with millions of cubic metres of water per year, the Lesotho Highlands Water Project (LHWP) is the largest and most ambitious long term water scheme of its kind in the continent, and has done much to develop the region's water supply. The Lesotho Highlands, with its high rainfall and surface area of high basalt mountains - the Maloti - is an outstanding catchment area.

The project aims to address the needs of South Africa's rapidly expanding Gauteng province, which generates almost 60% of the country's industrial output and 80% of its mining output, and where over 40% of South Africa's population lives. The province needs more water than its main source, the Vaal River, can provide.

The Lesotho Highlands Water Project captures most of the excess water from rainstorms in the Orange/Senqu River catchment and transfers it to the Vaal River system, at the same time ensuring the sustainability of life forms dependent on flows downstream of its storage dams.

Construction on phase 1A of the project began in 1984, and the first dam, Katse, began delivering water in 1998. Construction on phase 1B of the project began in 1998, and comprises the 145 metre high Mohale Dam on the Senqunyane River, the 32 kilometre Mohale Tunnel linking Mohale Dam to Katse Dam, and the 6 kilometre Matsoku weir and tunnel, which diverts flood water from the Matsoku River into the Katse reservoir.

In 2005, Lesotho and South Africa signed an agreement for a R53 million feasibility study for Phase II of the LWHP, which will include a major dam on the Senqu River.

 

Water Bottling Investment Opportunities

As referred to above, Lesotho's major natural resource is water and it is considered one of the most pure in the world with very little microbiological and chemical contamination which does not require intensive treatment. With increasing fears of water borne diseases, people are voting with their wallets when they buy bottled water.

 

Bottled water is also considered a food product internationally, thus investment in water bottling is necessary since this would result in a positive impact on public health in the region, by providing safe drinking water and soft drinks in areas with poor water supply quality.

 

 

Top

 

Sandstone

Sandstone Deposits are found all over Lesotho and can be exported in different forms and thicknesses. The whole industry is in the capable hands of small artisans with limited investment capabilities.

 

In Lesotho, sandstone is extensively used in the construction of residential houses, office buildings, commercial complexes, hotels, restaurants and special monuments. The demand for sandstone slabs and tiles as well as veneering stones has been increasing and different applications and designs are being made. For example, sandstone fireplaces are a very attractive furnishing option.

Joint venture partnerships are encouraged with local companies, which cannot only create value addition, but also generate employment and earn foreign exchange for the country, while reviving the talent of artisans in a significant manner.

 

Top

 

Diamond Mining

 

In present-day Lesotho, the exploitation of diamonds occurs in the Maluti range of mountains in the north-east of the country. Lesotho has several diamond dealers as well as two diamond cutting enterprises.

 

The Lets'eng Diamond Mine, jointly owned by the Gem Diamond Mining Company of Africa and the Lesotho government, reopened in 2003 and is the highest diamond mine in the world, at over 3km above sea level. The mine produces the highest proportion of large stones of any mine in the world and is famous for its high quality 100 plus carat stones. In 2006, the biggest diamond to be found in 13 years, the "Lesotho Promise," at 603 carat (120 grams) was found at Lets'eng. This was the 10th largest white diamond ever to be found in the world.

 

In 2006, an agreement was concluded between the Lesotho Government and Kao Diamond Mine Ltd, regarding a Mining Agreement and Lease diamond operation in one of the largest of several kimberlite pipes in Lesotho, the 20ha Kao pipe. Other diamond mines are also in existence.

 

For Trade and Investment queries, please contact the Embassy in Dublin.

 

The Lesotho National Development Corporation (LNDC) is responsible for promoting Lesotho as an attractive investment location for both foreign and indigenous investors.

 

For a concise overview on trade and investment opportunities available in Lesotho and for more information on the LNDC, please log onto www.lndc.org.ls

 

Lesotho's small domestic market obliges her to adopt an export-led growth and expanded international trade, particularly in the globalised marketplace of the 21st century. An essential element of this strategy is to increase Foreign Direct Investment, which will bring the established international trade links and superior technological and business needed to augment the capacity of local producers and help diversify the economy.

Lesotho has a substantial consumer market on its doorstep, as well as being in close proximity to the port of Durban on South Africa's east coast. This gives it access to South Africa's first class infrastructure and communications networks, and through this the wider international community, making it suitable for export-orientated manufacturing industries. Foreign trade benefits from regional integration within SADC and SACU, while Lesotho's status as an LDC gives it duty-free access to the markets of industrialised countries.

Lesotho's political and regulatory environment is stable and investor friendly, with its free market economic system forming the basis for sustained development and growth. The legal framework is solid and based upon the rule of law, as demonstrated by anti-corruption cases upheld by the best judges in the world. The country's labour force is young, predominately English-speaking, highly versatile and trainable. Serviced industrial sites and factory shells are available for rental at competitive rates, with a subsidy provided to investors who erect their own factories at designated sites. Investment is protected through the Multilateral Investment Guarantee Agency (MIGA).

A favourable fiscal and financial environment has been created to promote an attractive investment climate in Lesotho. This includes:

• Tax Incentives - 0% tax on income generated from exporting manufactured goods outside of the Southern African Customs Union (SACU)
• Financial & Export incentives - these include an export finance facility, long term loans and/or equity participation and zero rated exports under the Lesotho VAT system.
• Lesotho Duty Credit (DCC) scheme - conditions for participating in the scheme are that a company must manufacture within SACU and export its textile or clothing products outside the area. The DCC scheme gives a rebate on import duty based on the value of goods exported

For further information on 'Doing Business in Lesotho', please log onto the following websites
or call the Embassy for a copy of the 'Practical Guide to Doing Business in Lesotho'.

www.trade.gov.ls
www.lndc.org.ls