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Kobeli questions dubious investment climate

The Managing Director of Afri Expo Textile


May 19, 2021 4 min read

4 min read


THE current state of trade and investment climate in the country are at a low web and have been exacerbated by the raging COVID-19 pandemic and its aftermaths.

While consumer spending has declined significantly because of job losses, some industries such as tourism have also suffered a devastating blow due to among others, restrictions on movement of people.

Top Lesotho industrialist Teboho Kobeli says it will take years for trade to normalise and for investors to return to Lesotho, assuming the investment climate also returns to normal or improves.

Mr Kobeli is the Managing Director of Afri Expo Textile, the largest domestic textile producers.

He says conditions for investment are not improving but rather continue to take a dip.

“There are several reasons why the status quo is not improving and that include lack of a clear policy to assist indigenous businesses. There is also lack of a plan to drive self-sufficiency in food production,” Mr Kobeli notes.

He adds: “There is a disoriented political will and action, with a tendency to look at own self or foreigners instead of small Basotho-owned businesses.” 

On the issue of Africa Free Trade that is topical on the Continent, Mr Kobeli says Lesotho is a player as it has also ratified the free trade agreement.

However, Basotho are yet to reap the benefits and education led by the concerned government ministry, he also says.

Some of the benefits to be accrued from the deal include access to a huge market on the continent, elimination or reduction in tariffs, trade barriers and taxes. 

And if correctly constituted, the agreement will provide the continent with an opportunity for collective bargaining or trade.

To the economy it brings the following: access to a huge market for any type of product manufactured in Lesotho, such as textiles and water.

But on a negative side, dumping of foreign products will depress fragile industries such as dairy, poultry and textiles amongst others.

Commenting on the status of the African Growth and Opportunity Act (AGOA), Mr Kobeli says for now, the deal is still operational but sadly predominantly in the hands of Asian investors.

According to the current treaty, it is scheduled to expire by the end of 2025. At the moment, there is no clear indication as to whether or not it will be renewed.

The government of Lesotho has not pronounced itself on the issue; however, the key risk is that should it not be renewed, more than 35 000 workers employed in the industry will lose their jobs.

At its peak, AGOA had produced about 45 000 direct jobs and thousands of indirect and induced jobs.

AGOA’s contribution to the economy is quite significant as far as direct employment is concerned because of the salaries earned and spent within the economy of Lesotho.

 For example, 35 000 jobs at M2 020 minimum salary amount to over M70 700million in overall salaries paid by the textiles employers.


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On the negative side, Mr Kobeli says Lesotho is missing a huge amount of revenue in the form of taxes because proceeds from the sale of textile products do not come to Lesotho but rather go directly to the Asian investors' countries of origin.

While the industry has provided Lesotho nationals with key skills for sewing, cutting, packaging and others; there is a huge risk as managerial and supervisory skills have not been imparted to Basotho.  

This is a great risk for the industry should the Asian investors leave the country.

For now, AGOA is present; however the future is uncertain because the current treaty has not been ratified beyond 2025.  

Mr Kobeli said the issue of substitutes is also very unclear and one is of the opinion that they do not exist.

“This is justified by the lack of indigenous textile policy, lack of financial and technical assistance to Basotho and satisfactory participation by Basotho in the industry.”

 

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