Driving growth in textile sector

Driving growth in textile sector

MASERU

THE textile industry is central to Lesotho’s economy. With 45 000 workers, it is the largest private sector employer in the country.
It accounts for 92 percent of manufacturing jobs, most of which are held by women. The more than 40 factories generate 43 percent of Lesotho’s exports.

The sector’s contribution to the economy however goes beyond formal jobs and exports.
The survival of many economic activities, both formal and informal, is tied to the sector.

Textile workers are the lifeblood of the taxi industry, retail shops as well as catering and accommodation businesses. There are also other formal and informal businesses that feed off the sector.
Yet despite this apparent significance the economy remains largely dominated by foreign investors.

Only two of the 40-something textile factories are locally owned.
This trend which has been sustained for the past three decades is however slowly changing as more locals enter the sector. Although the new entrants remain relatively small, there are strong indications that local investors are willing to invest in their growth.

One of those locally owned factories is Afri-Expo Textiles which started in 2016.
Located in Ha Tikoe Industrial Park, Afri-Expo is a reflection of what is possible with determination and courage. It started at a time when the prevailing narrative was that Lesotho’s textile sector was dying. The markets were dry and wage disputes were wreaking havoc across the sector.

Galloping production costs were squeezing margins.
At the same time buyers were leaving in droves to cheaper producers in other countries whose governments were offering generous incentives to existing and potential investors in textile.
Yet Teboho Kobeli, Afri-Expo’s managing director, says he was not fazed by the gloom associated with the sector. Kobeli says his decision to go against the grain was based on his knowledge of the sector.

He has vast experience in the clothing business.
“The truth is that most of what we have been told about textiles in Lesotho is not true. I suspect it is meant to scare locals from getting into the sector,” he says.
“The business is sustainable if you do it well. Everyone wears clothes. You wear them from the day you are born to the day you die.”
“The market is there but you just have to tap into it by making the right products and having the right skills.”

That bravery is beginning to pay off in ways Kobeli never imagined.
Today the factory employees about 600 workers with a monthly production capacity of 10 000 units.
Kobeli says the company is struggling to meet the huge demand from buyers.

That is why he has roped in Sekhametsi Investment Consortium to provide the financial muscle and expertise to grow the company. Last year Sekhametsi bought a 30 percent stake in Afri-Expo for M10 million.
Kobeli says the long-term goal is to establish factories in the ten districts and employ 10 000 people.

“AGOA (African Growth and Opportunity Act) is coming to an end soon and it’s likely that most foreign investors will leave the country. The disaster can only be avoided if Basotho participate in the textile sector at ownership level,” Kobeli says.
AGOA is the trade facility for poor countries to export textiles to the United States duty-free.

Agoa expires in 2024 and there is uncertainty over its renewal. Some foreign-owned textiles are said to be already getting ready to jump ship when AGOA expires. Afri-Expo is one of the few companies that is unlikely to be affected by AGOA’s ending.
“Lesotho is sitting on a time bomb that only Basotho can defuse by starting their own factories to create employment. There is no doubt that the foreign investors will leave. What is however certain is that we have the means and skills to fill that void as locals,” Kobeli says.

The company is focusing on the regional market which is less susceptible to the whims of the United States’ lawmakers. Kobeli says the regional market has served the company well.
“With Sekhametsi’s help we can grow the business and increase our production.”
Palo Kotelo, one of the two Sekhametsi representatives on the Afri-Expo board, says the investment fits well with the consortium’s growth strategy.

“We see the potential in this business but we are also looking at ways to create sustainable jobs for Basotho. We are pleased by the direction that the company is taking,” Kotelo says.
“It is time for Basotho to control their destiny by investing in the key areas of their economy. No country has ever developed by relying solely on foreign investment. The real drivers of any economy should be the locals.”

The factory focuses on the Cut, Trim and Make business which is at the very bottom of the textile manufacturing chain.
The plan, Kobeli explains, is to move up the value chain to make its own products.
That would allow the factory to put an additional 30 percent mark-up on its products.

But to do that Afri-Expo has to conquer several hurdles.
For instance, the factory in Ha Tikoe has become too small for the company’s operations. Storage and working space have become a problem.
“We are crammed in this area. We cannot increase production unless we get a larger factory,” he says.
The other problem is a laundry to wash denim garments, the factory’s main products.

Lesotho has small textile laundries that cannot meet the market demand.
Afri-Expo has to send its products to a laundry in Durban.
“It’s costing us money because we have to transport the garments to Durban. We also lose time while waiting for the products to come back.”
At times some of Kobeli’s products are stuck in Durban for months because the laundry is overwhelmed.

Using the laundry in Durban also comes with logistical challenges at the borders.
It also makes Afri-Expo’s products more expensive.
Kobeli says they are now working on establishing a laundry that will serve not only Afri-Expo but the whole industry.

“With our own laundry we can increase our margins by 25 percent. We can hire more people and increase our productions because we are able to accept more orders.”

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