Industrial upgrading and development in Lesotho’s apparel industry: global value chains, foreign direct investment, and market diversification

Spreading the gains? Prospects and policies for the development of regional value chains in Southern Africa

“…In terms of Southern Africa apparel exports, these transnational firms still dominate (large-volume CMT) exports from Lesotho to the US market, and play a role in maintaining relatively minor exports to the USA from Madagascar and Mauritius. These transnationals are locked into US value chains and, given their product profile, neither can nor wish to expand into the regional market (Morris and Staritz 2017).…”

“…Another major regional investment shift has occurred through South African investment in the Lesotho and Swaziland apparel industries. Seeking to escape what they regarded as a restrictive domestic labour regime, a significant number of South African firms relocated their apparel production, moving plants into neighbouring Lesotho and Swaziland, and used this regional tariff-free base and their existing value chain linkages with retail buyers to export their products back into South Africa (Morris and Staritz 2017;Morris et al 2011;Morris et al 2016).…”

“…): (i) South Africa emerging as an economic hub and regional end market; (ii) buyers from South African retailers in RVCs taking advantage of tariff-free entry into the South African market (through SADC and SACU trade arrangements) and creating supply chains from Lesotho, Swaziland, Mauritius, and Madagascar; and (iii) new forms of regionally embedded FDI primarily from South Africa (into Lesotho and Swaziland) and Mauritius (into Madagascar).Preferential access to the South African apparel market changed the nature of the manner in which RVCs facilitated regional integration. Free trade membership of the SACU, with no rules of origin requirement, substantially expanded exports of apparel from Lesotho and Swaziland to South Africa(Morris and Staritz 2017;Morris et al 2011). Likewise, SADC's preferential trade access, requiring two-stage conversion rules of origin, allowed Mauritian and Madagascan exports tarifffree entry into the South African market(Morris and Staritz 2014).…”

Small African Economies in a More Uncertain Global Trade Environment: The Potential Impact of Post-AGOA Scenarios for Lesotho

“…Compared to other large apparel exporters, only a small part of value in exports is embodied in wages (see Figure 3). Lesotho remains stuck in a low-wage, low-skill, low-linkage segment with many foreign firms (especially from Asia) investing little in skills training or in developing backward linkages to domestic suppliers (Morris and Staritz 2016). 2011, unskilled labor makes up 87% of labor value added in textile and apparel exports ( Figure 4).…”

Supporting Lesotho's Economic Diversification and Trade Integration

“…As it has been the most dynamic export sector in recent years, much of the literature, including some articles and reports mentioned above focus on textiles and apparel. 7 From a value chain upgrading perspective, Morris and Staritz (2017) examine a diverse set of primary and secondary data as well as firm interviews and interviews with various government ministries' and agencies, and find that "the nature of the value chain and triangular manufacturing network in which Taiwanese-owned firms operate relative to their South African-owned counterparts appears to be the major reason for the limited levels of industrial upgrading and skills development within the Lesotho apparel sector." Thus, the South Africa-driven value chain offers greater potential for upgrading and for local linkages as South African firms -in their analysis -appear more interested in transferring more production functions from South African plants.…”