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The potential 50% tariff hike has led to buyers from the US not placing orders, resulting in factories being forced to close.
For illustrative purposes. Picture: iStock
Like a domino effect, garment factories in Lesotho are closing one after the other, as the Trump administration threatens a 50% tariff hike. The closure of these factories has left many without jobs.
In the same breath, Lesotho has experienced job losses after major US funding cuts to USAID and PEPFAR, led by the Department of Government Efficiency (DOGE). The department was formerly led by Elon Musk. Recently, T-Connect Lesotho, a reseller of Starlink, launched.
Musk recently stepped down from his position in DOGE to focus on his business interests. Starlink is his satellite internet service.
However, if the Trump administration is busy causing job losses in the country, how will people afford Starlink?
ALSO READ: Did Donald Trump get false info about Lesotho exports? Thousands of jobs are at risk
More job cuts on the table
The secretary-general of the National Clothing Textile and Allied Workers Union (Nactwu) in Lesotho, Sam Mokhele, told The Citizen he has recently been in a lot of meetings with employers over extensive lay-offs due to a lack of orders because of US tariffs.
While negotiations are ongoing on the potential 50% tariff hike, the Trump administration has imposed a 10% tariff. This has led to buyers from the US not placing orders, resulting in factories being forced to close.
Mokhele said the layoffs and retrenchments will negatively affect the lives of workers and their families. Looking at the bigger scale, he added that Lesotho’s economy is set to be negatively impacted.
Other sectors also affected
He touched on how some sectors will be indirectly affected. If there is no one going to the factories to work, it means hawkers selling around the factories will be affected because there will be no one to sell to.
The transport sector will also suffer because there will be fewer people to transport to work and fewer products to be transported. “The list is endless: retail, education, health and construction sectors will be affected. Together with trade unions.
“More factories are expected to lay off workers for now, and if the tariffs situation does not change for the better, we will be faced with retrenchments, followed by the shutdown of factories.”
One solution
Mokhele said the only solution he sees to this situation is for the Lesotho government to negotiate with the US government to reduce the tariffs to 10%, instead of the 50%.
“If negotiations do not go well, we will have a very serious problem. Also, market diversification is needed even though we are now under pressure from the current situation. This is something the government should have done while the situation was still normal.”
He also mentioned that he is unsure what will happen with the African Growth and Opportunity Act (Agoa), as it is set to expire in September. Lesotho exported duty-free to the US under it.
Agoa was established with the purpose of providing new market opportunities. Allowing Lesotho to export without paying taxes presented a significant opportunity for economic growth and job creation.
ALSO READ: South African education programmes hit hard as USAID shuts down
Disaster waiting to happen
Mokhele stated that employees will not receive payment for three months. The union has been engaging with employers, with no success, in efforts to secure payment for the employees.
“We approached the government for a subsidy, but there is nothing. Really, it is going to be a disaster if things cannot change at the end of the tariffs suspension by the US government.”
Starlink in Lesotho
Meanwhile, the Lesotho Communications Authority (LCA) granted Starlink a 10-year operating licence. The internet service’s presence in Lesotho is expected to create more than 10 000 jobs.
Lesotho is the 23rd African country to be licensed for the service. Others on the continent include Nigeria, Malawi, Zambia, Eswatini, Botswana and Ghana
T-Connect Lesotho CEO Phelane Phomane said they are not going to be selling megabytes, but rather time to use the internet without limitations, and it will cost less than a loaf of bread.
Starlink in SA?
Starlink is not available in South Africa. However, there have been talks around introducing Musk’s product to the country.
Musk claimed Starlink was barred from operating in South Africa because he is not black, an allegation South African officials refuted.
In May, Communications and Digital Technologies Minister Solly Malatsi published a policy direction to provide alternatives, paving the way for the Starlink satellite internet service in the country.
NOW READ: Inside SA government’s confused response to the USAid funding crisis
