Trade Overview
Lesotho, the "Mountain Kingdom," leverages its unique geographic position within Southern Africa and its preferential market access to operate as a specialised hub for export-oriented manufacturing. The country's trade profile is dominated by a highly successful textiles and apparel industry, which has become a critical supplier to major brands in the United States. Beyond textiles, Lesotho is a vital exporter of water to South Africa, a unique and strategic trade relationship. The government is focused on diversifying its export base by developing agro-processing and light manufacturing to further capitalise on its duty-free access to regional and global markets.
Why Trade with Lesotho
Lesotho has a well-established and resilient textile and garment industry, recognized globally for its quality and reliability, making it an ideal sourcing destination.
As a member of SACU and the Common Monetary Area (CMA), trade with South Africa is seamless, with no tariffs or currency exchange friction, effectively extending the South African domestic market to businesses in Lesotho.
Lesotho is one of the most successful utilizers of the African Growth and Opportunity Act (AGOA), providing manufacturers with duty-free access to the lucrative United States market for more than six thousand products, with apparel being the key export.
The country offers a skilled and competitive workforce, especially in the textile and light manufacturing sectors.
Lesotho's export of high-quality water to South Africa's industrial heartland through the Lesotho Highlands Water Project is a unique and critical component of regional resource trade. Lesotho has an untapped potential in its natural resource sector that includes rare earth minerals such as uranium, coal, and gas. The country is also renowned for its wool and mohair trade, which contributes significantly to the rural economy and contribution to export earnings. Additionally, the country ‘s favourable climate supports agricultural activities, offering opportunities for growth in commercial farming.
The Lesotho National Development Corporation (LNDC) actively supports export-oriented businesses, providing serviced industrial sites and facilitating trade.
Madagascar: A Unique Island of Opportunity for Global Trade
Madagascar's trade policy is built on leveraging preferential access to major global markets while deepening its integration within Africa to foster investment and sustainable growth, guided by the national "Plan Emergence Madagascar" (PEM).
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Global & Bilateral Market Access:
- USA (AGOA): The African Growth and Opportunity Act (AGOA) is a cornerstone of Madagascar's industrial policy, providing its vital textile and apparel industry with duty-free access to the U.S. market.
- EU Economic Partnership Agreement (EPA): The interim EPA provides Malagasy exports with duty-free, quota-free access to the European Union, the primary market for its agricultural and fisheries products.
- World Trade Organization (WTO): As a member since 1995, Madagascar is integrated into the global rules-based trading system.
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Continental & Regional Integration:
- Dual Bloc Membership: Madagascar is a member of both COMESA (Common Market for Eastern and Southern Africa) and SADC (Southern African Development Community), allowing it to tap into multiple regional value chains.
- AfCFTA (African Continental Free Trade Area): Madagascar has ratified the AfCFTA Agreement, viewing it as a long-term catalyst for expanding its exports of value-added goods across the continent.
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Investment Promotion:
- Economic Development Board of Madagascar (EDBM): The EDBM acts as the central one-stop shop for investors, facilitating business registration, providing information on incentives, and supporting the implementation of investment projects.
Madagascar boasts an exceptionally diverse resource base. Its strategy focuses on adding value to its world-famous agricultural products while developing its significant potential in textiles, mining, and the blue economy.
Current Trade Snapshot:
- Primary Exports: A unique mix including vanilla (world's largest producer), nickel, textiles/apparel, cloves, and seafood like shrimp.
- Key Imports: Fuel, machinery, vehicles, and food staples like rice, presenting opportunities for domestic production and energy development.
Focus on Manufacturing & Value Addition:
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Gourmet Agriculture & Fine Foods:
- Vanilla & Spices: Moving beyond exporting raw vanilla beans to producing high-value extracts and "fair trade" or organic certified products for premium markets. Similar strategies are applied to cloves, cocoa, and pink peppercorns.
- Lychees & Tropical Fruits: Focus on improving cold chain logistics to increase exports of fresh lychees and develop processing facilities for juices and canned fruits.
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Textile & Apparel Industry:
- Established Hub: A major employer and exporter, the textile sector is a cornerstone of the formal economy, producing garments for major international brands under the AGOA agreement.
- Growth: Potential lies in moving to higher-value garments, using sustainable and local raw materials like cotton, and improving vertical integration.
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Mining for the Future:
- Critical Minerals: Madagascar has significant deposits of minerals essential for the green transition, including nickel, cobalt, and graphite. The focus is on ensuring responsible extraction and exploring opportunities for primary processing domestically.
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Blue Economy & Aquaculture:
- With over 5,000 km of coastline, the potential is immense. The country is a significant exporter of farmed shrimp (prawns) and is working to expand its aquaculture sector sustainably.
As a large island nation, efficient port and customs operations are critical. Madagascar is investing in upgrading its key infrastructure and digitalising its trade processes.
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Port Infrastructure - The Toamasina Hub:
- The Port of Toamasina is the country's main international gateway, handling about 80% of its trade.
- A major port expansion project, backed by international partners, is underway to double its capacity, dredge deeper berths for larger vessels, and build a new container terminal, which will significantly reduce shipping costs and time.
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Digitalisation of Trade:
- GASYNET: This public-private partnership manages Madagascar's electronic trade facilitation systems.
- Single Window (Tradenet): The national single window system streamlines processes by providing a single digital platform for all stakeholders (customs, port authorities, ministries) to manage import/export documentation, enhancing transparency and reducing clearance times.
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Logistical Challenges:
- While port and customs systems are being modernised, improving internal logistics, including road and rail networks, remains a key challenge and a priority for connecting production zones to export gateways.
Investment Overview
Lesotho offers a unique and stable platform for investors seeking to establish highly competitive, export-focused manufacturing operations. The kingdom's key advantages lie in its deep integration with the South African economy and its preferential access to the US market under AGOA. The government is committed to building upon its success in textiles by diversifying into other light manufacturing and agro-processing sectors. The LNDC provides a one-stop-shop for investors, offering attractive incentives and world-class industrial infrastructure to support the establishment and growth of new enterprises.
Lesotho — Foreign Direct Investment (FDI) Statistics
FDI in Lesotho is highly concentrated in the textile/apparel sector, which relies on the US preferential trade deal (AGOA)— now expired—and in the water project infrastructure. Political instability and macroeconomic uncertainty pose major challenges to attracting broad-based investment.
–$30 M
FDI Inflow (Net)
Lesotho is one of the few SADC nations to recently record a net FDI outflow, indicating more capital left the country than entered, potentially due to equity withdrawal or repayment of inter-company debt.
–0.55%
FDI Inflow (% of GDP)
The persistent low or negative FDI-to-GDP ratio reflects underlying investor concerns and heightened risk perception.
27.22%
Gross Capital Formation
Gross Capital Formation as a share of GDP (2023 estimate), indicating relatively high capital spending despite weak FDI inflows.
Textiles & Water
FDI Concentration
Investment is heavily concentrated in textile/apparel (AGOA-driven) and the Lesotho Highlands Water Project, limiting diversification and broad-based private-sector development.
Top 5 Investors
- Taiwan — dominant investor in the textile/apparel sector.
- China — major investor in manufacturing and construction.
- United States (US) — anchor apparel investments relying on AGOA access.
- South Africa — key investor in finance and distribution.
- Belgium — historically significant partner for diamonds.
The FDI stock is dominated by countries linked to Lesotho’s core pillars: textiles/apparel, water infrastructure, and diamonds.
Where is the FDI Going? (Top Sectors)
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Manufacturing (Textile/Apparel)
Rank 1
The main source of formal private-sector employment, historically driven by AGOA preferences into the US market.
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Water & Infrastructure
Rank 2
The Lesotho Highlands Water Project (LHWP), a multi-billion dollar joint venture with South Africa, attracts major project-based investment.
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Mining
Rank 3
Primarily diamonds, which remain a key export commodity and a source of high-value foreign exchange.
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Financials / Services
Rank 4
Supporting the small domestic financial market and facilitating trade, remittances, and sectoral investment.
Source: The Global Economy / World Bank (2024).
Why Invest in Lesotho
Lesotho offers ready-built factory shells and fully serviced industrial sites, allowing investors to set up manufacturing operations quickly and efficiently.
Capitalize on duty-free access to the United States and the entire Southern African Customs Union (SACU), a dual advantage few countries can offer.
The Lesotho Highlands Water Project not only generates revenue but also provides opportunities for hydropower generation. The country also has significant untapped potential for wind energy.
With a unique, cool climate, Lesotho has potential in high-value agriculture. Opportunities exist in processing deciduous fruits (apples, peaches), vegetables, and cannabis for medicinal purposes.
The country has a strong track record of developing a skilled workforce to meet the exacting standards of global apparel brands.
The LNDC acts as a dedicated partner to investors, providing support with site selection, permits, and access to a range of fiscal incentives designed to boost export-oriented businesses.
Key Investment Sectors in Lesotho
Vertically integrated operations from fabric milling to the production of high-quality denim, knitwear, and sportswear for major international brands.
Processing of fruits and vegetables into juices, jams, and canned products. Cultivation and processing of medicinal cannabis for the pharmaceutical industry.
Assembly of consumer electronics, electrical components, and automotive parts, primarily for the South African market.
Development of hydropower projects as part of the Lesotho Highlands Water Project and investment in wind farms to capitalize on the country's mountain topography.
Development of niche tourism experiences, including mountain resorts, adventure sports (skiing, hiking), and eco-lodges, leveraging the kingdom's stunning natural beauty.
Key Investment Sectors in Lesotho
These incentives support regional development, integration, and competitiveness across Southern Africa in alignment with Lesotho's economic cooperation goals.
Tax & Fiscal Incentives
- Tax compliance support: Dedicated assistance to help investors understand and meet their tax obligations.
- MAP per tax treaties: Mutual Agreement Procedures available under applicable tax treaties to resolve cross-border tax issues.
- Efficiency of tax administration: Ongoing reforms to streamline tax filing, assessment, and payment processes.
- Tax treaties & trade agreements: Access to a growing network of treaties that reduce double taxation and support trade.
- Dispute resolution: Established mechanisms to address tax disputes fairly and transparently.
Infrastructure & Skills
- Serviced industrial sites: Access to fully serviced industrial land and ready-built factory shells at competitive rental rates.
- Training grants: Financial support available for skills development and training of the local workforce.
Business & Operational Support
- Access to finance: The LNDC can assist companies in securing financing through local and regional development finance institutions.
Success Stories
Illustrative examples given the scale of the economy; focus on potential and established niches.
Global Apparel Manufacturing
Companies like Nien Hsing Textile (Lesotho) have established large-scale, vertically integrated operations in Lesotho, producing high-quality denim and garments for iconic US brands like Levi's and Gap, making the country a powerhouse in African apparel manufacturing.
Strategic Resource Management
The Lesotho Highlands Water Project is a multi-billion-dollar, bi-national project that successfully harnesses water resources for export to South Africa while generating hydroelectricity for Lesotho, representing a major engineering and economic success.
Regional Integration
Several companies in the light manufacturing sector have set up operations in Lesotho to assemble goods specifically for the South African market, taking advantage of the seamless market access under SACU.
Lesotho Investment News
Isuzu Dealer Network Expands to Strengthen Lesotho’s Automotive Market
EU-Supported Hydropower Program Advances Highlands Energy Expansion
Quthing Grains Project Boosts Local Agro-Processing Capacity
Eco-Tourism Investments Expand Across Lesotho’s Mountain Retreats
Technology Overview
Lesotho's technology sector is emerging with a pragmatic focus on supporting its key economic pillars: manufacturing, agriculture, and government services. The national digital strategy is centered on expanding connectivity, improving digital literacy, and deploying targeted technology solutions to enhance productivity and create new opportunities. With growing mobile penetration and government commitment to digital transformation, Lesotho is laying the groundwork for a more efficient and connected economy.
Technology Facts & Figures
Key Technology Sectors in Lesotho
Deploying technology to improve the efficiency and competitiveness of the vital textile and apparel industry. This includes supply chain management software, production planning systems, and technology for ensuring compliance with international standards.
Expanding on mobile money platforms to offer a wider range of financial services, including micro-loans, insurance, and digital payment solutions for workers and businesses.
Using mobile technology to provide farmers with weather information and market data. Opportunities exist in developing systems for managing high-value crops like medicinal cannabis, including traceability and quality control.
The government is a key driver of tech adoption, with opportunities in the development of systems for civil registration, business licensing, tax administration, and other online public services.
Utilizing technology to improve healthcare access in a country with challenging mountainous terrain. This includes telemedicine for remote consultations and mobile health solutions for community health workers.
Technology for monitoring and managing water resources and renewable energy generation (hydro and wind), ensuring the efficient operation of these critical national assets.
Leading Technology Hubs & Initiatives in Lesotho
As the capital and economic centre, Maseru hosts the country's main telecommunications providers, government ICT departments, and emerging innovation spaces like The Hub Morija.
The LCA is the independent regulator of the communications sector, responsible for promoting competition, ensuring quality of service, and managing the rollout of new technologies and infrastructure.
This is a key government initiative aimed at creating a centralized and secure digital platform for all government services, improving efficiency and reducing administrative burdens.
An innovation hub that provides a space for young Basotho to develop digital skills, incubate their tech ideas, and collaborate on projects, fostering a grassroots tech culture.
Various international partners are working with the government to support digital literacy programs and the development of ICT infrastructure, playing a crucial role in building the foundations of the digital economy.
Lesotho Technology News
Lesotho Launches Digital Government Infrastructure for Streamlined Public Services
FinTech in Lesotho: Mobile Payments Fuel Inclusive Economic Growth
Lesotho Invests in 5G and Fiber Infrastructure to Drive Connectivity
Digital Farming Solutions Take Root in Lesotho's Mountainous Terrain
Unlock The Potential Of Lesotho
Lesotho is positioning itself as an emerging investment destination in Southern Africa, leveraging its deep trade integration, political stability, and export-oriented economy. With a strong foundation in textile and apparel manufacturing, growing momentum in high-value diamond mining, and government-led initiatives to diversify into agribusiness and light manufacturing, Lesotho presents attractive opportunities for investors. Its strategic location within SACU, preferential market access through AGOA and the EU EPA, investor-friendly environment, and commitment to industrial development make it a compelling destination for international businesses seeking access to regional and global value chains.