Knit/Woven Fabric Mill
LESOTHO
Serve Africa, EU and North American markets with knit/woven fabric mills in Lesotho. Welcome to Lesotho’s textiles industry cluster!
Introduction
Lesotho’s attraction for knit/woven fabric mills investments include:
- Global market access on zero or low tariff arrangements depending on the knit or woven material
- Water and wastewater treatment facilities that support serviced plots or existing modern industrial units
- High labour productivity experienced by established international firms over several years.
- Government incentives that support investment and training costs.
- Raw materials can be accessed from the SADC region or easily imported through ports in South Africa.
Convenient
export to neighboring
markets in the
SADC region.
Strengths &
Opportunities
The government of Lesotho welcomes and fully supports socially compliant textiles production as one of its most important priorities of the 2020s.
(WRAP)
World Responsible Accredited Production (WRAP) certified businesses in Lesotho’s textiles industry cluster employ over
5,000
PEOPLE
Lesotho has a proven and growing demand for knitted, crocheted (HS60) or woven fabrics (HS54 HS55) the majority of which is for export. 25% of Lesotho’s established textiles cluster exports are of knitted/crocheted apparel and clothing (HS61).
LESOTHO’S MAIN
EXPORT PARTNER AT
80%
IS SOUTH AFRICA
and other SADC countries are (6.5%). About 14.3% of exports go to the United States mainly consisting of textile and apparel products under the AGOA facility.
Apparel and textiles accounted for 46.6% of exports, of which more than half were articles of apparel and clothing accessories (knitted or crocheted). (Lesotho Bureau of Statistics, 2016).
Lesotho makes for an ideal location for knit/ woven fabric mill operators seeking to secure their access to Africa, Europe and North America. Exports are set to grow further in coming years as AGOA, and its replacement agreement and the EU EPA agreement present opportunities for international trade.
Lesotho presents investors with a stable and democratic business environment. Although a developing country, Lesotho benefits from high standards of political governance and local industrial infrastructure. South Africa and neighbouring countries are easily served by overnight truck. International market access, through the Port of Durban, is just six hours trucking time away.
Project Assumptions
Knit/woven fabric mill investors will find serviced industrial plots inside established industrial areas. Investments are facilitated by Lesotho’s LNDC, through industrial site provision, introductions to the local industry cluster and potential partners/suppliers. Support will be given to apply for investment incentives and training grants.
The local value chain for garments and textiles is continually developing. It is with this in mind that Lesotho supports the use of sustainable, environmentally friendly materials and processes as well as 100% recycled raw materials to reduce the dependence on petrochemical raw materials
Knit/Woven Fabric Mill.
Financial Analysis
TOTAL INVESTMENT
A total investment of approximately:
LSL* 192m
comprising fixed assets of LSL 182m, pre-production expenditure of LSL 800k and initial working capital of LSL 9.1m will be required for the establishment of the Knit/Woven Fabric Mill enterprise. The graphs below illustrate a financially viable operation with the opportunity expected to generate a profit throughout its operational life.
In addition to the positive NPV and IRR, the initial investment cost of the project is expected to be fully recovered in just under 7 years. The investment opportunity also responds favourably to the Country’s developmental objectives through its positive socio-economic impact in terms of employment creation, economic agglomeration and potential forex earning opportunities.
The project’s annual net profit after tax increases from approximately:
LSL 23.5m
LSL 34.1m
in year 10. Similarly, the projected cash flows of the envisaged project indicate that it will generate positive net cash flows throughout the 10-year operational period.
Financial Analysis
Belo Industrial Park, Butha Buthe.
Nyenye Industrial Park, Maputsoe.
The financial analysis of the Knit/Woven Fabric Mill investment opportunity is computed over a ten-year period. Revenue and expenditure projections are in line with industry growth prospects and market potential and have been informed by and benchmarked against industry standards and norms. In addition, assumptions relating to inflation; depreciation and salvage value; and company tax have been worked out based on the existing laws
and directives of the country. The figures above represent high level estimates as of January 2021 and are not derived from a full feasibility study. Investors are advised to conduct their own due diligence.
Lesotho National Development Corporation
Email: ip@lndc.org.ls