Lesotho National Development Corporation

Textile Design Hubs

Invest in Lesotho’s

Textile Design Hub

LESOTHO
Textile Design Hub: A unique opportunity for an international investor to drive innovation and growth in the textiles sector.

Introduction

 Textile Design Hub: A unique opportunity for an international investor to drive innovation and growth in the textiles sector.

This includes the production of textiles and garments using renewable energy and sustainable processes.

The Lesotho public and private sector seek an international investor and technical partner for this unique project and to showcase national resources

Convenient
export to neighboring
markets in the
SADC region.

Strengths &
Opportunities

The Lesotho government, industry, the tertiary education sector, local investors and entrepreneurs wish to engage with international investors to secure critical design and innovation infrastructure for the country, located in the capital, Maseru.

Lesotho’s base of graduates, skilled textiles workforce and university innovation hubs will feed into the design hub. Mentorship, trade access, technical support and finance will be the key elements of the design hub’s offering. Partners will include major manufacturers, brands and institutes in the global garments and textiles industry.

THE MASERU TRAVEL TO
WORK AREA HOLDS
200 000
OF THE NATIONAL
POPULATION OF 2.14M

The estimated labour market for innovation/ ICT employment is potentially up to 5,000.

This labour pool can be extended through training and skills development, then applied to sustainable businesses and employment opportunities.
OF THE POPULATION 

The fashion design and materials sector is a niche part of global textiles and garments. Lesotho features a unique culture of design. It also has a commitment to sustainably produced natural materials (including leather, wool, mohair, new vegetable materials). This is supported by a burgeoning international garments and textiles industry as well as textiles and graphic designers.

Additional sub sectors and activities present opportunities in export oriented industries including work-wear, textiles accessories such as buttons and zips, blankets, car seat covers and other automotive textiles.

Lesotho can contribute to global industry innovation and the production of safe textiles and garments using renewable energy. The elimination of potentially haLSLdous substances and improved production processes fits with Lesotho’s unique natural environment. Examples include the development of new and sustainably produced textile materials, as well as anaerobic digestion and composting processes at key stages of the value chain.

Strengths &
Opportunities

At present, Lesotho relies on South Africa’s infrastructure for compliance with international markets standards and technical regulations.

The country also seeks to strengthen its intellectual property (IP) commitments in order to exploit indigenous designs and move up the value chain.

THE LESOTHO DESIGN HUB

 The Lesotho design hub will be a key contributor to design, innovation and technology transfer, working closely with other innovation centres in the country and in neighbouring South Africa.

As the first of its type to be established in Lesotho, investors can be assured of the full support of the government, local stakeholders and international development institutions.

Lesotho features:
  • Unique culture of design.
  • Access to sustainably produced natural materials (including leather, wool, mohair, new vegetable materials).
  • A burgeoning Lesotho indigenous garments and textiles industry.

For this, it seeks to stimulate partnerships with
design hub investors, major manufacturers,
brands and institutes in the global garments
and textiles industry.

Furthermore, the government of Lesotho is determined to respond to the impact of climate change and take preventative measures in its own industry.

THE MASERU TRAVEL TO WORK AREA
The Maseru travel to work area (TTWA) holds 200,000 of the national population of 2.14m. Lesotho has a modest but highly responsive talent pool of ICT, business skills and experience. Tech accelerator programmes that focus on training, mentoring, finance, apprenticeships are needed in key centres across the country. The Maseru design hub would lead this initiative.

Markets

Lesotho’s membership of SADC and SACU allows Lesotho to export deciduous fruit to SADC countries without being subject to quotas or tariffs. The estimated market size is 300 million consumers. Lesotho’s geographical position and good road connections with South Africa permit short lead times and reasonable costs to transport produce from the Maseru area to Johannesburg, Cape Town and Durban (the port of dispatch for exports by sea). Lesotho has already trialled the export of fruit to South Africa to supply supermarket chains, with encouraging results.

Apricots and peaches are AGOA-eligible, so they can be exported to the USA, provided that US health standards are met. That potentially opens up a market of 300 million consumers. Apples, apricots, peaches and plums may also be exported tariff-free to the EU under the EU/SADC EPA, again subject to compliance with relevant standards. The 27 EU member states have a population of around 450 million.

Beyond those markets Lesotho could also exploit its trade preferences under the Generalized System of Preferences to export to countries such as China, Japan, Australia, Canada and Turkey.

Fiscal Incentives

Corporate tax: 10% on profits from sales of agricultural goods produced in Lesotho Training: Cost of Lesotho citizens allowable at 125% for tax purposes

Withholding tax:

  • 10% on service contracts with non-residents
  • 25% on dividends distributed from income by resident companies to non-resident shareholders
  • No withholding tax on dividends distributed to Lesotho residents

VAT:

  • 15% on goods and services sold in Lesotho
  • 0% on direct exports

Risk guarantees:

  • Partial credit guarantee through the LNDC
  • Tailor-made, agriculture-specific loan through the Post Bank of Lesotho

Specific incentives for the horticulture sector:

  • Access to a Sesotho language technical training manual for local workers in on-farm and crop management
  • Access to demonstration and crop pilot plots
  • Facilitation support to identify and mobilize village level farmer engagement
  • Access to technical data on historical crop performance

Support from the LNDC includes:

  • Serviced industrial and commercial sites at competitive rentals
  • Provision of industrial and commercial buildings at competitive rentals
  • Financial assistance on a selective basis
  • Investment facilitation services
  • Assistance with permits and licenses
  • Assistance with company registration
  • Assistance with industrial relations issues
  • Appraisal of investment projects
  • Assistance with preparation of project briefs for the Environment Impact Assessment (EIA) Certification

The project would align with SDGs 1, 2, 8, 9, 10 and 15.

 Belo Industrial Park, Butha Buthe.

Financial Analysis

TOTAL INVESTMENT
A total investment of approximately:

LSL* 302k

comprising fixed assets of LSL 16.5 million, pre-production expenditure of LSL 1.6 million and initial working capital of LSL 495 thousand will be required. 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 3 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.
NET PROFIT
The enterprise’s annual net profit after tax increases from

LSL* 185k

in year 1 to approximately:

LSL* 280k

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
NOTE
The financial analysis of the textile Design Hub 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.
For more information please contact:

General Manager: Investment & Trade Promotion
Lesotho National Development Corporation
Email: [email protected]

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