Small, mountainous, and completely landlocked by South Africa, Lesotho depends on a narrow economic base of textile manufacturing, agriculture, remittances, and regional customs revenue. About three-fourths of the people live in rural areas and engage in animal herding and subsistence agriculture, although Lesotho produces less than 20% of the nation’s demand for food. Agriculture is vulnerable to weather and climate variability.
Lesotho relies on South Africa for much of its economic activity; Lesotho imports 90% of the goods it consumes from South Africa, including most agricultural inputs. Households depend heavily on remittances from family members working in South Africa, in mines, on farms, and as domestic workers, though mining employment has declined substantially since the 1990s. Lesotho is a member of the Southern Africa Customs Union (SACU), and revenues from SACU accounted for roughly 44% of total government revenue in 2014. The South African Government also pays royalties for water transferred to South Africa from a dam and reservoir system in Lesotho. However, the government continues to strengthen its tax system to reduce dependency on customs duties and other transfers.
The government maintains a large presence in the economy – government consumption accounted for 37% of GDP in 2014 and the government remains Lesotho’s largest employer. Access to credit remains a problem for the private sector. Lesotho’s largest private employer is the textile and garment industry – approximately 36,000 Basotho, mainly women, work in factories producing garments for export to South Africa and the US. Diamond mining in Lesotho has grown in recent years and may contribute 8.5% to GDP by 2015, according to current forecasts.
Lesotho was designated as AGOA Eligible Country on October 2nd 2000. Lesotho has been declared eligible for Apparel Provision on April 23rd 2001 and benefits the Lesser Developed Country Special Rule for Apparel (3rd country fabric) and Lesser Developed Country Rule for Certain Textile Articles (Category 0). Regarding the Category 9 Textile Products, Lesotho is eligible to export Handloomed / Handmade but not the folklore annex nor the ethnic printed fabrics.