Lesotho’s Garment Industry in a Post AGOA Landscape

Source: Getty Images (Grigorenko)

In November 2025, Lesotho’s garment industry confronted a stark reality. Hippo Knitting, once among the country’s largest textile employers, laid off 295 workers and announced plans to retrench another 420 employees by January 2026. Worse still, the company may close completely by July if conditions do not improve. The reason cited by management? Uncertainty over the renewal of the African Growth and Opportunity Act (AGOA), the United States trade agreement that had underpinned Lesotho’s garment boom for more than two decades.

This single factory closure is a legal, economic, and trade‑policy alarm bell, highlighting the fragility of an entire sector built on preferential trade access and external market dependency.

The Rise of Lesotho’s Garment Industry

Lesotho’s garment industry owes its origins to AGOA, signed into law in 2000. AGOA granted eligible sub-Saharan African countries duty-free, quota-free access to the US market for a wide range of goods, including textiles and apparel. Critically, the “third-country fabric” provision allowed Lesotho to import fabrics from non-AGOA countries and still qualify for US duty-free exports.

Between 2000 and 2004, Lesotho’s garment exports to the US surged. Factories mushroomed, employment soared, and for a brief period, private-sector manufacturing employment exceeded government employment. Tens of thousands of Basotho women found stable work, and the garment industry became the backbone of Lesotho’s formal economy.

AGOA created a legal and economic framework that encouraged foreign investment, enabled market access, and catalyzed rapid industrialisation. For years, the country’s garment sector was hailed as a development success story, demonstrating how trade preferences could transform a small, landlocked economy.

Structural Vulnerabilities: Growth Without Depth

Yet from the beginning, Lesotho’s garment sector carried inherent risks:

• Limited domestic value chain: Garment factories assembled clothes but relied on imported fabrics and yarns. Local production of upstream inputs remained minimal, creating dependency on external supply chains.

• Foreign ownership and management: Many factories were financed and run by foreign investors. While this injected capital and know-how, it left Lesotho vulnerable to external market decisions.

• Export concentration: The US market accounted for the vast majority of exports. When AGOA terms changed or buyers paused orders, factories had few alternative markets.

The sector’s explosive growth was thus built on a legal and economic arrangement outside Lesotho’s full control.

AGOA provided opportunity, but not resilience.

A Fragile Industry Faces New Shocks

The fragility of this system has now become painfully evident. Recent developments have added layers of uncertainty:

• US Tariff Shock: In 2025, Lesotho was subjected to the highest reciprocal tariffs among nations under the Trump administration, a staggering 50% import duty on exports to the US. For a sector dependent on price competitiveness, this legal change instantly undermined the economic calculus that had sustained the industry.

• AGOA Renewal Uncertainty: Even as tariffs bite, factories await confirmation of AGOA’s renewal. Hippo Knitting cites paused or cancelled orders as international buyers wait for clarity, effectively freezing production decisions.

For Hippo Knitting, the combination of these two shocks is existential. The company’s management has appealed to the government for emergency relief, a freeze on rentals, financial support, yet legal remedies within Lesotho’s labour law can only go so far. Workers must still be retrenched fairly, unions consulted, and severance obligations met. But these domestic protections do not replace the loss of market access or the broader legal and policy uncertainty that underpins international trade.

Hippo Knitting: A Case Study of Systemic Fragility

Hippo Knitting’s situation highlights key lessons for Lesotho and similar economies:

1. Trade preference dependence is risky. AGOA facilitated industrial growth, but the unilateral nature of the agreement means that Lesotho’s fate is largely determined by US policy. Factories can flourish only as long as the legal framework granting preferential access remains active and predictable.

2. Compliance and governance matter. Reports suggest Hippo Knitting may have failed to maintain WRAP certification, necessary for US buyers to source ethically produced goods. Legal compliance with international standards is a prerequisite to benefit from trade agreements; failure here amplifies vulnerability.

3. Labour law obligations intersect with trade law exposure. Domestic laws require fair retrenchment procedures and severance. But when trade access is suddenly constrained, factories may struggle to meet labour obligations while remaining viable, creating a tension between legal responsibilities and economic survival.

4. Overreliance on a single market is dangerous. The US market has long dominated Lesotho’s garment exports. The combination of tariffs and AGOA uncertainty exposes the sector to sudden, massive shocks. Diversification of markets is no longer optional; it is a legal and strategic imperative.

Lessons from the Past, Imperatives for the Future

The trajectory of Lesotho’s garment industry offers both caution and insight. AGOA enabled rapid growth and employment, but it did not generate industrial depth, local ownership, or diversified markets. The current crisis, crystallized in the Hippo Knitting layoffs, underscores the legal and structural vulnerabilities that have always lurked beneath the sector’s success.

Going forward, Lesotho’s policymakers and industry actors must consider:

• Market diversification: Regional, continental, and alternative global markets to reduce exposure to unilateral US policy changes.

• Upstream value-chain development: Domestic production of fabrics, yarns, and other inputs to reduce dependency on imports.

• Strengthened legal frameworks for compliance: Ensuring factories meet international labour and ethical standards to maintain market access.

• Resilience-focused industrial policy: Incentives for local investment, ownership, and capacity-building, making the industry less reliant on foreign investors and external preferences.

Conclusion

Hippo Knitting’s layoffs are a stark legal and economic warning. They reveal that an industry built on unilateral trade privileges, foreign capital, and external supply chains can flourish spectacularly, but remain precarious. The non-renewal of AGOA and the tariff shocks expose structural fragility, threatening livelihoods, economic stability, and Lesotho’s industrial credibility.

For Lesotho, the challenge is clear: transform legal and trade dependency into industrial resilience.

Only by deepening domestic capacity, diversifying markets, and embedding compliance and governance at the heart of operations can the country ensure that its garment sector survives and thrives, beyond the fragile promise of preferential trade access.