Lesotho Declares Two-Year Disaster Situation Amidst Rising Unemployment
This week, Lesotho has announced a two-year “disaster situation” due to soaring youth unemployment, which is reportedly worsened by uncertainties surrounding President Donald Trump’s tariffs. The unemployment rate stands at around 30%, with nearly 50% of young people affected. The emergency declaration will last until June 30, 2027.
Deputy Prime Minister Nthomeng Majara stated that this decision aims to unlock funding for initiatives focused on boosting the economy and generating job opportunities for youths. Additionally, the government plans to remove registration fees for small startups, which might help stimulate growth.
Interestingly, Lesotho had just emerged from another “disaster condition” declared in July 2024 due to food shortages caused by significant droughts in 2020. Prime Minister Samatekane is calling for assistance from various humanitarian organizations and development partners.
The United Nations World Food Program (WFP) has indicated that a considerable portion of Lesotho’s population lives below the “food poverty line,” with one-third grappling with severe food insecurity.
Lesotho has been receiving support from numerous U.S. Organization for International Development (USAID) programs, particularly related to HIV/AIDS, although many of these initiatives faced budget cuts earlier this year. The U.S. government, under Secretary of State Marco Rubio, consolidated much of USAID’s budget into the State Department.
The tariffs imposed by President Trump have particularly impacted Lesotho, which had a 50% tariff rate announced in April. This was part of an attempt to address the trade imbalance with the U.S. Most of Lesotho’s textile and clothing factories, predominantly owned by Chinese and Taiwanese firms, export around 70% of their output to American markets.
Conversely, Lesotho imports very little from the U.S., with most goods coming from South Africa. Overall, the country’s imports total just over $2 billion, making American products relatively inaccessible for many citizens.
The reason for the prevalence of foreign-owned textile factories in Lesotho can be traced back to the African Growth and Opportunity Act (AGOA), a program initiated in 2000 to provide tax-free access to U.S. markets for sub-Saharan African countries. Over the past 25 years, exports from countries eligible for AGOA have surged by more than 400%.
This program was originally set to expire in 2015, but Congress extended it for another decade due to its success in attracting foreign investment to economically challenged African nations. However, the extension is expected to end in September, and Lesotho is concerned it could lose up to 40,000 jobs if there is no new allowance.
Officials from the State Department mentioned that the AGOA will need to “reflect the modern world” and incorporate greater reciprocity before it can be renewed. In the meantime, the high tariffs established in April have been temporarily adjusted to a general 10% tariff as negotiations continue.
The Trump administration’s calculations led to an effective tariff on U.S. goods from Lesotho hitting 99%, factoring in tariffs, non-tariff barriers, and trade imbalances with the U.S.
Lesotho, being part of the South African Customs Union (SACU), has its external import tariffs set collectively, typically averaging around 30%. However, the uncertainty over tariff policies and potential changes to AGOA has reportedly induced a sense of “panic” within the country. Trade Minister Mokety Shelley noted that American buyers have recently hesitated to place orders, uncertain of future conditions.
Economic analyst Lefu Thaela added that factory owners are hesitant to spend money and expand their capacities due to the fear of not receiving sufficient orders. Some are even seeking buyers outside the U.S. to ensure the continuity of their operations.
