Lesotho is a small, mountainous, and landlocked country, surrounded by its much larger neighbor, South Africa. It has a population of about 2.2 million, and a nominal gross domestic product (GDP) per capita of $1,091 in 2021.
Lesotho’s economic growth has slowed recently, aggravated by the COVID-19 pandemic. Agriculture was the only important sector to grow in the first three quarters of 2021, thanks to good weather, government support, and import substitution.
Southern African Customs Union (SACU)
Botswana, Lesotho, Namibia, South Africa, and Swaziland form a customs union. Members of SACU benefit from duty-free trade while also imposing a common external tariff on imports from the rest of the world. Lesotho benefits from SACU’s free trade agreements with other countries and trade blocs as a member.
Southern African Development Community (SADC)
Lesotho is a Southern African Development Community (SADC) member state (SADC). SADC aims to achieve deeper regional integration and long-term growth through four phases: a SADC Free Trade Area (FTA), a SADC Customs Union, a SADC Common Market, and a SADC Monetary Union. When the maximum tariff liberalization was completed in 2012, the SADC FTA was completely implemented in twelve SADC Member States. The FTA excludes Angola, the Democratic Republic of Congo, and Seychelles.
African Growth and Opportunity Act (AGOA)
AGOA, a unilateral and non-reciprocal initiative that grants African countries duty-free access to the US market for over 6,400 products, helps Lesotho.
Cotonou Agreement
Lesotho is a member of the African Caribbean Pacific (ACP) – European Union (EU) Partnership Agreement, which offers select ACP products non-reciprocal preferential access to the EU market. The Cotonou Agreement classifies the country as a least developed country, while the EU’s Everything But Arms (EBA) initiative strengthens its position. Except for guns, Lesotho has quota- and duty-free access to the EU market under this scheme. Lesotho has also recently signed an Interim Economic Partnership Agreement, which will strengthen its access to the European Union significantly.
EPA SADC – Southern African Development Community
On June 10, 2016, Botswana, Lesotho, Mozambique, Namibia, South Africa, and Eswatini (formerly Swaziland) signed the EU-SADC Economic Partnership Agreement (EPA), which includes Botswana, Lesotho, Mozambique, Namibia, South Africa, and Eswatini (formerly Swaziland). The EPA entered into force provisionally on October 10, 2016, and Mozambique has been applying it provisionally since February 4, 2018.
The SADC EPA is a development-focused trade agreement that provides asymmetric access to SADC EPA partners. They can protect sensitive products from full liberalization and implement controls when EU imports rise too quickly.
A chapter on collaboration identifies areas of trade that could benefit from the funding. A chapter on sustainable development, which addresses social and environmental issues, is also included in the accord.
In terms of goods trade, the increased market access includes better trading terms for wine, sugar, fishery products, flowers, and canned fruits, mostly in agriculture and fisheries. The EU, for its part, will gain significant additional market access to the Southern African Customs Union (products include wheat, barley, cheese, meat products, and butter).
