# 2.2. Employment dynamics

Trade has had a significant impact on employment-intensive industries, most notably in textiles and apparel. However, Lesotho’s unemployment rate remains high, at over 25%, and has not declined in recent years according to modeled ILO estimates. Youth unemployment is almost 10% higher. The country has among the lowest labor productivity rates in the world and production remains very labor-intensive: compared to other Southern African countries. An overarching concern remains the relatively small size of the private sector. This makes up just 14.7% of GDP (Molapo 2016). Recently international observers have urged, and the Government of Lesotho itself has recognized, a need to shift towards a more private sector-led growth model (see e.g. World Bank 2016). However, the private sector remains small. Of this, MSMEs make up 85% and employ approximately 200,000 people. While there are several larger firms, especially in the textile and apparel and mining sectors, there remains a missing middle with only 6% of firms considered medium-sized. A large number of manufacturing firms are also single enterprises according to the most recent Manufacturing Census, and over half (50.8%) are foreign-owned, though in about 20% of these nationals and foreigners have a joint venture (Bureau of Statistics 2016).

A large part of Lesotho’s economy is made up of informal businesses, with few efforts to measure their significance. One notable exception is Matsoso (2015) who used household surveys and census data to establish that the informal sector makes up a substantial but declining share of GDP, estimated at 55.4% of GDP in 2011 and 44.2% by 2014. The industries with the most substantial informal sector are agriculture, hunting and forestry, wholesale and retail trade, hotels and restaurants and “other community, social and personal activities” (see Table 1).

**Table 1: Informal economy output at current prices by industry and absolute values of population** **<u>projections</u>**

|**Industry**|**2011**|**2012**|**2013**|**2014**|
|---|---|---|---|---|
|Agriculture, hunting and forestry|1436.6|1441.0|1446.0|1451.5|
|Manufacturing|826.1|828.7|831.6|834.7|
|Construction|520.1|521.7|523.6|525.5|
|Wholesale and retail trade|1910.3|1916.2|1922.9|1930.2|
|Hotels and restaurants|1220.8|1224.5|1228.8|1233.5|
|Transport, storage and communications|919.6|922.4|925.6|929.2|
|Education|389.1|390.3|391.6|393.1|
|Health and social work|276.5|277.3|278.3|279.3|
|Other community, social and personal activities|1508.1|1512.7|1518.0|1523.8|
|**TOTAL OUTPUT (million Maloti)**|**9007.1**|**9035.0**|**9066.5**|**9100.8**|
|**Population projections**|1,896,833|1,902,707|1,909,321|1,916,573|

Source: Matsoso (2015) The dominant manufacturing sector in terms of employment and output remains textiles and clothing, employing 33,686 people in the fourth quarter of 2015. However, this represents a decline of 25.7% against the previous year (Bureau of Statistics 2016).<sup>5</sup> The sector has considerably lower average wages than other manufacturing sectors such as leather and footwear, food and beverages and other manufacturing sectors.

> 5 A recent compilation of data on the textiles and apparel sector, based primarily on surveying 57 individual firms, found that the sector provides 41,706 jobs and supports many more individuals indirectly.

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