Lesotho

As a least-developed country (LDC), Lesotho is a beneficiary of the EU's "Everything but Arms" (EBA) arrangement. The World Bank classifies Lesotho as a lower middle-income economy with a per-capita income of $916 in 2023. Total EU imports from Lesotho amounted to about €310 million in 2023. Lesotho also trades with the EU under the Economic Partnership Agreement with six countries of the Southern African Development Community (SADC). Therefore, EBA preferential imports only constitute a small share of its total exports to the EU and in 2023 stood at €2.7 million.

What is the EBA?

The EBA arrangement covers all LDCs as classified by the United Nations. This arrangement enables duty-free and quota-free access for all products originating in LDCs except for arms and ammunition. Unlike beneficiaries of the Standard GSP and GSP+, LDCs are not excluded from the scheme if they benefit from other preferential arrangements or agreements with the EU.

Lesotho flag

At a glance: EU preferential imports from EBA beneficiary countries (2023, € million)

group

2.3M (2023)

Population

account_balance
Parliamentary Constitutional Monarchy

Government

trending_up

1.8% (2023)

GDP Growth

equalizer

6.3% (2023)

Inflation

money

$ 2.1B (2023)

GDP

66 v

Freedomhouse index

4 v

ITUC Global Rights Index

32.3 ^

Environmental Performance Index

Facts about Lesotho's economy

Enclave Economy

Lesotho is a small, landlocked, and mountainous economy, which is entirely surrounded by South Africa. This geographic particularity has an important impact on Lesotho’s economy.

Export Products

Lesotho's top export products are diamonds, articles of apparel and clothing (including trousers, pullovers, and t-shirts) and water.

Trade Partners

Neighbouring South Africa is the most important trade partner for Lesotho, accounting for a share of about 63% (2023), and in particular is the largest supplier to Lesotho (80% of Lesotho's imports in 2023 came from South Africa). The EU is the most important export market with a share of 45% in 2023, followed by South Africa (33%) and the US (20%).

Economic Structure

Lesotho’s economy is highly intertwined with South Africa with which is shares a number of infrastructure systems. The main industries include diamond mining, food, beverages, textiles, and handicrafts. The government is Lesotho's largest employer and public expenditure accounts for more than a third of the country's GDP. In 2023, agriculture contributed around 7% to the GDP, the service sector contributed 51%, and industry 29%.

Remittances

Remittances are highly important to Lesotho and contributed almost 23% to the country's GDP in 2023. Remittances mostly originate in South Africa, where a large share of Lesotho’s workforce is employed.

Trade with the EU

Total trade with the EU summed up to €408 million in 2023. The EU is Lesotho's second most important trading partner with a share of 16.5%. About 45% of Lesotho's exports go to the EU, making it the most important export market.

Lesotho and the EU

Imports from Lesotho by product section (2023, € million)

Imports from Lesotho over time (€ million)

LESOTHO AND THE EU’s GSP

Economic Impact

1%

Only a small fraction of Lesotho's exports to the European market are eligible for EBA preferences.

87.80%

Lesotho currently takes advantage of EBA preferences for 87.8% of eligible exports.

Preference utilisation and export diversification

Lesotho's imports to the EU

Preference Utilisation vs. total eligible imports

Both total, as well as EBA eligible imports from Lesotho, have been increasing in recent years. Nonetheless, only a small fraction of Lesotho’s exports to the EU market is eligible for EBA preferences. The most prominent export good from Lesotho, diamonds, already benefits from zero third country duties. Since 2021 the utilisation rate increased significantly, and stood at 88% in 2022., the PUR increased to 32.7%. The utilisation of EBA preferences can be further enhanced for all product sections.

The largest product sections under EBA

Lesotho’s export sector is dominated by the export of diamonds. Under the EBA, exports remain highly concentrated on agricultural products and, more recently, garments and pharmaceuticals, though for only a small portion. This suggests a limited degree of diversification.

SUSTAINABLE DEVELOPMENT

Lesotho, as a beneficiary of the EBA scheme, is not obligated to ratify any conventions to be able to benefit from preferential access to the European market. Nonetheless, Lesotho has ratified all 15 core international conventions on human and labour rights, which includes 7 UN human rights conventions and 8 ILO conventions on labour standards. Additionally, Lesotho has ratified 8 conventions on environmental protection and 4 conventions on good governance aspects.

Core international conventions on human rights and labour standards

Ratified

  • Convention on the Prevention and Punishment of the Crime of Genocide (1948)
  • International Convention on the Elimination of All Forms of Racial Discrimination (1969)
  • International Covenant on Civil and Political Rights (1976)
  • International Covenant on Economic Social and Cultural Rights (1976)
  • Convention on the Elimination of All Forms of Discrimination Against Women (1981)
  • Convention Against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment (1987)
  • Convention on the Rights of the Child (1990)
  • Convention concerning Forced or Compulsory Labour, No 29 (1930)
  • Convention concerning Freedom of Association and Protection of the Right to Organise, No 87 (1948)
  • Convention concerning the Application of the Principles of the Right to Organise and to Bargain Collectively, No 98 (1949)
  • Convention concerning Equal Remuneration of Men and Women Workers for Work of Equal Value, No 100 (1951)
  • Convention concerning the Abolition of Forced Labour, No 105 (1957)
  • Convention concerning Discrimination in Respect of Employment and Occupation, No 111 (1958)
  • Convention concerning Minimum Age for Admission to Employment, No 138 (1973)
  • Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour, No 182 (1999)

Additional Conventions

  • Convention on International Trade in Endangered Species of Wild Fauna and Flora (1973)
  • Montreal Protocol on Substances that Deplete the Ozone Layer (1987)
  • Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (1989)
  • Convention on Biological Diversity (1992)
  • The United Nations Framework Convention on Climate Change (1992)
  • Cartagena Protocol on Biosafety (2000)
  • Stockholm Convention on persistent Organic Pollutants (2001)
  • Kyoto Protocol to the United Nations Framework Convention on Climate Change (1998)
  • United Nations Single Convention on Narcotic Drugs (1961)
  • United Nations Convention on Psychotropic Substances (1971)
  • United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988)
  • United Nations Convention against Corruption (2004)

EU-Lesotho Bilateral Development Assistance

DG INTPA

Access all info about EU-Lesotho relations on the International Partnerships website: https://international-partnerships.ec.europa.eu/countries/lesotho_en

Opportunities in Lesotho

  • Strong interrelation with South Africa and duty-free goods transport between the two countries
  • Stable situation on the labour market
  • Regional proximity to important regional economic hubs, such as Durban and Johannesburg
  • Further opportunities in expanding the textiles industry but also the agricultural sector
  • Vast natural resources like water, but also diamonds

Contact points