Local Embeddedness, Upgrading and Skill Development: Global Value Chains and Foreign Direct Investment in Lesotho's Apparel Industry

This case study examines how different sources of foreign direct investment (FDI)—specifically international versus regional—impact value chains, skill development, and local linkages within Lesotho's apparel sector.

• Regional FDI, specifically from South Africa, shows a higher potential for deeper investor participation and the relocation of production functions due to proximity, contrasting with global FDI which often targets specific competitive advantages. South African investment in Lesotho was driven by a desire to shift clothing production away from unfavorable local conditions in South Africa, leading to greater incentives for continuous financial and technical investment in Lesotho operations.
• International FDI from Taiwan in Lesotho's apparel sector was primarily rent-seeking, focusing on exploiting cheap labor to serve US mass-markets and taking advantage of AGOA trade rents. This resulted in minimal technology and skill transfer, as well as little further investment, effectively hindering further development.
• While some FDI only creates temporary employment, other types are more sustainable; however, the growth of South African FDI in Lesotho has been constrained by local factors including low productivity, limited local capabilities and skills, and poor institutional and physical infrastructure.

APA

South African Institute of International Affairs (2016). Local Embeddedness, Upgrading and Skill Development: Global Value Chains and Foreign Direct Investment in Lesotho's Apparel Industry. https://saiia.org.za/saiia-toolkit/local-embeddedness-upgrading-and-skill-development-global-value-chains-and-foreign-direct-investment-in-lesotho-s-apparel-industry/

Chicago

South African Institute of International Affairs. Local Embeddedness, Upgrading and Skill Development: Global Value Chains and Foreign Direct Investment in Lesotho's Apparel Industry. 2016. https://saiia.org.za/saiia-toolkit/local-embeddedness-upgrading-and-skill-development-global-value-chains-and-foreign-direct-investment-in-lesotho-s-apparel-industry/.

Wikipedia

{{cite report |author=South African Institute of International Affairs |title=Local Embeddedness, Upgrading and Skill Development: Global Value Chains and Foreign Direct Investment in Lesotho's Apparel Industry |date=2 June 2016 |url=https://saiia.org.za/saiia-toolkit/local-embeddedness-upgrading-and-skill-development-global-value-chains-and-foreign-direct-investment-in-lesotho-s-apparel-industry/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{southafricaninstituteofinternationalaffairs2016local, author = {{South African Institute of International Affairs}}, title = {{Local Embeddedness, Upgrading and Skill Development: Global Value Chains and Foreign Direct Investment in Lesotho's Apparel Industry}}, institution = {South African Institute of International Affairs}, year = {2016}, month = jun, url = {https://saiia.org.za/saiia-toolkit/local-embeddedness-upgrading-and-skill-development-global-value-chains-and-foreign-direct-investment-in-lesotho-s-apparel-industry/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }