Firm Size Distribution in Lesotho Manufacturing Sector Implications for Job Creation

UNDERSTANDING FIRM firm size distribution is critical for informing policy intervention for sustainable job creation. The focus of the Government of Lesotho industrial policy has been to create jobs through growth of the manufacturing sector. To date, this has produced desirable results as witnessed by the surge in the production of textile and clothing resulting in manufacturing sector being the largest formal employer in the country. Using the unique dataset covering companies that are assisted by Lesotho National Development Corporation (LNDC) during the period 2004 2015, the paper evaluates the company survival patterns, investigate the evolution of firm size distribution in the manufacturing sector.

The methodology employed takes into account the possible impact of the global financial crisis on the sector which presented a major shift in the global economic developments. The results show that the size distribution of the Lesotho manufacturing sector is dominated by the companies in the middle sized and large sized categories and they possess high survival rate. It is further found that majority of the companies in the sector remain in their size classes suggesting little growth by the sector.

Smaller companies in the sector seem to be the ones registering faster growth. There is plethora of reasons underneath the differing survival patterns between the large and small firms and therefore different policy interventions should be explored for each category. The arising policy implications is that, for job creation effort should be put in place to increase the number of large companies and also support should be extended to the lower sized companies to increase their survival.