Better times predicted21 March 2005
There are reportedly six tanneries in Tanzania but most are moribund. However, a joint venture between the East Hides Group and Caspian will mean that production at the huge Morogoro tannery is scheduled to resume this month (April). Despite the fact that the tannery has not been operational for some time, it is fully equipped with Pajusco drums and other Italian technology, including an effluent treatment plant from Italprojetti. The tannery was refurbished in the late 90s but left to languish. While lying idle, all the electric motors were stolen so it has just been a case of obtaining the necessary spare parts and once they are in place the tannery can resume production. This is a very large and well-equipped tannery built to handle raw hides and skins from raw to finished. Initially, however, they will probably only process one container of hides each week to wet-blue while they establish their production methods and find their market. The hides are smaller than European standards, 26ft2, and ultimately destined for corrected grain for shoe uppers, with the lower end going for industrial gloving. It is thought that the skins will only be suitable for lining. There is a finishing department at the tannery but this will remain closed for the time being and the situation will be reassessed at some time in the future. Once the beamhouse is up to speed there will be employment for around 120 people and total capacity is 25,000 hides/month and 75,000 skins. The Caspian Group, who own the Morogoro tannery as well as the Mwanza tannery, are a local Tanzanian business with diversified operations in agriculture, mining and construction. East Hides, on the other hand, are a very successful international group which started life in 1992 as hide traders but which have since been establishing their own tanneries. They have been active in sourcing raw materials from Africa for some time and the Morogoro venture is a springboard for them to start up more branches in the region. They plan to use domestic raw material but are investigating the feasibility of buying hides from Burundi and Rwanda. They are also aware that it is possible to import and export to and from Uganda and Kenya without duty being imposed so these are other possible sources of supply. The sister tannery of Morogoro, Mwanza Tannery is on the banks of Lake Victoria and was closed due to environmental issues. While it is hoped that the tannery can be revived at some stage, this may not prove possible. Tanzania is uniquely positioned in that it has eight bordering countries (Rwanda, Burundi, DRC, Kenya, Uganda, Malawi, Zambia, Mozambique) giving a total regional market size of more than 150 million people. Despite one of the highest cattle populations in Africa, and millions of dollars in existing investments, the leather sector in Tanzania has never been able to reach its potential. The main constraint has been ensuring adequate hides and skins are sold to local manufacturers rather than exported. The potential for a thriving leather sector does exist but, in the past, progress has been frustrated by poor industrial policy, deterioration of the infrastructure, corruption in government and, occasionally, misguided assistance from donor nations and aid agencies. Tanzania enters 2005 with a human population estimated to be 35 million and rising. Livestock populations are an estimated 17.7 million cattle, 2.5 million goat and 3.5 million sheep. Potential annual hides and skins production, with off-take rates of 15% for cattle and 20% for goat and sheep, amount to around 2.6 million bovine hides, 2.4 million goatskins and 700,000 sheepskins. Hide and skin collections average only 50% of potential slaughter, that is: 1.4 million cattle hides, 900,000 goat skins and 400,000 sheepskins. Infrastructure Roy O'Shaughnessy last visited Tanzania during the 1990s. Deterioration in the governmental services, industry and commerce, was evident everywhere. In most cases the major causative factor lay in governmental corruption and inefficiency. Further, the 'trickle down' nature of corruption at the top had tainted almost every aspect of Tanzanian life. 'The ordinary person, though normally honest, has to take his 'cut' in order to survive, no matter whether tinker, tailor, soldier, sailor, policeman or school teacher.' This remark, made in passing by an extremely likeable and intelligent Tanzanian friend, finished as follows: 'But donor nations and aid agencies are partly responsible for the dishonesty sweeping through Tanzania. African governments have received so many huge financial loans with no strings attached, no real controls to ensure monies are used for the purposes agreed. It should not surprise western governments that corruption in Africa is now endemic. If funding were dispensed to town and rural councils in Europe with the same laxity, corruption similar to that in Africa would result.' It was difficult at the time to disagree with his view and it remains difficult now. It is certainly a view to which donor nations and aid agencies should give cognisance, especially so in the event of cancellation of existing debts and the granting of further financial aid. Raw materials Agriculture accounts for 50% of Tanzania's GDP. Livestock contributes about 30% of the agricultural GDP, but could contribute very much more if livestock resources were utilised fully. Trading in hides and skins begins in much of Africa with slaughter of an animal at a homestead. Alternatively, it may begin at a slaughter slab or at an urban abattoir. In any event, the tools used in slaughter, fleshing, flay and preservation, are likely to be unsuitable and the skills of the operator rudimentary. There is no acceptable abattoir in Tanzania and the standard of the hides has been described as the worst quality in the world. The government is eager to see the industry revived and this would be a good opportunity for them to put some legislation in place. They have already reintroduced dipping to prevent disease. Standards of fleshing, flay and preservation, are poor throughout Tanzania - despite a Unido sponsored US$18 million All Africa Hides and Skins Improvement Project activated in 1987, continued until 1991 and then extended to 1994. The Unido project involved the training of veterinary assistants, butchers and farmers in hide improvement techniques; practical demonstrations; free supply of vital equipment (lifting tackle, flaying knives etc) plus provision of transport to enable indigenous trainers to routinely visit remote areas. Little of lasting value was gained from the project even though the initial response from subsistence level farmers was promising. The reasons were many but, quite definitely, unsophisticated farmers often felt cheated by shrewd urban buyers. Hide buyers, they said, invariably haggled for the lowest possible price and seldom agreed to pay even marginally more for top grade hides than they did for a fourth. However, the fact is that around 30% of the value of the hides is still lost due to indiscriminate branding and bad flay. With no modern slaughtering facilities in the country, there is a crying need for investment and expertise. Branding as a cultural practice would be very difficult to reduce let alone eradicate. Animals are sold many times and each time receive a fresh brand in an obvious place to denote new ownership. Animals are generally slaughtered on a slab and then hung for hide removal. This results in the level of flay cuts expected in such situations. However, there is a secondary source of damage as young boys come along with knives and cut off the small amounts of meat still adhering to the hide, resulting in further damage. Only about 50% of hides produced in Tanzania currently reach the market place. The other half are either never presented for sale because of low prices or are rejected by buyers because of defects. Of those collected a majority are exported as raw stock for processing abroad. This leaves very little raw material for delivery to local tanneries. The end result is that fixed overheads have to be met from production levels far less than break-even. This generally translates into tannery closure and bankruptcy. Maximum utilisation of Tanzania's livestock resources, from hide production through to finished leather, cannot be achieved under an out of date methodology reliant on farm homestead operations, slaughter slabs and rural butcheries plus a network of collection points. Such systems can be expanded and improved, but that is all. The long-term answer lies in the encouragement of commercial production of cattle and a closing of the gap between numbers of hide produced and the numbers collected and useable. This is achievable in Africa. Tanneries The Leather industry in Tanzania reached its peak during the period 1980-1985 with the three government owned tanneries performing at near installed capacity levels. During this period the tanning sub sector consisted of three parastatals, Mwanza Tannery, Moshi Tannery and Morogoro. A period of continuous decline followed resulting in government divesture between 1992 and 1995. By the late 90s, the decline in the leather industry was so bad that of the six recognised tanneries in Tanzania most had ceased to operate. The tanning sub sector was listed at that time as consisting of three large tanneries and two medium size tanneries. In addition there were two small artisanal tanneries processing vegetable tanned leather for domestic use. 1. Africa Tanneries Limited (formerly Mwanza Tanneries Ltd) located in Mwanza and situated on the shores of Lake Victoria. The tannery consisted of well laid out factory building and office block. Right from start up it was planned to process both hides and skins from raw stage through wet-blue, crust to finished leather. In 1993 Africa Trade development Ltd took over Africa Tanneries Ltd and started leather production as well as extensive rehabilitation. The rehabilitation, which is estimated to have cost US$1.5 million, included additional civil works, upgrading of effluent treatment plant and machinery and equipment. Tannery operations started in February 1994 with a production capacity of 1.5 million pieces of hides per annum equivalent to an annual output of 7.5million sq ft of combined production of chrome tanned leather and vegetable tanned leather. The tannery reached an operating capacity of 50% of the installed capacity. 2. The Tanzania Leather Industry Ltd (Morogoro Tanneries Ltd) located in Morogoro town about 200km from Dar es Salaam. This tannery was started in 1974 by the National Development Corporation (NDC) through assistance provided by the government of Bulgaria. It started operations in 1978 and its management was transferred to TLAI in 1979. 3. Moshi Leather Industries Ltd, formerly Tanzania Tanneries Company Ltd, have on the whole been the most dynamic of the tanneries owned by the government. However, like the other two tanneries in Mwanza and Morogoro performance declined resulting in eventual privatisation. The privatisation took place through a joint venture arrangement between the government of Tanzania and the Industrial Promotion Services (IPS). After the take-over IPS rehabilitated the tannery by injecting fresh capital, technical and managerial expertise. This tannery was producing wet-blue leather for export and limited quantities of finished leather for the local markets. 4. Afro Leather Industries are located in Dar es Salaam and have the capacity to process 300 hides per day. In 1998 they were operating at about 30% of the installed capacity. 5. Lake Trading established a medium sized tannery in Kibaha on Morogoro-Dar es Salaam road. Initially, they established the capacity to process about 300 hides per day or 3,000 skins up to wet-blue. The tannery planned to expand gradually. Today, 'the leather industry in Tanzania is at a crossroads and if levies on raw hides and skins exports do not prove effective within six months, I doubt whether it will survive', says Azim Mawji, director of Afro Leather Industries Ltd, who describe themselves as one of the country's only two tanneries. Tanzania, like its East African neighbours, Kenya and Uganda, last year imposed a 20% levy on the export of raw hides and skins, based on their fob value. Smuggling is still a problem, Mawji said, but under declaration is a bigger problem. Afro Leather were founded in 1987, closed in 1997 and reopened in April 2003. They currently wet-blue 200 hides/day and pickle one or two containers a month of sheep and goatskins. They work with wet-salted hides and skins. The other tannery, Kibaha Tannery, are part of Industrial Promotion Services, which recently reopened Leather Industries of Kenya and Leather Industries of Uganda, all in anticipation of more effective policing of levies on raw stock exports. Kibaha wet-blues or pickles 150 hides and 2,500 skins, or 250 hides and 1,500 skins/day, all from fresh hides and skins. Lake Trading do some of their own slaughtering, supplying Kibaha, and 30-40% of hides and skins supplied to Afro Leather are from abattoirs, although they are more like slaughter slabs than abattoirs. Overall, however, they estimate that less than 10% of Tanzania's hides and skins were semi processed locally. All semi processed hides and skins are for export, to India and Pakistan, and now China, which has rapidly grown to be the biggest buyer of raw and wet-blue hides. Currently there is no leather finishing in Tanzania and the domestic footwear industry is almost non existent, thanks to the unregulated import of second hand shoes, as well as new footwear from China. Since the liberalisation of the economy, trade has been dead, Mawji said. 'The levy on raw stock exports is supposed to correct that, both by making us more competitive and by providing funds for projects which will improve the raw material, better animal husbandry and slaughter for example. But if it's not properly administrated, there's no point.' The Mwanza, Morogoro and Moshi plants were all built with funding from one or other of the competing powers. The East bloc and West bloc alike were anxious at the time to win friends and influence people in Africa. The declared aim of donor aid to help Africa develop was only part of the agenda. Unfortunately the plants concerned were built in a hurry. Little regard was given to whether or not raw material resources in the area and customer demand, locally and abroad, were such as to ensure a base for continuity of production. Furthermore, machinery provided tended to be of the cheapest and even obsolete. Little attention was given to the availability of spares and the training of maintenance staff. Cannibalising of machinery began pretty well from day one. And, to cap it all, despite the huge production capacities, effluent treatment facilities were woefully inadequate: effluent from the Mwanza Tannery originally emptied directly into Lake Victoria! Not surprisingly, the Mwanza, Morogoro and Moshi plants never achieved design capacity working. Breakdowns were frequent and drawn out. Output seldom achieved 45%-50% and, more often than not, ran at between 20% and 30% of capacity. Afro Leather Industries are a well-run organisation. Their proprietor, Azim Mawji, is of Indian origin. He has an in-depth understanding of business priorities and runs a tight ship. Given improvement in raw material supply, as hoped for now that the 20% export levy has been placed on raw exports, his tannery will probably increase output. Azim Mawji is right when he casts doubt on the advantages of a levy on the export of raw stock. This interferes with free trade and encourages smuggling, which makes domestic shortages worse. Also, levy systems - as Mawji has implied - are seldom efficiently administered by bureaucrats. Afro could also move into finished leather if and when the footwear sector picks up. The company are always quick to recognise opportunity. During the Unido Improvement Project (referred to earlier) Azim Mawji negotiated the provision of modern effluent treatment facilities at his plant under extremely favourable terms. Very similar conditions to Afro Leather Industries apply at Kibaha tannery. Kibaha is a sister company to Lake Trading. They are both in turn members of Industrial Promotion Services who also have additional tanneries in Kenya and Uganda. Out of the installed capacity of up to 300 hides to wet-blue or pickle 3,000 skins daily Kibaha are currently running their production at close to 60%. Again the plant is efficiently run. The managing director is Alawi Al-Beiti. Tanzania has enviable raw materials resources and also the basic infrastructure necessary for the processing of both semi processed wet-blue for export and finished leathers. But it lacks a domestic consumer base capable of supporting a viable footwear and leathergoods sector. Yet, this is a pre-requisite to development of the sector's full potential. The answer can only lie in development of a truly prosperous consumer base. Foreign nations will always prefer to import wet-blue from Africa rather than raw stock, the reason being that 90% of effluent generated in finished leather production occurs during the conversion from raw to semi processed. Thus, importers of wet-blue avoid the problems and costs incurred in effluent treatment and gain the advantages of value added conversion to finished leather, footwear and leathergoods, where profits margins are much better. At one time Tanzania had the beginnings of a viable footwear manufacturing sector in the Morogoro Shoe Company and the Bata Shoe Company, the latter located in Dar es Salaam. Bata, in particular, benefited the Tanzanian economy in so far as it produced footwear to international standards, was export orientated, and maintained contacts with Bata branches worldwide. This was of tremendous advantage to Tanzania. President Julius Nyerere, however, opted for nationalisation. The Bata Company was taken over and renamed the Boro Shoe Company. This was the beginning of the end. Both Bata Shoe and Morogoro Shoe gradually ran down and ultimately folded. Much skilled labour and their dependents ended up poverty stricken. Years later the Tanzanian government invited Bata to return and rehabilitate the plant. Presumably on the basis of 'Once bitten, twice shy', Bata refused the generous offer! Conclusion Present-day Tanzania has an inability to manufacture locally at prices consumers can afford; a dependence on cheap imported footwear, often smuggled in with the connivance of customs officials and politicians. But now there is a chance to rectify matters. The wealthy nations seem ready to help Africa again, perhaps even to cancel all existing debts and donate afresh. Hopefully, they will have learned from their mistakes of the past, the error of dispensing funds without strings attached. This time round Tanzanian politicians must recognise the need for transparent government, the need for national wealth to not merely circulate at the top but, rather, to trickle down to the lowliest worker. One can only hope the requisite lessons have been learned.