Blueprint for the African leather industry

The Blueprint for the African leather industry focuses on development, investment and trade guidance for the leather industry in Africa. The report looks at the major obstacles the industry must overcome before it can realise its potential of becoming a major source of employment and income. The CFC is already financing projects in Africa that will lead to increased collection, better preservation, improved quality and better processing of hides and skins. But the organisation has also recognised the need for a comprehensive and integrated approach to the problems facing the African leather industry and has joined with the Food and Agriculture Organisation (FAO), the International Trade Centre (ITC), the United Nations Industrial Development Organisation (Unido) in preparing a development, investment and trade guide for the leather industry. CFC and Unido financed ten studies (see Table 1) at each stage of the leather supply chain to identify the major constraints and opportunities. The findings of these studies were discussed by a panel of experts at Meet in Africa 2002 in Tunis. A Blueprint for the African Leather Industry has been developed from these studies. The African leather supply chain has not managed to keep up with the substantial growth in production of leather and leathergoods in other developing countries, although the quantity and value of its production and exports have actually increased. This picture becomes even more critical when one considers the size of the African livestock population. Even the increase in domestic African demand, still modest, is satisfied mainly by either cheap imports from other developing countries, such as China, or by second-hand goods from developed countries. The main positive factors in the African supply chain are the large animal resources available and the potential to improve the quality and image of African hides and skins. Institutions have been set up to introduce and maintain certain standards within the African industry. There is an on-going process of harmonising some of these standards in some countries². Databases are also available to support the industry but the level of efficiency is not the same across the whole of Africa. Some progress has been made regarding political stability but there is room for improvement. Some countries are reducing their levels of pollution and trade promotion strategies have been designed and support institutions established, although their coordination could be improved. The list of negative factors is longer. The quality of the hides and skins is the main factor that is restricting the positive development of the African supply chain as a whole. Poor quality is caused by: a lack of incentives for producers to improve quality; the traditional lifestyles and patterns of the livestock producers; a price structure that does not encourage quality; and a lack of a grading system for hides and skins. The infrastructure within Africa, such as roads, electricity, telecommunications etc, is deteriorating and there is an inadequate level of technical development throughout the supply chain. Africa also suffers from low levels of foreign investment. With corporate tax levels above 30%, there is little or no incentive for foreign firms and the availability of local working capital is another hindrance. Banks only offer short-term loans at high interest rates. Although low labour costs should give the African industry a competitive edge, instead the result is low productivity and poor workmanship. Training programmes in many countries are both scarce and out of date with a desperate need for training in modern processes and techniques. Trade and marketing information, expertise and support are all lacking. Technologies such as the internet are under-utilised and there is a lack of experience in marketing and trade negotiations with the outside world. Freedom of trade has now meant that second-hand imported shoes from Europe are often of a better quality than shoes produced locally. And of course there is quality. The prevalence of defects in African hides and skins and the inability to fulfil delivery dates are key issues that need to be addressed. The expansion of leather shoe production was greatest in the Far East (1990-1999) but much less in Latin America, and there was a decline in all developed regions. China is the largest producer in Asia using 70% of its leather for the production of footwear. Africa has experienced only a small increase in the production of shoes. Animal husbandry Good animal husbandry is essential to the quality of products throughout the leather supply chain. Most of the animals in Tanzania, Sudan and Senegal are local breeds raised in Pastoral systems by nomadic and semi nomadic herds. Only Zimbabwe has a large commercial sector which raises exotic and high grade cattle. Consequently the quality of animal hides and skins in these countries is generally poor due to poor nutrition and animals not being culled until old age. Long term livestock development strategies are needed to improve nutrition and disease management, and to promote awareness of the benefits of culling animals at an optimum age in addition to the damage branding causes to valuable parts of the hide. Manpower available in the four countries is insufficient in both quantity and quality. Training in cattle breeding and management is required, and will give the workforce a greater understanding of the influence these activities have on the quality of hides and skins. However, the industry in most countries is too small to support a training facility. Traders have become aware of the value of skins and hides as a foreign exchange earning commodity. It is important that the benefits of fledgling exports are channelled back through the chain to the farmers to provide them with an incentive to improve quality of hides and skins. Sudan and Tanzania have introduced a duty of 15% and 2% respectively on exports of raw hides in order to promote the local processing of leather while Ethiopia has completely banned the export of raw hides and skins. However, a levy on the export of raw hides and skins may be counter productive, restricting the market so that only those that are poor quality are sold raw. The international market pays for better quality hides and skins but there is little evidence that when African countries produce better quality they receive better prices. Even where they do, the additional benefits are not transmitted down through the chain to the livestock producers or even to the people who are directly engaged in handling the hides and skins. Unless farmers, butchers, collectors and handlers of hides and skins benefit economically, they cannot be expected to invest their efforts in providing better quality. [Editor's note: this is a widespread problem and not confined to Africa] Slaughterhouse management Slaughter facilities consist broadly of slaughter slabs in rural and urban areas, mechanised abattoirs, usually in urban areas, and non-specific places used by farms and households. The quality of the hides and skins is largely dependent on the animal husbandry and method of slaughter. Most rural slaughter is carried out under very poor conditions and is often not adequately supervised. Tools are usually rudimentary and in many cases running water is not available. Of the four case study countries, only Zimbabwe has mechanized abattoirs and until recently these have provided about 90% of the hides in Zimbabwe. Recent land resettlement and the accompanying disruption initially increased the supply of animals for slaughter but this has now leveled off and a reduced supply is anticipated in the short to medium term. In Sudan, most of the hides and skins also come from abattoirs. In Dakar this proportion is 45% and in Tanzania less than 10%. Some of the abattoirs in the four countries were built a long time ago but, although maintenance is generally inadequate, they still provide hygienic slaughter and are equipped with refrigerated rooms. The method used to recover skins in abattoirs in Sudan is pulling rather than flaying as practiced in other countries. In Senegal both methods are used, directly affecting the quality of the raw skins obtained. Pulled skins fetch higher prices because they have fewer flay cuts. However, due to size, hides are flayed with knives. [Editor's note: this is where the SFF could prove so useful] Unfortunately the high cost of running the larger abattoirs has, over the years, diverted slaughter to smaller, unregulated abattoirs. The number of these is increasing, particularly in Tanzania, Zimbabwe and Senegal, due to weak legislation and limited supervision. In most cases poor flaying, lack of skills and the absence of hide pullers in these abattoirs lead to the production of low quality hides and skins. The post-slaughter handling of raw materials exacerbates this quality problem. Tannery management Most tanning in Africa is carried out in tanneries using modern techniques. However, most tanneries were initially established with imported reconditioned equipment and there has been little subsequent investment in modern equipment and technology. A little traditional tanning using vegetable tannins is carried out in pits along the major rivers but the volume is low and has little economic significance. In most African countries the leather industry was established as an export-based industry of semi-processed hides and skins with no consideration given to linking it to the development of a finished leather and leather products industry. Thus there is no incentive for the development of technical tanning skills and for obtaining access to new technologies. Obsolete equipment and a frequent lack of spare parts and chemicals, low levels of literacy and training, coupled with badly organized workflow and a lack of technical know-how, contribute to low quality products and low levels of productivity. There is also a lack of qualified management and supervisory staff and a limited knowledge of market trends in finished leathers. Despite the many difficulties faced in implementing pollution control in Africa, important regulations and pollution prevention measures have been introduced, especially in Ethiopia, Kenya, Namibia, Tanzania, Tunisia, Zambia and Zimbabwe. Large projects have been developed to relocate tanneries in Old Cairo in Egypt and Fez and Casablanca in Morocco to industrial districts equipped with consortium-type water and solid waste treatment plants. Within the Unido Regional Africa Leather and Footwear Industry Scheme (RALFIS), support was given for the installation of well-designed effluent treatment plants and/or the rehabilitation of existing ETPs plus training operators; 35 tanneries were assisted. Various cleaner technologies have been adopted and introduced in eleven tanneries in the region. The salient points in the chapters on manufacture of leather products, marketing and business strategies are: African countries' share of the global market in hides, skins and leather is not commensurate with their share of raw materials; there is insufficient production of non-footwear leather products in Eastern and Southern African sub region; and in order to attract the international market, the African industry must become mindful of ethical and environmental issues. This comes with suggestions for improvements in quality, training etc. There is also the suggestion (page 66) that the product be finished with a design which reflects the local identity, to create a recognisable image and unique selling point. Recommendations The challenge faced by the African leather industry may be enormous but, according to the report, is one that undoubtedly can be met. With the major strength in availability of raw hides and skins, and with global forecasts¹ that world demand for leather in the coming decade will be greater than supply, the African leather industry is well equipped to become producers of leather products seen by the world as the best in quality, design and value for money. For this to be achieved, the following steps would need to be taken: 1. The gap between available raw material resources and the products processed and trade from these resources is substantially reduced 2. A market-orientated approach with a buying system based on value incentives is applied throughout the supply chain 3. Private sectors and governments are agreed on regional trade initiatives and an approach to trade liberalisation 4. Investment and working capital are available in the form of equity finance and other mechanisms to facilitate production and trade 5. An improved business environment and the transparency of operations attract FDI 6. The components of the African leather supply chain are modernised, both technically and managerially, and the quality of human resources and support institutions is of a high standard 7. The production of footwear and other leather products is driven by the market in the pursuit of import substitution; the promotion of linkages with the global leather supply chain through sub-contracts, partnerships and other alliances; and the development of Africa's own design capacity in the 'Made in Africa' strategic approach.