SECTOR OVERVIEW

Leather Sector Overview

Leather and leather product sector cycle - Leather sector development in Africa

The hides and skins derived industry sector has many sub-sectors that operate quite independent from each other but are, however, closely linked in a supply and customer relationship chain.

There are hardly any successful enterprises in the world which have managed to create a well functioning business that controls all the hides and skins derived industry sub-sector operations under one umbrella. This was, however, tried in some of the African countries where state owned enterprises were controlled by a parastatal organization that was responsible for the operations of the whole leather sector. In most cases these operations were totally unsuccessful and caused very big drawbacks in the development of the sector. Rather large investments were made with different development bank funds starting tanneries and shoe factories that never functioned. Prime examples of this type of disasters can be found in Sudan, Tanzania and Somalia. It was only in Ethiopia, under the National Leather and Shoe Corporation, that this type of operations functioned reasonably well and benefited the sectoral development.

To-day it is generally accepted that the hides and skins derived sector and its operations are best suited for small and medium scale private sector operations and it seems that the lessons have now been learned and that most of the African countries have privatized or are in the process of privatizing the formerly state owned companies.

General situation of the leather industry sector in Africa at present

The African continent, in spite of its relatively large domestic animal population, is a minor supplier of raw hides and skins, semi-finished and finished leathers, footwear and other manufactured leather products. According to available statistics the situation is as follows:
 

Animal population (million head; FAO est. 2000)

Hides and Skins Production (million pieces)

As seen above the total number of domestic live stock in Africa, including bovine, sheep and goat, is 493 million heads or 14.7% of the worlds total. However, Africa produces only 10.8% of the world’s hides and skins in numbers. If one takes into consideration the sizes and quality of the skins then the African contribution towards the worlds leather raw material is even far less. Probably only about 6-7%. In monetary terms the international trade of African hides and skins, leather and leather product is less than 1% of the total international trade of this commodity group, which according to FAO statistics for 1997-1999 is estimated to average 43 billion US$ per annum.

The problems caused by poor infrastructure are very pronounced in most of the African countries, i.e. the lack of good roads, lack of facilities for dipping and veterinary decease controls, lack of village level slaughter slabs and drying sheds with water and hygienic conditions has much effect on the quality of the African raw hides. This lack of infrastructure causes many problems to the hides, the worst of which is putrefaction. It is well known that even the best tanners cannot make acceptable quality of leather from hides and skins which have started to putrefy or showing other such types of post-mortem defects.

By using various finishing technologies a good tanner can cope with many pre-mortem defects such as thorn scratches, insect bites and other surface defects and thereby cover and mask such faults. A poor grain of the African bovine can be grain printed and beautified with two-tone effects or at least made into military or work-boot leathers but a poor hide structure caused by putrefaction cannot be improved by any means and has to be rejected.
 

Lack of understanding of value of the commodity

There is very little understanding of the value of the raw hides and skins in the level of African tribal herds men, pastoralist and farmers. Several campaigns by FAO and UNIDO as well as local governments have brought some improvement to the situation. However, it is often found that the campaign results - which initially are encouraging - disappear very soon if not followed up and monitored on a continuous basis. The reasons are usually that such operations have no built-in sustainability. It is also very difficult to raise funding for such a purpose.

It is, of course, quite understandable if an African pastoralist after slaughtering the cow throws away the skin or gives it, practically free of charge, to a fellow tribes man for making some crude products such as cutting strips for bed bottoms etc. To prepare a well preserved hide, saleable to the local industry or for exports, would take some labour and care and still only fetch a small amount of money from a local collector who may or may not turn up at the remote village to collect the hide.
To improve this situation is a long-term problem needing continuous efforts from the side of the international agencies concerned. However, no radical changes can be expected until the local organizations and the trade itself will provide suitable incentives for improved hide and skin quality so that the primary producers of the commodity will have economic rewards to take care of the product.

Short sighted policies of traders and hides and skins merchants

The local and international people involved in the hide and skin trade have in the past demonstrated a very shortsighted policy concerning the hide and skin improvement. The general pattern has been that during the years when there is a shortage of hides and skins in the market everything will be collected and the traders come into the most remote villages to collect. All the grades are sold in "Shele-bele" (Swahili term for unsorted lot including everything from first to rejects) and good prices are paid by the trade. At that time the grading norms worked out by the international schemes are immediately forgotten as the trade can absorb everything and the local trader prefers to sort the material in his own warehouse for customer lots.

During the poor trading years when the supply is larger than demand, the local traders will insist again on purchase by grades and all the poorer grades are left to rot. The local primary producers, who do not understand the international market movements are surprised that suddenly he can supply only the first and second grades and these fetch lower price than unsorted lots some time before. Then the argument of the international advisers stating that hide and skin improvement pays sounds like a cliché with no foundation.

Grading, Pricing and Costing problems

As it has been described above the grading, pricing and costing of raw hides and skins in African conditions is a real problem where assistance from the international organizations is well needed. FAO has taken the initiative to provide guidance in this area. However, to be able to make a real impact such programme has to be tightly connected to local associations such as ESALIA and its national member associations. So many assistance projects in the past have failed due to the top to bottom approach. If the local private industry and their associations are not the main players in such programs the results will be very meager.

CFC funded ESALIA executed pilot project “Hides and Skins Grading and Pricing in Selected ESALIA Countries” has been practically completed. The results have been most encouraging and the countries involved (Ethiopia, Kenya, Tanzania and Zambia) are all requesting strongly the continuation of the project and launching a full-scale program at earliest opportunity.

On the other hand also the international associations such as ISHALTA ICT, and COTANCE have to be involved in order to get international acceptance and compatibility with the international contract procedures, environmental standards (Eco-labeling) etc.

Footwear and Leather Goods

Although all the African tribes had, prior to the colonial era, a traditional leather craft industry producing all items needed by the tribal society such as water bottles, garments, shields, leather ropes and decorative items, this handicraft industry has not developed and is to-day mainly producing poor quality "airport-art" for the tourist trade. There is, however, an excellent opportunity to develop a product line by the SME footwear and leather goods sector that is taking inspiration from the African traditional arts and craft and produce an “Out of Africa Look” footwear and leather products for the international market.

Recent studies carried out by the international organizations and some NGO's show that the international footwear market is expected to expand. The international industry and trade is looking for new sites with favorable working conditions to re-locate and expand their operations. Some African locations seem to be ready to take over this role. The potential for this industry is there and it is based on sizeable raw material source, favorable labour cost and the recent re-orientation in government policies to liberalize the economy.

Footwear can be produced in highly mechanized conveyorized assembly lines or in modern "rink system" production units or by one shoemaker artisan with hand tools only. The comparative advantage in footwear production varies, to a large extent, between different locations and the type of footwear produced.

Some of the African countries such as Ethiopia, Kenya and Zimbabwe have already made very interesting progress under the guidance of the UNIDO Africa leather Programme in starting exports to the industrialized countries markets. It has been shown that some shoe segments from Africa can find buyers even in a country like Italy.

However, concentrated efforts in the training of skilled workers, supervisors, technologists, designers and entrepreneurs is needed before the African footwear industry will reach the right quality level to be able to produce large quantities of footwear for the international market. However, the progress made in starting such training through the TPCSI in Kenya is encouraging and needs to be reinforced and upgraded.

It is expected that foreign investments and industrial cooperation, which are needed to boost-up the industrial development in this sector, would be forth coming if the industrial skill levels can be improved and if the governments can offer the potential investors a stable political and industrial climate which includes free and fair trade in the leather sector and the reduction and eventual elimination of protectionism of all kinds.

The recently adopted COTANCE strategy for Africa is a good example on what kind of cooperation opportunities are offered to the African leather trade by the international leather community.