Trade in hides and skins, and semi-processed, tanned leather goods is lucrative business. This is particularly the case for some developing countries where the dynamism of the sector has led to a move up the value-added chain and strong market positions. As a result, developing countries hold a 45% share of world trade in leather manufactures. Many have substantially increased their share of world footwear production in relation to developed countries.
 Yet Africa shows only a modest increase. Import penetration of the domestic leather footwear markets by other developing countries is an estimated 73%. Leather and leather products generally account for less than 4% of total exports. The numbers tell the story: African countries have 15% of the world’s cattle and 25% of its sheep and goats, but produce only 14.9% of global output of hides and skins — 8% of bovine hides and 14% of sheep and goat skins. Exports of hides and skins have fallen in recent years to below 4%, yet leather is ranked very high as an export commodity in several African countries. The countries’ tanning capacity has fallen from 9.2% to 6.8%. At the same time, the livestock population has jumped about 25% over the last decade, faster than the world trend.

To address the issues behind these statistics, ITC, with financial support from the Netherlands, launched its Integrated Leather Sector Export Development Programme for Africa in 1997. Seizing global market opportunities is a key challenge for the African sector. Important steps have been taken over the past seven years — a foundation has been laid, the cornerstone of which is African partnership.

Mind the gap!

Leather is a leading export for many African countries. The gap between resources and production is wide, but exposes the potential of the industry. Reducing the gap is critical in this important sector, which is strategic for economic and industrial development. By boosting exports, the entire continent stands to benefit. Because leather is a by-product of the meat industry, the supply chain begins with animal husbandry, the lifeblood of many rural communities.

Successful development of the sector could help reduce poverty in rural areas. As a labour-intensive industry, it is an important source of employment across the patchwork of its pan-continental supply chain. Because of the backward and forward linkages in the chain, Africa can be both a source of raw materials and an exporter of finished goods.

A Blueprint for the African Leather Industry is a report commissioned by the UN Industrial Development Organization and jointly prepared by ITC, the Food and Agriculture Organization and the Common Fund for Commodities. It identifies Africa’s potential and makes recommendations to players in the supply chain — governments, the private sector and international organizations. The report is the outcome of the “Meet in Africa 2002” meeting that brought together 25 African experts in Tunis.
It recognizes several positive indicators that provide a solid base for finding cost-effective solutions:

• Institutions have been set up to introduce and reinforce standards and quality.
• Databases have been established to support the industry.
• Standards have been harmonized at national level in several countries, facilitating transactions and greatly reducing costs.
• Trade promotion strategies have been designed and support institutions established, although coordination needs to be strengthened.

Supply chain challenges

Supply chains, often buyer-driven, can span several countries and regions, as marketing and manufacturing agents set up global production networks. To enter new markets, the sector must integrate itself at national, subregional and regional levels. However, effective integration is difficult. Each stage of the supply chain — from recovering hides and skins, to converting them into leather in tanneries, to manufacturing and marketing leather products — requires specific policies, human skills and support systems.

The expert group meeting held during Meet in Africa 2002 identified a number of obstacles:

• The quality of hides and skins.
• A poor and deteriorating infrastructure of roads, power supply and telecommunications that affects all of the supply chain.
• A lack of foreign investment.
• Low labour productivity, poor management and outdated training services.
• Inadequate levels of technological development, productivity and workmanship.
• Limited or no access to secure working or low-cost capital.
• Environment protection measures.
• A lack of marketing information, expertise and control. “The problems, constraints, challenges and solutions are interrelated and as a result, require an integrated approach,” says Giovanni Dadaglio, Senior Market Development Officer at ITC’s Market Development Section.
  

Partnership galvanizes the industry

The main challenges to integration include the lack of mechanisms for regional collaboration for the sector, limited contact between firms and support institutions and low international visibility of the industry. To meet these challenges, ITC recognized the need for a combined effort by all stakeholders.

The 1997 programme brought together stakeholders in a partnership developed over a series of highly successful trade shows, organized by ITC together with African partners. It also gave birth to the only organization representing the sector across the continent — the African Federation of Leather and Allied Industries (AFLAI).

Meet in Africa, launched in Cape Town in 1998, followed by Casablanca in 2000, Tunis in 2002 and Addis Ababa in 2004, is now an international crossroad, combining a trade fair involving buyers from all over the world with events including seminars, expert group meetings, buyers–sellers meetings and factory visits. In this forum, firms and institutions identify measures to be taken and valuable partnerships are forged. It also brings together professional associations, trade support institutions, customs, transport companies and various ministries of the host country to coordinate each event.

Meet in Africa is driving intra-African and other South-South trade in leather. (Photo: SIC SA)

Another important outcome is increasing the visibility and raising the profile of the industry. Meet in Africa revealed that business is conducted a great deal through intra-African and South-South trade as well as with overseas Western buyers. Participants at the 2002 meeting reported deals resulting from more than 480 bilateral meetings between 260 buyers and sellers. The event attracted 367 exhibitors from 38 countries, 2,200 professional visitors and more than 300 participants in seminars and the expert group meeting. An estimated US$ 10 million in trade was transacted.
 Meet in Africa has been funded by the Netherlands’ Centre for the Promotion of Imports from Developing Countries (CBI). The Société Internationale du Cuir (SIC SA) of France, one of the leading organizers of the most important international leather trade fairs, has become a solid partner of ITC and AFLAI in organizing Meet in Africa, which has progressively attracted partnership not only from international organizations, but also from the private sector. ASSOMAC, the Italian association of manufacturers of machinery for leather products, which facilitated periodic AFLAI meetings, sponsored the preparation of sectoral studies and coordinated Italy’s participation in the events.

Meet in Africa also serves as a catalyst for collective action. To consolidate further the partnerships and cooperation, AFLAI was created in 1998 at ITC’s recommendation. As the only organization representing the sector, AFLAI initiatives have strengthened existing national and subregional associations and kick-started new subregional associations, notably in western, central and North Africa. Today, AFLAI represents 46 countries through a network of associations.
  “Mobilizing partnerships and intensifying the dialogue among different industry actors and stakeholders was — and still is — essential. This is one of the underlying goals of Meet in Africa,” says Mr Dadaglio. “The increasing interest and participation in the event has resulted in an intensified dialogue, sharing of experiences and a common quest for solutions.”

Meeting future challenges

To become a strong global player, African countries must overcome many obstacles, including trade challenges, and a wide range of difficulties embedded in the supply chain, due to both internal and external pressures. The sector has a major opportunity if it can effectively bridge the gap between resources and production. Its major strength is the availability of raw hides and skins, as global forecasts predict that world demand for leather in the coming decade will outstrip supply.

Realizing the industry’s full potential will involve much work, including modernizing the supply chain technically and managerially. A market-oriented approach with a buying system based on value incentives is also needed. The production of footwear and other leather products should be driven by internal market demand. Promoting linkages with the global leather supply chain through subcontracting, partnerships and other alliances is key, as is developing Africa’s design capacity in a “Made in Africa” marketing approach.

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A virtual meeting place

Leatherline, the portal developed by ITC, was launched in September 2003. It provides comprehensive information responding to the needs of the sector worldwide, including online business directories covering the supply chain of the industry, latest business news and opportunities, trade fairs, technical guidelines, market surveys, bibliographies and other useful links. User hits numbered 280,000 (12,000 visits) in June 2004. Leatherline has collected detailed information on 2,000 companies, with another 12,000 being verified. The site is free: http://www.intracen.org/leatherline.

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Meet in Africa sparks new business agreements

Meet in Africa gives birth to new business relationships, with an increasing weight of South-South and intra-African trade. There are many successes to report. For example, a partnership agreement was signed between Esperabe Peux Export from Chad and the TCIM-Roggwill group, world leader in exotic leather goods, of which Hermès International is a shareholder. Another company from Chad signed an agreement with Meister and Company in Marseilles to supply 20,000 goat skins.

Tannery Ahmed A. Shahin and Sons from Egypt linked up with Curtumes Iberia of Spain to supply all of their production of wet-blue leather. A Brazilian company, MK Química, after having tried without success in the past to make contacts in Africa, succeeded in establishing its market in Tunisia and Zimbabwe. The company developed a programme to supply chemicals to tanneries that are members of the Eastern and Southern Africa Leather Industry Association, which helps local tanneries to obtain ISO certification as producers of environmentally friendly products.

A large tanning group from Morocco producing finished leather finalized business with three new European customers, representing an increase of 5% to 10% in annual exports. A tannery and shoe-upper manufacturing company concluded agreements with five new clients that during the following year represented 30% of the total monthly turnover. Nalina Ltd of Kenya, which manufactures handbags, wallets, folders, briefcases, travel bags and handcrafted sisal bags for local banks and hotels, started exporting to Germany, Italy, Switzerland and the United States.


Writer: Dianna Rienstra