Skin in the game: Why EAC must vie for a bigger share of leather market

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Ideas & Debate

Skin in the game: Why EAC must vie for a bigger share of leather market


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Sambasiva Rao, the managing director of Alpharama Limited, explains leather quality details at the Laikipia Governor Ndiritu Muriithi’s (in black suit) office in Nanyuki in January 2020. PHOTO | NMG

Summary

  • The Leather Industry Network for the East African region (LIN-East Africa), and online platform set to be launched this week, will open up new opportunities for adding value to hides and skins and thus aid economic and industrial development.

The East African region needs policies and concrete actions to tap, promote and expand the underexploited leather sector for industrial and socio-economic development.

The required resources are abundant and renewable — with the region’s large population of cows, sheep and goats estimated by the East African Community (EAC) Secretariat at 150 million animals in 2013. And because it is labour-intensive, the sector has the potential to employ millions of people along the supply chain.

Entrepreneurs, farmers, policymakers, investors and other stakeholders can use readily available resources, such as the Leather Industry Network for the East African region (LIN-East Africa) online platform set to be launched this week, to open up new opportunities for adding value to hides and skins and thus aid economic and industrial development.

The platform is a one-stop shop for data, including quantitative information, that sector players can use to monitor production and performance.

This information will help shape the leather industry’s policy direction and disseminate market data so as to better cater to customer needs and help entrepreneurs get a piece of the immense global leather trade pie.

The global trade in footwear, for example, is a multibillion-dollar industry. The Asian countries of China, India, Vietnam and Indonesia were the world’s leading producers of footwear in 2019, accounting for about 75 percent of global output of shoes of various kinds.

The East African leather industry represents about 0.24 percent of the $200 billion global market value, with annual revenues of $478 million, comprising $106.4 million in wet blue and $372 million in finished leather.

In the eastern African region, Ethiopia has been exploiting this booming trade in leather and associated products for the past decade.

The country has stepped up footwear production with new factories, worker training and better shipment networks, exporting more than two million pairs of shoes to the United States in 2016, according to the information portal Agoa.info.

The EAC must get in on the act. It has several competitive factors working in its favour in the leather supply chain.

These include the large animal populations already available in the region and opportunities for producers to improve the quality of hides and skins by working with research institutions.

On quality, institutions have already been established in some countries to introduce and reinforce standards. Low standards can be caused by lack of incentives for producers to improve quality, cultural attitudes of livestock producers, price controls and absence of grading.

Databases, such as those maintained by the United Nations Industrial Development Organisation and now LIN-East Africa, have been set up to support the industry. But standards need to be harmonised and reinforced at the national and regional levels. This will aid transactions and cut costs for entrepreneurs.

The other advantage is greater awareness about reducing environmental pollution from tanning operations. Tanning involves processing raw leather to turn it into a stronger and more resilient material for making various products. Greater awareness of breakthrough effluent management methods will help in promoting environmentally friendly products.

Another positive development is that the EAC Secretariat and the bloc’s member states have adopted the EAC strategy, which seeks to develop the leather sector value chain to create jobs and provide high-quality, affordable leather products for citizens of the region.

Member states have also committed to addressing several issues, including regulation and governance, as well as data and market-related factors that discourage private investments in the leather sector. The success of the EAC leather strategy hinges on cooperation among partner states and between the public and private sectors.

At a workshop in Arusha, Tanzania, in May 2019 on how to implement the EAC Leather and Leather Products Strategy for 2019-2029, private sector stakeholders from the region heard that tax harmonisation policies were being implemented across the bloc.

Participants also affirmed that there is a market for finished leather products, that member states have leather products development strategies, that they are prioritising the leather sector in their industrialisation policies, and that there is growing demand for hides and skins and leather products.

The players recommended that for leather-sector promotion strategies to work, EAC member states need to ban imports of second-hand leather products, develop a common marketing platform or market intelligence portal, put to effect a regional leather and leather products development strategy, and develop and adopt leather and leather products quality standards.

The success of these strategies will depend a great deal on cooperation between the private and public sectors. LIN-East Africa, a one-stop shop for information, networking and business, will help in fostering this cooperation.

Ms Mwasi is the Director, Center for Business Innovation & Training.

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