Uncertainty clouds future of local leather sector

The leather industry in Tanzania has faced severe difficulties for a long time. More recently, however, there have been signs that the sub-sector is headed for serious downfall. While local craftsmen decry lack of enough government commitment to revamp the sub-sector, and faced with lack of enough processed leather in the country, local tanneries are on the brink of closure due to lack of raw skins and hides.

With an estimated population of 21.3 million cattle, 15 million goats and 6.4 million sheep, as well as being Africa’s third largest leather exporter, it is surprising that Tanzania’s leather industry is still in a shambles - counting little in terms of job creation and poverty alleviation.
A recent visit by The Citizen to the three major tanneries in the country reveals that unless serious actions are taken, the tanneries may cease operations, due to lack of raw materials. The Morogoro, Moshi and Himo tanneries that can employ up to 1,200 people when working at full capacity, currently have a combined workforce of 140 people, due to lack of enough raw materials that force management to lay off some workers. Management of each of these factories had not at any time forecast that the situation would turn out to be like this, but competition with illegal traders who export raw skins and hides have made it a grim reality.

The potential annual hides and skins production, according to government records, with off-take rates of 15 per cent for cattle and 20 per cent for goat and sheep, amount to about 3.8 million bovine hides, 2.4 million goatskins and 2.2 million sheepskins. Hides and skins collections average only 50 per cent of potential slaughter; that is: 2.4 million cattle hides, 900,000 goat skins and 400,000 sheepskins. The tanners say they invariably haggle for the lowest possible price and seldom agrees as illegal Pakistan traders pay local suppliers higher prices, only to cheat on duty payment to the government, allowing them better prices in their countries.

Hundreds of thousands of tonnes of the skins and hides of thousands of animals in Tanzania every year are exported in raw form to China, Italy, Spain, Mexico and elsewhere. The managing director (MD) of Morogoro Tannery, Onorato Garavagli, said that the company was almost going without dry skins for a week, contrary to the past when it had used to receive at least two trucks every day.

The Morogoro tannery is fully equipped with eleven Pajusco drums and other Italian technology, including an effluent treatment plant from Italprojetti. The management had planned to install ten more drums, at the cost $90,000 each to increase production. Refurbished in the late 90s, it is a very large and well-equipped tannery built to handle raw hides and skins from raw to finish. “We cannot operate at full capacity due to lack of raw materials, and if the trend continues, we will be forced to close completely,” said the MD. The tannery has the capacity to process 4,000 pieces of hides and 15,000 sheep and goat skins per day with a requirement of between 400 and 500 workers. It has now resorted to hiring at least 60 casual workers every day in addition.

Mariam Joseph, one of the casual workers at the tannery, expressed fear that there might not be any more work at the tannery unless the situation changes. The mother of three children has worked at the tannery for at least two years. “The situation has worsened, and very soon we may be forced to look for work elsewhere as the management stated that if the trend continues, they will be forced out of business,” she said.

Only about 30 per cent of hides produced in Tanzania currently reach the market and the remaining is 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.

The situation is not different at Moshi Leather Industry where management has stalled the earlier expansion plans due to shortage of materials.

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. Many industry stakeholders want an immediate ban on the export of raw hides and skins, which are normally processed for making shoes and other leather products imported into the country at extremely high prices. Export of raw skins and hides has not only denied Tanzania the benefits of value addition, but has also for many years stifled efforts by the local entrepreneurs to prosper. The deputy minister for Trade and Industry, Mr Lazaro Nyalandu, says the government has already indentified factors affecting development of the sector and grand plans are underway to address them. “We now want to do everything possible to cut export of raw skins and hides. One of the strategies will be to impose higher tariffs that will discourage export.“

Tanzania Tanneries Association (TTA) chairman, Mr Onorato Garavagli, however, blames continued lack of political will to rescue the sector despite frequent promises by the authorities. “We have had several meetings with government officials where they consistently made promises, but nothing happens in terms of action… this comes at a time when local tanneries are running short of raw materials,” he lamented in an interview with The Citizen on Sunday recently. He was dismayed that despite a joint meeting with various stakeholders, where they agreed to find a new way forward, the authorities had reiterated the current export arrangements would remain in place. (The Citizen)