India is a world leader when it comes to producing high quality finished leather. After decades of experience, Indian tanneries have become adept at meeting the demands of today’s fast changing fashion industry. More than half India’s leather has to be imported from abroad. East Africa should be perfectly positioned to become a major supplier, especially since prices for cow leather from competitors in Argentina and Brazil have been steadily rising.
At the moment, the output of East African tanneries doesn’t meet the standards demanded by the Indian market, but if quality could be improved through a joint venture partnership with an Indian company, the advantages would be enormous. “If you import 100 kilograms of raw leather, you get 60 to 65 kgs of finished leather,” Ajay Kumar Singh, assistant international marketing manager for Superhouse, one of India’s leading exporter explains,” You have paid for transporting 40 kgs of leather that you can’t use. If you import finished leather, you can use it all, and if the cost of labor is cheaper, the price will come down.”
Proximity of Africa to India is another advantage. The fashion industry changes fast and reducing shipping times to just-in-time delivery can generate a significant price advantage. Ajay points out that India has at least seven major institutes training the next generation of experts to work on leather. East Africa has one institute in Nairobi, but it doesn’t have a laboratory.
“If we export to Europe we need the leather to be “C” certified,” he says. “ To get a C certificate, you need to have a certain infrastructure and technology. If you want to export from Africa, you need to train manpower and that may take a year to a year and a half. They will need to understand each phase of the manufacturing process. In India we have institutes. We learned a great deal from the US and Europe. In Africa there is one institute in Nairobi, but it does not have a laboratory. How can you train a student if you don’t have a laboratory or any way of gaining practical experience?”
“The market is getting very complicated,” says Sumit Bhatnagar, who heads production at Superhouse’s factory in Noida, an hours drive from New Delhi. “Buyers expect cheap Chinese prices and they are asking us to give them gold at the price of silver. The biggest factors in leather is waste and labor costs, that and the technology. You need to create something new every day if you want to be in the market, and especially in the fashion industry. If we buy leather overseas and the leather is not good enough, it is difficult to send it back.”
Ajay, who participated at the breakout sessions on leather at New Delhi thinks that East Africa could have a substantial edge over competitors, but only if it manages to overcome a number of significant barriers. The first is the quality of the product. In contrast to the textile industry, which costs relatively little to set up, leather production involves a series of complex processes involving expensive chemicals and a demanding technology. Altogether, it requires a costly investment. A leather specimen on the wall of Superhouse’s factory in Noida is a constant reminder to workers of all the things that can go wrong from scratches and tears to pock marks and rough patches. “The fashion industry changes quickly and it is constantly demanding new finishes from us,” says Sumit.
East Africa may not be able to match the high technology that India has developed any time soon, but it can produce semi-processed leather known as “Wet Blue.” The leather in this case has been partially tanned with chromium sulphate which turns it blue and stabilizes it for the next stage in processing. Ajay thinks that Superhouse can take this kind of leather and handle the final high tech finish demanded by the major brand buyers. It can even process the wet blue into finished leather and export it back to Africa.
The greatest barrier to Indian investment, however, is concern over the lack of consistent trade policies and general government instability in the region. “I was just in Zanzibar,” Ajay explains,”They were ready to do business, but when I asked them about their investment policy for the next five or ten years, they couldn’t answer me. How can we do anything when after a year their policy may be totally different? We were thinking of building a factory there and then exporting to Kenya and the East African market, but we don’t know whether they will ban exports from Tanzania to Kenya? What would we do then? If we produce products here, it takes up to 100 days to ship it to Tanzania. If we produce products locally in Tanzania, it takes half as long to reach Kenya and Rwanda, but we need to be assured by the governments that the policy will be there, and that they are not going to ban exports or impose new tariffs, or an export duty. In Kenya, for example, if you want to export, you have to pay duty to the government. In most countries there is an incentive to export. In East Africa you often have to pay the government, and you don’t know how much duty they are going to impose on you.”
These are precisely the problems that SITA intends to work on in the next year.
Sumit Bhatnagar gives a quick rundown of the world leather market today. “Leather from India is cheaper than China,” he says, “but we are more expensive than Bangladesh or Pakistan. For high quality finished leather, we are the best.” It’s a highly competitive world, and one in which Africa should have definite advantages if it can get its policies in line. “We have factories in the UK and Spain,” says Ajay,“if we have to invest in the US, we have no problem, because we know there will not be any frequent policy changes. If there are changes they take care of the investors. We have investors in the UK and in Spain. We even have investments in China. We know if the policies change there, we won’t have problems. The investors will be taken care of.”
The breakout session in New Delhi, highlighted the tantalizing possibilities for East Africa in the future, even for eventually being part of the trade in Indian markets. Leading European brands such as Mango and Zara have opened stores in India. Estimates are that at least 40 million Indians currently have the same purchasing power as shoppers in Europe and North America. Accessing those markets depends on creating consistent and dependable trade policies and performing a comprehensive value chain analysis