Operators of leather manufacturing companies have made a startling remark about the success of leather beneficiation. Just a few months after the Minister of Trade and Industry, Neo Moroka, officially launched the P30 million worth state of the art tannery factory, there is less to celebrate.
This week, The Sunday Standard learned that the first round of the country’s beneficiation in leather and leather related products will have to produce quite a bit of quality products before it can be considered as a success story. In fact, the success of the project depends on goodwill, says Mr. Malekantwa Mmapatsi, the Commercial Director of Tannery Industries Botswana (TIB).
Casting his eyes above the horizon, Mmapatsi sees Botswana leather competing and dominating the luxury leather product market in vehicle seats and dress shoes. But if the truth be said, the project is likely to fall on its weight because of the country’s indifference to protecting its domestic firms, strict bureaucratic tendencies, high cost of doing business in the country and agrarian way of rearing livestock.
With the cattle population exceeding that of people, one would expect the TIB to ride high on the back of abundant raw hides. But that is not the case. This is not because the Botswana Meat Commission (BMC) kill is below their production capacity.
“You see, in principle we have met and agreed with senior executive members of BMC that they should reserve at least 50 percent of wet blue hides that they auction from time to time,” said Mmapatsi. “But what obtains on the ground is against the spirit of our arrangement.” When it comes to auction day, he says, they are subjected to open bidding just like international bidders who have the financial muscles.
“During the auction sale, the guys from Italy and agencies here that have linkages to international leather manufacturers close us out by hiking the bid price. They are able to bid at high prices because where they come from, the cost of doing business is more competitive than here,” he explains. If the reservation agreement was to be upheld, he believes that it would play a significant role in assisting them to be competitive in the international arena and help them attain full employment of machinery.
Protection of TIB, he argues, would not only be peculiar to Botswana.
“Right now, we cannot even think of going to Namibia to buy leather there but the Namibians easily do that. They can even easily compete against us with the leather that originates from here.”
The Namibian government, he said, took advantage of the Southern African Customs Union (SACU) clause on protection of domestic infant industries by levying high duty on importation of leather when the country’s sole tannery was struggling. The situation has since improved and Namibia now has three vibrant tannery firms.
Even if they were to get all the wet blue from the BMC, he reckons they would not take the high end of the international luxury leather industry by the scruff of the neck. This is because of the poor nature of rearing livestock in the country and the legislation surrounding the identification of livestock. The high end league, which happens to be automotive leather interior, is super sensitive.
“In automotive industry, if the hide has a scratch mark, they disqualify it. Now imagine, given the nature of rearing domestic animals in this country. And I would say only a small percentage, maybe 10 percent of the hides, may make the grade in the automotive industry.”
The 10 percent, adds Mmapatsi, is likely to come from farms that practice modern farming techniques such as feedlot and ranching. Even feedlot cows have the disadvantage of producing small hides.
“A feedlot cow is slaughtered after 18 months and you can imagine how big it would be.” The dilemma to primitive farming methodology, he says, is that Botswana beef fetches high premium in the beef market because of the natural feeding system.
What compounds matters in the worsening state of hides is the system of branding as enforced by the Ministry of Agriculture.
“It is very bad during the period of foot and mouth vaccination. The Ministry of Agriculture should seriously consider coming up with a different vaccination identification system and stop this indiscriminate branding. Imagine if your cow is 10 years old and has been vaccinated annually, it means that it would have 10 brands all over the body.”
Because of the poor state of raw materials, he says, the TIB is technically pushed into the lower yield market when the company could be taking advantage of systems put in place before it entered the market. A few years ago, SACU set the stage for firms, such as the TIB under the Motor Industries Development Programme, by heftily levying motor vehicles parts, leather seats being part of the category. Now that it was becoming expensive for European based companies that deal with manufacturing leather seats to source leather from the SACU region, they decided to relocate their firms to the region. And a majority of them are based in neighbouring South Africa, where the TIB could be taking advantage of the geographical closeness by exporting to such firms.
“When those companies relocated, they were forced to use indigenous leather and that caused a shortage in leather supply and the automotive leather is now set at a high price,” he explains.
He consoles himself in the fact that the shortage in the region has resulted in openings in other sectors, albeit low yield ones, such as lounge suites manufacturing and footwear to the extent that firms participating in those sectors have resorted to purchasing finished leather from as far as South East Asia, Italy and North America.
TIB is a leather processing firm that was set up on a joint venture partnership between two Batswana, two Bulgarians, CEDA Venture Capital Fund and Botswana Development Corporation. The firm runs two leather processing operations, a Lobatse re-tanning plant and Phakalane finishing plant. At full production, the company estimates that it would have employed about 120 people and further jobs would be created in the down stream activities and backward linkages.