Sam Setter's 'Pills': For readers who need some wry medicinal humour

Development aid: What happened in Ethiopia demonstrates that plans by governments, UNIDO and NGOs that don’t take into account economic realities will fail

What follows is just an example of many similar situations in the whole spectrum of development aid for the leather industry in a variety of countries and in Africa in particular.

Ethiopia is known in the industry for having excellent quality sheep and goat skins. Before the UN, through UNIDO, got directly involved in the "development” of the Ethiopian leather industry, the country had about 35 tanneries, most successfully exporting pickled goat and sheep skins. Some exported wet blue, mainly to countries like Italy, UK, India, Indonesia and Malaysia. Some leather was locally finished and sold to local shoe factories.

UNIDO promotes, correctly, value addition for various industries in developing countries to reduce poverty, increase income and employment, and develop expertise. Based on the documentation and suggestions that were presented, in 2008 the Ethiopian Government introduced a 150% export tax on raw, pickled and wet blue hides and skins in order to process these into crust in Ethiopian tanneries. The companies invested in the equipment and started to export crust to more or less to the same countries that had bought their pickled and wet blue leathers.

In the next step in 2012 – after only 4 years – and applauded by a Dutch NGO, the Government extended the 150% export tax to crust, and tanneries had to invest again in finishing equipment to achieve the Government’s requirements.

This time, however, few tanneries could afford to invest in more new equipment as they had not yet been able to earn enough from their wet blue and crust exports to pay off their EARLIER machinery investments. Worse, there had not been enough time to assure an output of consistent crust quality, meaning that many buyers abandoned Ethiopia as a supplier because of quality issues. Another important factor was that effluent treatment of the tanneries left a lot to be desired and needed investments.

Sales of leather dropped and one after the other, tanneries had to close. Shoe exports did increase, but not to anything like the same value as the previous leather exports, and there wasn’t always a direct link between Ethiopian finished leather and Ethiopian finished shoes.

So today I am told that there are about 6 tanneries operating of which 3 produce minimum quantities and 3 are producing less than 50% of their capacity.

To try to reverse this disaster, in 2020 the Ethiopian Government withdrew the export tax on pickled, wet blue and crust leathers. Unfortunately, buyers – mainly from Indonesia, Turkey, India and Italy – had moved on and had found other sources, meaning that little changed.

One of the bigger surviving tanneries is now focussing on wet blue production, hoping to win back some market share, but leaving the finishing department more or less idle. Hence the whole value addition intention has gone down the drain, because it was badly conceived and executed even more badly!

Some $20 million+ development dollars were invested in the value addition projects in Ethiopia, including more than $2.6 million spent on LIDI, the Leather Industry Development Institute, which in happier days actively trained people in a small tannery unit and shoe factory.

Today LIDI exists in name only and most training in Ethiopia is done in vocational schools. The LIDI compound is a demonstration of complete neglect.

All this money came out of the pockets of taxpayers from many developed countries, and in the case of the Ethiopian leather projects, mostly from the EU, and Italy in particular.

What rubs salt into the wound is that at the end of their Ethiopian leather projects, UNIDO threw a party at a 5-star hotel in Addis Ababa to celebrate their “enormous success". One remains speechless!

Malawi: A project that shouldn’t have failed

Please allow me to react to the article in S&V Footwear & Leather Goods last month on the footwear and leather goods industries in Malawi, and observe that the country has a not indifferent livestock industry, but, and that is a missing element in the article, it doesn’t have a hide and skin processing capacity.

Not anymore, I should say, as It had once a tannery in Liwonde mainly for wet blue processing though it could do also some finished leather. The tannery equipment was donated by UNIDO, and the project, contrarily to what happened in Ethiopia, was operating successfully.

Regretfully the tannery had no or limited access to foreign markets and it lacked support from the Government which pushed the owner to sell the (donated) equipment to tanneries in Kenya, closing the only leather processing capability in the country. It is true that landlocked

Malawi has high transport costs, but it exports its raw hides and skins, mainly to South Africa and China, from where it buys finished leather and leather goods, possibly made at least in part from its own raw materials. Sounds crazy, eh?!

So why shouldn’t it produce processed leather and leather goods itself? After various UN and COMESA leather industry conferences, the theoretical knowledge to tan and finish leather is available. Chemicals are available just over the border in Tanzania and South Africa from where transport costs should be bearable. So if Malawi would have again its own tannery, it could process its own raw materials and make the shoes, worth close to $8 million (not all leather), it now imports! Over the years various studies have analysed the Malawi leather value chain with all kinds of proposals, but nothing, virtually nothing has been transformed from paper into reality.

Note: We are aware that there is now a tanning operation at some stage of development, but we don’t yet have any details.