Is leather industry in trouble?
Jan 21, 2009
THE low price of hides and skins is killing the leather industry. Prices have fallen to sh150 from sh1, 600 as of November last year.<br>Amisi Sonko, a hides and skins trader says traders have been incurring losses as a result of selling at throw-away p
By Ibrahim Kasita
THE low price of hides and skins is killing the leather industry. Prices have fallen to sh150 from sh1, 600 as of November last year.
Amisi Sonko, a hides and skins trader says traders have been incurring losses as a result of selling at throw-away prices.
“There are adequate supplies of hides and skins but the processing plants have no adequate capacity to process them. This has lowered the value of our exports.â€
Causes of low prices
Sonko, like his colleagues, does not know the causes of the abnormal price reduction.
Omar Faisal, a trader at the City Abattoir, said most of his colleagues have abandoned the trade while others have started dealing in other goods like coffee and cotton.
“Most of the hides and skins are rotting in the stores because there are no buyers. Skins and hides that weigh below 10kgs are not purchased,†he said.
Faisal says hides and skins are classified according to weight and length. The fresh hides/skins fall in the categories of cattle hides; light weighing 10.7kg, medium 25-22kgs while heavy category starts from 22kgs and above.
The goat/sheep skin is categorised in small ranging between 50-60cm long, medium ranges from 60-70cm while large starts from 70cm. Faisal said that increment in taxes levied on hides and skins exports to $0.4 per kilogramme up from $0.25 was forcing some of the processors and tannery to buy the products at low prices for them to stay in business.
Nelson Wambuzi Gaggawala, the state minister for trade said: “The price is determined by the market forces of demand and supply. I cannot intervene. But for the taxes levied, it is important for them to know that it was meant to add value on raw hides and skins in order to create jobs for our people.â€
Bright Rwamirama, the state minister of agriculture in charge of animal husbandry was too busy to comment.
Benefits of hides and skins to the economy Uganda’s leather is of high quality and texture and of heavy substance. The industry has tremendous potential for foreign exchange earnings. It has the capacity to attract tremendous and profitable foreign investment.
It is estimated that Uganda produces about 1.1 million bovine hides and two million goat and sheep skins annually.
Uganda has four leather industries: Uganda Leather and Tannery Industries and Sky Fat both located in Jinja; Balawi Hides and Skin in Busia and Novelty Tannery in Masaka.
Exports
More than 95% of the hides are exported in raw form, which yields $9m export earnings per annum. A substantial amount of unprocessed hides and skins are air dried. Exports have risen to 30 destinations. These include Hong Kong, Pakistan, Italy, Spain, India, UK, Netherlands and Kenya, among others.
The leather sector presents a range of investment opportunities. The total footwear requirement of the country is estimated at 19.8 million pairs per year.
Uganda bovine hides have a distinct advantage because of their high texture and heavy substance that makes them suitable for production of heavy upper leather and vegetable tanned sole leather.
Sources of hides and skins
According to a report: “Investing in Uganda Leather Sector,†60% of the cattle slaughters and 90% of the goat and sheep slaughters occur in rural areas. The only preservation method available is sun drying that leads to the production of fair to good grades of hides and skins.
The main slaughter houses, according to the report, are located in urban centres of Kampala, Jinja, Mukono, Masaka and Mbarara. Hides/skins produced in the main slaughter houses are traded as fresh stock and transported directly to the tanneries for processing. Processing of fresh hides guarantees high quality leather.
Challenges
Lack of trade and marketing information is hindering investment decision in the industry. This is leading to low productivity and poor workmanship, according to Sonko.
Lack of grading for raw hides and skins and price settings. Lack of commercialised farming systems and poor marketing of physical opportunities are some of the challenges.
Lack of a policy to guide the sector to address the constraints and amend the Hides and Skins trade Act of 1964 which does not conform to the new policy reforms.
Poor production methods associated with lack of proper equipment, inadequate infrastructure, limited human resource capacity and poor husbandry practices.
Limited processing and value addition due to lack of quality raw materials, inadequate human resource, environmental concerns, high investment costs and lack of incentives to invest in the industry.
Poor marketing
Lack of credit facilities.
THE low price of hides and skins is killing the leather industry. Prices have fallen to sh150 from sh1, 600 as of November last year.
Amisi Sonko, a hides and skins trader says traders have been incurring losses as a result of selling at throw-away prices.
“There are adequate supplies of hides and skins but the processing plants have no adequate capacity to process them. This has lowered the value of our exports.â€
Causes of low prices
Sonko, like his colleagues, does not know the causes of the abnormal price reduction.
Omar Faisal, a trader at the City Abattoir, said most of his colleagues have abandoned the trade while others have started dealing in other goods like coffee and cotton.
“Most of the hides and skins are rotting in the stores because there are no buyers. Skins and hides that weigh below 10kgs are not purchased,†he said.
Faisal says hides and skins are classified according to weight and length. The fresh hides/skins fall in the categories of cattle hides; light weighing 10.7kg, medium 25-22kgs while heavy category starts from 22kgs and above.
The goat/sheep skin is categorised in small ranging between 50-60cm long, medium ranges from 60-70cm while large starts from 70cm. Faisal said that increment in taxes levied on hides and skins exports to $0.4 per kilogramme up from $0.25 was forcing some of the processors and tannery to buy the products at low prices for them to stay in business.
Nelson Wambuzi Gaggawala, the state minister for trade said: “The price is determined by the market forces of demand and supply. I cannot intervene. But for the taxes levied, it is important for them to know that it was meant to add value on raw hides and skins in order to create jobs for our people.â€
Bright Rwamirama, the state minister of agriculture in charge of animal husbandry was too busy to comment.
Benefits of hides and skins to the economy Uganda’s leather is of high quality and texture and of heavy substance. The industry has tremendous potential for foreign exchange earnings. It has the capacity to attract tremendous and profitable foreign investment.
It is estimated that Uganda produces about 1.1 million bovine hides and two million goat and sheep skins annually.
Uganda has four leather industries: Uganda Leather and Tannery Industries and Sky Fat both located in Jinja; Balawi Hides and Skin in Busia and Novelty Tannery in Masaka.
Exports
More than 95% of the hides are exported in raw form, which yields $9m export earnings per annum. A substantial amount of unprocessed hides and skins are air dried. Exports have risen to 30 destinations. These include Hong Kong, Pakistan, Italy, Spain, India, UK, Netherlands and Kenya, among others.
The leather sector presents a range of investment opportunities. The total footwear requirement of the country is estimated at 19.8 million pairs per year.
Uganda bovine hides have a distinct advantage because of their high texture and heavy substance that makes them suitable for production of heavy upper leather and vegetable tanned sole leather.
Sources of hides and skins
According to a report: “Investing in Uganda Leather Sector,†60% of the cattle slaughters and 90% of the goat and sheep slaughters occur in rural areas. The only preservation method available is sun drying that leads to the production of fair to good grades of hides and skins.
The main slaughter houses, according to the report, are located in urban centres of Kampala, Jinja, Mukono, Masaka and Mbarara. Hides/skins produced in the main slaughter houses are traded as fresh stock and transported directly to the tanneries for processing. Processing of fresh hides guarantees high quality leather.
Challenges
Lack of trade and marketing information is hindering investment decision in the industry. This is leading to low productivity and poor workmanship, according to Sonko.
Lack of grading for raw hides and skins and price settings. Lack of commercialised farming systems and poor marketing of physical opportunities are some of the challenges.
Lack of a policy to guide the sector to address the constraints and amend the Hides and Skins trade Act of 1964 which does not conform to the new policy reforms.
Poor production methods associated with lack of proper equipment, inadequate infrastructure, limited human resource capacity and poor husbandry practices.
Limited processing and value addition due to lack of quality raw materials, inadequate human resource, environmental concerns, high investment costs and lack of incentives to invest in the industry.
Poor marketing
Lack of credit facilities.