Table of Contents

I. INTRODUCTION

II. PROJECT CURRENTLY UNDER IMPLEMENTATION: "RAW HIDES AND SKINS GRADING AND PRICING SYSTEM IN SELECTED AFRICAN COUNTRIES"

III. NEW PROJECT PROPOSALS

I. INTRODUCTION

1. The Sub-Group on Hides and Skins has maintained an active interest in obtaining the assistance of the Common Fund for Commodities (CFC) for commodity development activities. It is a designated International Commodity Body (ICB) under the rules of the CFC and in this role has promoted projects to improve the hides and skins sector. As Supervisory Body of ongoing projects it has responsibility to review progress and to provide assessment to CFC. One project is currently under implementation and two further proposals have been prepared but not yet approved.

II. PROJECT CURRENTLY UNDER IMPLEMENTATION: "RAW HIDES AND SKINS GRADING AND PRICING SYSTEM IN SELECTED AFRICAN COUNTRIES"

2. At its Sixth Session in Cape Town in November 1998 the Sub-Group, in its capacity as ICB, endorsed the project proposal "Raw hides and skins grading and pricing system in selected African countries" which was subsequently formally approved by the CFC. Information on progress of the project is provided below, but it is expected that participants from relevant countries and from PEA will be able to provide additional information to the Session.

A. PURPOSE AND OBJECTIVES

3. The quality of raw hides and skins in the region has been a major obstacle to the development of the leather sector. The introduction of grading by quality and pricing pilot schemes is expected to raise the quality standards of hides and skins so that the commodity and its derived products can more successfully penetrate the international markets. The objectives of the project as indicated in project components are:

a) Component 1 - Technical assistance for grading by quality and pricing system.

The objective of this component is to improve the quality of raw hides through:

• the development of quality certification stamp to be used on those hides and skins that meet the standards required both at the local and international markets;
• hides and skins improvement field activities in the selected countries, including national and regional seminars;
• introduction of a pricing system, which is pegged on quality grades.

b) Component 2 - Technical assistance to National Associations at country level.

The objective of this component is to disseminate to all African countries the results achieved by the four selected countries participating in the pilot scheme, and to provide technical assistance to national associations.

c) Component 3 - Institution building and establishment of a Leather Technology Training institute.

The objective of this component is to assure continuous training activities and to sustain a pool of qualified personnel needed in the region. Skilled people are needed at all levels and in all types of sectoral activities in order to provide the market with good quality raw hides and skins and derived products.

d) Component 4 - Technical assistance at the regional level, project coordination and management.

The objectives of this component are:

• to provide technical assistance to associations of the four countries;
• to efficiently manage and coordinate the project;

4. The total project cost is US$3 186 800. It is financed by a CFC grant of US$1.4 million. Contributions in kind to the project are provided by the Governments and Leather Industry Associations of Ethiopia, Kenya, Tanzania and Zambia. Co-financing contributions are also provided by the Italian Tanners Association (UNIC) and the United Nation Industrial Development Organisation (UNIDO). ESALIA is the Project Executing Agency (PEA). The project was launched in Kenya on 28 September 1999.

B. PROGRESS

5. The PEA has indicated in its reports that in general project implementation is in line with the targets for the various components as set out in the workplan of the project. However, some activities in Zambia are behind schedule.

a) Component 1: - Technical assistance for grading by quality and pricing system.

The PEA indicated that all the planned activities have been completed. Consultants and national co-ordinators have been recruited and regional activities started in July 1999. The first regional and national seminars have been conducted successfully and national workshops have been held in Ethiopia, Kenya and Tanzania. In particular the PEA indicated that:

• At the primary level the technical assistance provided in introducing a grading and pricing system included carrying out field extension activities in the selected countries. This process while not very complex in nature demanded the introduction of a pricing system based on quality grades, which will provide an incentive towards production of higher grades of raw hides and skins.
• It was necessary to differentiate slaughterhouses that have recorded high quality from those producing inferior quality material. For this reason, data were collected for the establishment of slaughterhouse indices. These indices will provide useful information to local raw hides and skins traders, tanners and the international leather business. The Slaughter House Index (SHI) enables traders to peg a price to the material from a particular slaughterhouse. The index will promote competition amongst slaughterhouses.
• A quality certification stamp has been designed for use as a marketing tool by tanners who are following the project's grading guidelines to identify and differentiate them from those who fail to follow the guidelines. The set standards are derived from the grading standards developed by UNIDO in cooperation with FAO under the UNIDO Africa Regional Leather Programme US/RAF/88/100 and US/RAF/98/200. The standards have been widely circulated and it is expected that with the existing recognition by the Italian Tanners Association they will have wide acceptance. A booklet on the grading standards has been published to facilitate wide dissemination and greater understanding within the leather sector.
• The quality mark is registered in order to protect it from possible misuse by those not meeting the required quality specifications. The use of the quality certification stamp is planned to be extended for use by other tanneries in countries not covered by the pilot project, provided that the tanneries meet the requirements of the quality stamp. This will ensure overall improvement of the quality of leather from other African countries. In addition, the respective National Bureaux of Standards have adopted similar standards at the national level.

ESALIA - CFC Quality Mark

ESALIA intends to use the Internet under its website, www.AfricaLeather.com to publicise the Quality Mark.

• Image Building of the African Leather sector: the project maintained, in cooperation with UNIC and Centre for Development of Enterprise, a stand in the premier International Leather Fair, Lineapelle, Bologna Italy in November 1999 and in May and November 2000 which acted as a platform for promoting not only the hides and skins grading and pricing project but also the image of the African Leather Sector. The project was also presented at the "Meet in Africa 2000 Fair" in Casablanca, Morocco. Participants at this event from West Africa expressed the need to have a similar project in their region.

b) Component 2: - Technical assistance to National Associations at country level.

The PEA reported that the equipment such as flaying knives and vehicles indicated in component II have been purchased and delivered to the four respective countries. Hide pullers have been ordered and delivered to Kenya. National experts have been selected and they have been trained in the new system. Field work for hides and skins improvement has started. One workshop on hides and skins improvement has been completed and a second is in preparation.

c) Component 3: - Institution building and training: Setting up a Leather Technology Training Institute.

The project has fielded a leather product expert from UNIDO to assess the requirements of the Leather and Leather Products Technical Institute in terms of machinery and equipment for leather products training. The PEA reported that the Trust Deed between ESALIA and UNIDO was signed and UNIDO has obtained clearance from the Ethiopian Government. Implementation is expected to start in the first part of 2001.

d) Component 4: - Technical assistance at the regional level, project coordination and management.

The PEA reported that in order to provide technical assistance and to obtain efficient management, regional coordinators and finance and administrator coordinators, have been recruited based on the changes proposed during the project launch. Technical expert recruiting is in line with the work plan and the expert engaged completed his assignment in September 2000 as envisaged in the planned activities. With reference to the liaison with international and national leather and trade associations and participation in fairs for trade promotion the PEA reported that the activity is continuing according the work plan and is expected to participate at the Lineapelle show in May 2001.

C. CONCLUSIONS

6. Project implementation is in line with the work plan as initially laid down. The PEA has not experienced any major difficulties in project execution and implementation and continues to receive full support from the participating governments and national associations.

III. NEW PROJECT PROPOSALS

7. Two project proposals have been received by the Secretariat:

A. ADDING VALUE ON AFRICAN LEATHER: IMPROVEMENT OF LEATHER PRODUCTS MANUFACTURING IN SELECTED COMESA COUNTRIES, ETHIOPIA, KENYA, SUDAN AND ZIMBABWE

8. This project proposal has been prepared jointly by the Leather and Leather Products Institute (LLPI)and the Eastern and Southern African Leather Industry Association (ESALIA). It has been submitted three times to the CFC, but without success. This proposal would need to be endorsed by the Sub-Group in its capacity as ICB, before it could be finally approved for financing by the CFC. An outline of the proposal is provided in document CCP: ME/HS 01/CRS.1

9. Lack of competitiveness of leather products manufactured in Africa both in the domestic and international markets has been a major problem in the sector. This has led to collapse of many small-scale industries manufacturing leather products. The industry has found it difficult to compete both in quality and price in standard or niche/segment markets. The industries need help in the improvement of skills, productivity, technology and marketing capacity. This project aims at providing technical assistance and a loan facility to selected production units in improving processing methods, quality and technical aspects of products and marketing capacity. The project will include development, adaptation and transfer of the relevant technologies and skills.

10. The immediate objectives of the project proposal are to develop pilot leather and leather products units in selected countries, to facilitate technology transfer and the use of new technology, to build capacity in selected research and training institutions to respond to technical needs of leather producers, to improve marketing skills, to create more employment opportunities, and to increase foreign exchange earnings. The integrated package sought comprises a grant for technical assistance and demonstration equipment and a loan component for capital equipment and working capital for selected production units.

11. The project would be located in Ethiopia, Kenya, Sudan and Zimbabwe. The estimated cost is US$6 938 000 of which US$1 million is sought as grant and US$5 million as loan facilities. The revised project proposal was submitted for the third time to the Consultative Committee of the CFC which, at its 27^th meeting in January 2001, observed that the project proposal was still very complex. Extensive coverage of countries and sectors of leather developments would make the project difficult both to manage and to realise. The Consultative Committee suggested splitting the project proposal into two sequenced projects comprising of:

a) Phase 1 A project designed to address issues of quality and marketing aiming at creating local capacities through strengthening existing training institutions, including upgrading of necessary equipment and tools;

b) Phase 2 A project designed to assist small and medium enterprises, including provision of credit facilities for the purpose of upgrading technology, tools and equipment.
The Committee also requested that all necessary information be provided including the identification of beneficiaries, method of their selection, detailed financial and economic appraisal, loan guarantees and risk management provision.

12. The Committee stressed that any reformulated future submission should take into consideration the Committee's recommendations.

13. The Sub-Group may wish to endorse this project proposal and request that the project be reformulated to comply with the CFC Committee comments and suggestions.

B. DEVELOPMENT OF PROFESSIONAL PARTNERSHIP IN THE HIDES AND SKINS SECTOR IN WESTERN AFRICAN COUNTRIES

14. This project proposal prepared by the Government of Mali and modified as requested by the Sub-Group at its Sixth Session in South Africa has been forwarded to the CFC for a preliminary review. An outline of the project proposal is presented in Document CCP:ME/HS 01/CRS.2. The main objective of the project proposal is to provide technical and financial assistance in order to improve production and marketing of raw hides and skins and leather and leather products in Western Africa, particularly in Burkina Faso, Mali, Mauritania, Niger and Senegal.

The objective would be achieved in two phases.

a) Phase I: with reference to the development of professional partnership among the countries the "Mutuelle de Professionnels des Cuirs et Peaux" of Mali would act as the focal point to liase with the associations of the other countries concerned. Technical and financial support for the recruitment of consultants and experts would be required.

b) Phase II: would improve the quality and productivity of the raw materials, promote and improve the tanning process of raw hides and skins, develop and increase trade between countries concerned, and promote trade of semifinished and finished leather products on international markets.

15. The project would be located in Mali and Mauritania. The PEA would be the "Office Malien du Bétail et de la Viande" (Ombevi)

16. The estimated cost of the project is US$4 887 500.

17. The Sub-Group may wish to endorse this project proposal for submission to the CFC.