The ostrich alternative

Bulawayo based exotic skin tannery, which also markets ostrich meat and related products in Europe and elsewhere, Ostrindo's output is mainly high quality ostrich finished leather. Other exotics, for example crocodile skins and hippo, are also accepted. The company compete with two other tanneries in Zimbabwe and several in South Africa for contract tanning services to ninety plus independent ostrich farmers. Ostrindo used to contract tan on behalf of producers in Australia, New Zealand, Spain, Canada, Scotland and elsewhere. Such customers either produced their own ostrich skins or bought raw materials in the world market and sent it to Ostrindo for treatment. The tannery then marketed the finished leather internationally and credited the overseas organisations their share of the earnings. This agreeable arrangement ceased with burgeoning political instability in Zimbabwe. International skin producers decided that the risk in sending expensive raw material to Zimbabwe was too great. Thus the service was lost to South Africa. The joint owners of Ostrindo are Cahyadi Kumala, an Indonesian investor, and Peter Cunningham, a third generation Zimbabwean. John Stambole, also third generation, is general manager of the tannery. The tannery is now mostly dependent on domestic origin raw materials from independent domestic producers. But, as with previous overseas customers, they not only process for independents but also market internationally on their behalf. All foreign exchange earnings have to come back to Zimbabwe before the shares of people upstream and downstream are taken off. This applies to all companies because, in terms of legislation, all foreign exchange exchange expenditure on imports and earnings from exports, are subject to Reserve Bank of Zimbabwe scrutiny. Asked if there were any difficulties in obtaining essential imports - foreign exchange is now virtually unobtainable except at unofficial market rates - Stamboli said the position was much as it had always been for EPZ (Export Promotion Zone) companies: ready access to foreign exchange, at the official rate, via the Reserve Bank. Imports and outputs, he said, were held in bond pending release by the reserve bank and 'at least 80% of earnings have to be from foreign sales but, in our case, virtually 100% is exported. 'There is sustained world demand for all grades of ostrich leathers. This is different from a few years ago, when only first and second were in world demand and lower grades had to be sold locally. Our foreign exchange earnings have increased dramatically as a result. Roughly 50% of skins are thirds or fourths and, even at lower prices, the additional earnings are considerable.' Downgrading seldom relates to slaughter conditions which, in Southern Africa, are excellent. Damage usually occurs on farms, where birds spend about twelve months after hatching. Ostrich are clumsy and accident prone. They fight with other birds, bump into things and suffer injury. This is, perhaps, explained by the fact that, on average, the brains of two adult birds will fit into one teaspoon. Despite this, they are pretty bright in their own environment insofar as survival is concerned, though adults stepping on the young is a common cause of chick fatalities in the wild. This is not a problem on commercial farms because, after hatching, growing birds are paddocked in age groups. Skins from adults average 14 ft2 and sell at about US$ 18/ft2 for top grades, lower grades at around $6. Increased acceptance of lower grades has helped put ostrich leather products within the price range of more consumers. This has had a pleasing effect on productivity and profits. The year 2000, when prices were buoyant, saw Ostrindo turnover at Z$380 million. World prices have fallen marginally this year, though not enough to seriously affect company operations. Ostrindo output is about 36,000 skins annually, equivalent to 75% of capacity. Current production stands at a mere 35% of capacity. There is a logical reason for this: ostrich only lay at a particular time of the year and so skins tend to come in seasonally. This is the low season, the Zimbabwe winter. The second half of 2001 will see capacity production. PT Royal Ostrindo had little knowledge of ostrich leather technology when they opened in 1997. Initially they formed loose consultative arrangements with experienced plants in South Africa, but have now built up their own expertise. Vuso Ndlovu is the tannery manager. He joined Ostrindo early 2000, having entered the leather sector in 1983 as a trainee tannery laboratory technician and being subsequently recommended for Nene College. Since graduation Vuso Ndlovu has gained wide practical experience in semi-processed, traditional finished and hair-on gameskin production, at plants in Zimbabwe and the Sudan. According to Ndlovu, Ostrindo raw material came primarily from the Bulawayo Ostrich Processors (BOP) abattoir. 'Skins are graded at the BOP plant by our own graders before coming to us', he said, 'and this helps keep after-receipt disputes about skin quality to a minimum. 'From then on stress is laid on maintaining quality in line with incoming raw grades or even improving on them.' Batches, at each stage of production - from arrival in green condition through to sending out as finished leather - are inspected and checked for grade before acceptance by operators at the next work station. Additionally, Ndlovu said, continual trials were conducted and statistical data built-up in an effort to enhance product quality, increase productivity and, at the same time, improve effluent and pollution control standards. Success in relation to the latter is evident from routine analyses of effluent carried out by the Leather Institute of Zimbabwe. Efficient pollution control has been an on-going feature of Ostrindo thinking since the design stage of the tannery. Finished leather quality is certainly of a high standard and compares favourably with accepted world standards. This is clear not only from visual examinaton of Ostrindo wares, but also by sustained overseas demand for the Ostrindo brand. Secondly, from the expressed satisfaction of domestic skin producers with their financial returns following placement of output with Royal Ostrindo. Stambole feels positive about the future of the ostrich industry in Zimbabwe. It had started with one or two farms in 1985, he said. Membership of TOPAZ, the Ostrich Producers Association of Zimbabwe, was now plus or minus ninety and still growing. He thought growth would continue in both the leather processing and finished article sectors. Tanneries are service organisations linked to Agriculture, says Stambole. Good and bad years are cyclical, with people coming into an industry in good times and leaving in poor. Growth had been incredible during the early years, but was levelling off now. He saw it picking up again, and also in other areas related to wildlife. For this reason Ostrindo had begun extensions to their tannery and intended moving into processing of gameskins, both hair-on and to smooth finished. This would widen their customer range to include taxidermists, safari operators, and safari-type footwear and exotic leathergoods manufacturers. Asked about the effect on Zimbabwe of growth in ostrich production elsewhere, such as Australia, the US and Europe, Stambole said Zimbabwe was part of a global market. It could not prevent other countries from buying fertile birds and setting up farms. But Africa generally - especially South Africa, with over 100 years' experience - produced efficiently. The continent should be able to hold a competitive edge. Ostrich were indigenous to Africa and presumably thrived best in African conditions. Stambole thought the position with overseas farming of ostrich was similar to the position with ostrich tanneries in Zimbabwe. There are three such tanneries, he said, and nobody wished to see any one of them monopolise the tanning sector. 'There is no monopoly. The fact is three tanneries exist, and all three have to strive for efficiency. Farmers have a choice as to where they send their skins. That keeps the three of us on our toes. This is a good thing. The same applies when Zimbabwe competes in world markets, the country has to face a challenge, maintain competiveness, produce better and more efficiently than elsewhere.' Asked what was the major difficulty facing industry, Stambole thought it was insecurity in the agricultural industry. This had a clogging effect on new investments and businesses. Industrialists increasingly thought twice about initiatives involving heavy capital expenditure - and then opted for a 'let's wait and see approach'. Within a few days of the interview with John Stambole, an example of the 'insecurity' he referred to hit the newspapers under the headline 'Investor threatens to sue'. According to the report, Cahyadi Kumala, who is Indonesian and, besides being a shareholder in PT Royal Ostrindo is also a major investor in Dollar Bubi Farms (Pvt) Ltd, had threatened to invoke the Zimbabwe-Indonesia Trade Agreement of 1992 to claim damages from the government of Zimbabwe. It seems that Dollar Bubi Farms, an established large scale ostrich raising project, had been mistakenly designated last year for resettlement by rural people. Stands were pegged by government officials and both settlers and so-called war veterans took up residence. Despite delisting last April, the occupiers refused to move, insisting they were the new legal owners. District and provincial officials appear to have done very little to correct the situation. But, when confronted by the press about Mr Kumalo's threat to sue, most denied any knowledge of the facts and referred reporters to higher authority. The financial manager of the Dollar Bubi group, Dion Hung, was, however, in no doubt about the facts and the results. He said a $72 million project to sub contract ostrich rearing to small scale farmers had been delayed and the jobs of 500 Dollar Bubi farm employees put at risk. The war veterans were disrupting production by interfering with farm employees and had cut off water supplies on one farm, on which the survival of the birds depended. This had resulted in the death of several ostrich imported from South Africa to improve the Zimbabwean flock. Trees had been burned and cut down for housing. Egg production between January and May this year had fallen to 50 against 700 over the same period last year. Dollar Bubi employees had been threatened with death on a continuing basis and, despite the reporting of such threats to the police, there had been no action. A subseqent news item stated construction of the world's biggest ostrich egg hatchery - with a planned capacity of 48,000 eggs - for which Mr Kumala had brought into the country $142 million worth of equipment, was in jeopardy. The press coverage galvanised government. The removal of settlers and so-called war vets alike was ordered and, soon after, the state media ran a series of articles extolling the merits of the Indonesian investments. But very much glossed over was the needless damage to Dollar Bubi Farms' property, to the environment, and to the lasting perceptions of potential foreign investors. It is small wonder that industry, commerce, the public at large, suffer a feeling of insecurity, and that international investors are in increasingly short supply.