Fair trade for Africa

14 June 2003

With the creation and distribution of the SFF, I seem to become more and more involved in matters that concern Africa and the more I get the opportunity to look at things inside the continent, the more I wonder about the intentions of the developed world towards Africa or the developing world in general. Recently I read an article in a newspaper that reported that Sub Saharan Africa is the major outlet for the world's tomato purée. Almost a hundred containers, worth a couple of million dollars, are exported yearly, mainly by Italian canning companies to developing Africa. Nestlé are selling even more important quantities of powdered milk, mainly produced in Holland, to the African continent. Multinationals make the Africans believe that their powdered milk is better for babies than mothers' milk or the milk produced by the African cow. I can understand a preference if the health of babies is invoked, even if it is simply not true that powdered milk is better than mothers' milk. But when I was told that the Italian tomato purée suited the African taste better, I wondered why people would be so choosy when they have little money and when they are hungry? The answer is not embedded in the taste buds of the fine African tongue but in the cost of the product. It is cheaper to buy imported tomato purée rather than buy a similar locally-produced product. The reason that European tomato purée is cheaper is not because Europe produces better tomatoes or in a more efficient way. The point is that due to huge subsidies to the European tomato industry, you can buy in Kampala a tin of European tomato purée cheaper than the same item produced in Kenya or South Africa where there are no subsidies, even if the tomatoes processed in Europe are imported from northern African countries! Most of the African industry, hence also the tomato purée canning industry, is the result of some form of developing aid. The EU as a whole and its member countries singularly dedicate an x% of their GNP for developing aid in order to construct and develop industries in Africa, for instance a tomato purée factory. But at the same time, the EU subsidises the tomato purée industry in Europe up to a point that the tomato purée from Europe is cheaper than the tomato purée from the African factory. Hence the tomato purée factory in Africa is doomed from the outset! Either it should never have been built, or the subsidies in Europe should have been reduced. Or maybe the whole exercise was developed exclusively to create jobs in Europe for those factories that produce equipment to supply the tomato purée project in Africa?! How does this relate to the leather industry? It doesn't! Or maybe there is an analogy. It is common knowledge that there is an excess production capacity for leather in many African countries, and a large number of tanneries lie idle in countries such as Namibia, Zambia, Tanzania, Kenya, Uganda to name just a few. There are simply not enough raw hides and skins to process. Nevertheless some of these countries export raw hides and skins on a relatively large scale. Local tanners are simply not in a position to buy their raw materials in their own country and process them into an exportable product at a competitive price, whether that is wet-blue, crust or finished. Pakistan, India, Hong Kong and China are the main export destinations of east African hides and skins. Their presence keeps the prices of the local east African markets high despite the general decline of the world markets. It is interesting to note that in March, a green hide from the abattoir in east Africa cost about $0.65/0.70 per kg which brings the estimated cost on a wet-salted basis to $0.85/0.90 to which local transport, and other overheads, must be added. One of the reliable market reports informed its members that Kenyan/Ugandan wet-salted hides during that period cost about $0.90/0.95 per kg FOB. If you compare the cost of the raw hide and the presumed FOB price, there is no profit, but more likely a loss, to be taken into account. And I have not considered the 20% export duty levied by the Kenyan government on export of raw hides and skins! The fact that India and Pakistan provide incentives to their leather industry has nothing to do with this because the monetary advantage of the incentives is too small to compensate for the non-profit or loss at the export stage in Africa. It all has to do with moving money out of Africa, important money! There is no other explanation. Customs turn a blind eye when a container with 18,000 goatskins is exported with an invoice that states that the container includes 9,000 pieces....... The 9,000 smuggled goatskins represent some $20,000 that leave the continent without a trace, also leaving tanning drums empty that could have been filled and could have earned foreign currency! Understandably, after intense lobbying by the Kenya tanners association, in a move to protect its home grown tanning industry, Kenya introduced, contrarily to the rules of free trade, an export duty of 20% on all raw hides and skins of Kenyan origin. Statistics tell us that exporters pay close to no export duty. Most exported raw material is reported as in transit from surrounding countries, and those materials of Kenyan origin are grossly under invoiced and, therefore, generate close to no income, something that has come under the scrutiny of the Kenya Revenue Authority. However, something seems to be moving. It is rumoured that in April, Kenyan authorities checked a large number of containers on leaving Mombasa, all for one particular east African hide and skins exporter, the same one who kept prices high against the tendency of the world market. Documents relating to these containers stated that the material they contained were rejects, whereas customs seem to have established that in reality the hides and skins were of normal tannery run quality. Obviously Africa offers huge business opportunities, but sadly this is not likely to benefit the Africans. Africa is given money to set up industries, which we don't want them to use, and we help them devise laundering systems to take out their foreign exchange and their natural resources for which we set up factories which should obviously lie idle. This time I can't blame the help organisations because, objectively, this is beyond their reach and certainly beyond their will. Sam Setter mail@samsetter.org

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