Roll the dice22 October 2020
Depending on when you pin the origin, we are now more than nine months into the biggest health and economic disaster the world has known in a century. Sam Setter uses this Limeblast to look at bits and pieces on what is going on in the leather business and who should and shouldn’t be gambling.
With tens of millions of jobs lost worldwide, the spending capability of the average citizen has been dramatically reduced. The rich have less of a problem, of course, though the middle class and the less privileged of this world will need to manage their money, if they have any.
People in developing and emerging countries are literally struggling to even get a bowl of food on the table. There have been more than 30 million people infected and almost one million individuals that have succumbed to Covid-19 at the time of writing. I am quoting this because we read newspapers and see TV reports daily with entrepreneurs bitterly complaining about their businesses, and others looking for bankruptcy protection to get rid of debts and remodel their businesses.
Then you see thousands gather on packed beaches worldwide, or in nightclubs, with only one purpose – to enjoy themselves and the hell with social distancing and face masks, resulting in infection cases rising dramatically and ICUs filling up again to capacity, endangering the lives of medical personnel, who do not have the luxury of relaxing on vacation. Elsewhere, restaurants in Europe were not allowed to accommodate 100% of their usual capacity, and it became difficult to get a table without reservation throughout the summer months.
One foot at a time
The leather business has started producing leather again, albeit at a very slow pace, making bags, shoes and car seats. Production is considerably down because after months of lockdown, shops have not sold their previous stock and are unable to buy a new supply for the new season until they have shifted their holdings one way or another.
Economically, it will take years to catch up to pre-Covid levels. You don’t need to be Einstein to understand that profits this year will be down or even non-existent, or to forecast that many businesses will post a loss and that some will be forced to close down. But if a business is not capable of absorbing a loss one year, what did they then do with the profits of the years before? I think we should stop complaining and look forward at how to manage today, to improve for the future and not make some of the mistakes that were made in the past.
The industrial countries are trying to sustain their industries – including the leather industry – with economic boosts, though it remains to be seen how successful this will be in the medium and long term. Developing and emerging countries have a totally different situation at hand, and examples of governments backing the industry are rare. I haven’t heard of any government in non-industrial countries investing in the future of their domestic leather industry.
People should understand that Covid indeed is a curse, but it is also an opportunity to abandon old models and look at new solutions. Webinars have been introduced but I am sceptical as to how well they are attended. Each time I attend a webinar I ask how many people are attending. I never get an answer, nor do I recall seeing the organiser boasting about the number of people in attendance like fair organisers do after their successful events.
Case in point
One of the worst examples of never improving is, and remains, Bangladesh, unfortunately. It is not only affected by the backlash of Covid but also by the unworthy management of the effluent problems of the central effluent treatment plant (CETP) that seriously damages the export sales probabilities of tanners. The news outlet NewAge wrote in July 2019 that the Savar Tannery Industrial Park will not be ready until three years from now, after others had written in 2019 that it would be ready this year.
Given the way that leather industry priorities are being managed in Bangladesh, the Savar Tannery Industrial Park may never be ready. On the contrary, tanneries will risk closure – some already have and never opened again – unless quick and drastic steps are taken. One of the issues is the CETP and its substructure, which were conceived and built with Chinese technology and by Chinese contractors. Even if the merits of the basic technology can be debated, the main reason why the Chinese suppliers were selected was not down to the technology but because they provided the best compensation. Due to the huge amounts that were reserved for this purpose, it is obvious to me that the remaining funds available for the equipment and construction are now insufficient to provide for quality results.
Due to the enormous amount of publicity given to the inadequate quality of the CETP discharged waters, brands and distribution chains – the end buyers of many leather products made with Bangladeshi leather – have become aware of the unbelievable pollution of the Dhaleshwari river that flanks the Savar Leather Park.
The buyers of leather moved to other more compliant suppliers and slowly the Bangladeshi leather-related exports went down, a tendency aggravated by the Covid pandemic. The tanners who had invested huge amounts of money for the move from Hazaribagh found themselves with enormous debts to their banks and ever-decreasing revenue. One of the telltale results is that Kurbani hides, which were swept up by the tanners at premium prices in the past, were rotting away in the streets in 2020.
The Bangladeshi leather community and the government are well aware of the causes of their market losses, but nothing is being done. Three years ago, proposals were made to upgrade the Savar CETP and turn it around into a world-class ETP that would come at a cost of €25m – peanuts for an emerging country like Bangladesh – but decisions were put on hold due to upcoming elections. Once the elections were held, still nothing was done due to the many domestic ‘experts’ providing their opinions to the government, with most looking for their share of the jackpot, I surmise. Those that were involved in the original design defended their decisions in order not to expose themselves to various accusations. So, in three years nothing was done and from statistics you can see that in that time the declines in leather exports from Bangladesh are becoming worse and worse.
Can anything be done?
Important and politically influential tanners petitioned the government to allow them to build their own individual effluent treatment plants (ETPs) in order to save their investment. The request was granted to three tanneries that I am aware of before a new entity put its weight in, delaying the actual issuance of the construction permits caused by specific requests for clarifications that are just plain excuses to line more pockets.
I have accused tanners in Bangladesh more than once of what I believed irresponsible behaviour, particularly where CSR and pollution are concerned, but this time I must recognise that they are the victims and are caught between a rock and a hard place. They still look for deals and savings rather than quality and progress, but in this instance, they have my full sympathy and backing.
Sure, leather exports are declining in Bangladesh due to the Covid pandemic, but there is no doubt in my mind whatsoever that the fundamental culprit behind the export decline is the way Bangladesh has been handling the effluent treatment issues in the Savar Industrial park.
Sam Setter’s views are his own and do not necessarily represent those of Leather International. For a rebuttal on the state of the industry in Bangladesh, see our regional focus on page 17.