Tutti Frutti

The latest from Rwanda is that the government issued export licenses in June for the export of wet-salted hides. At long last it realised that the smuggling made only a very few rich people richer and that the state should have its share.
It is surprising though that companies that exported in 2005, and who were stopped from one day to the next, have been refused when they applied recently for an export license. Rwanda is a country that gets huge amounts of international help ‘to combat poverty’ but refuses to recognise the legitimate claims to export hides and skins by those who lost their jobs in 2005 due to the export ban.
Instead a newcomer called Uhuru, who have never done anything in or for the
country, got a license within a month. It makes one wonder! Anyway that’s Africa. Personal interests have priority. That’s why the continent is so poor.
I have said it already, that if Africa was not kept as poor as it is, hundreds of thousands who are engaged in ‘helping’ it, would be without their gold-lined jobs. You will remember that Bob Geldof and others have urged the developed world to cancel the debt of African countries. None of the African countries will ever be able to pay back the yearly interest that they are accumulating, let alone the capital. So the African debt is just a matter of accounting, which is discussed in the annual IMF meeting in Washington where tens of millions of dollars are wasted in dinners, hotel suites and limousines (read Lords of Poverty).
What would be far more important is to compel African presidents and ministers, most of whom have a finger in the development pie, to repatriate the money that was creamed off development aid and sent to financial paradises. Remember the Mobutu treasure? And Idi Amin’s? Mugabe’s? Well these gentlemen are only the tip of the iceberg. If that kind of money, that has been stashed away, was returned to Africa, where it belongs, we’d have a lot of problems resolved. Anyway that's politics. Let's go back to economy.
Last year I wrote about export duty and who received the benefits in terms of money. Now I'd like to dedicate this part of this month's Limeblast to why export tax is the only solution to get the leather industry off the ground in some countries. And it is not only the Far East that is an obstacle to development. On the contrary, China tends to buy more and more wet-blue or semi-tanned leathers in order to resolve its own pollution problems, taking them to Africa.
In order to create jobs and a minimum of wellbeing, developing countries must create an economy that can at least feed its own requirements. They can't continue to export raw materials and import finished materials, hence creating jobs abroad and not at home.
Without creating an economy and thus a class of people with an income, they will always be importers of the cheapest manufactured goods. This just meets minimum requirements and thus they remain an ideal dumping place for whatever others don’t want to buy.
In order to build and/or run a tannery an entrepreneur needs to invest some serious money. It is, therefore, logical to demand the insurance that one can find the necessary raw materials for transformation. Kenya and Tanzania had several important tanneries which were forced to close due to lack of raw materials which were exported at prices that local tanners could not afford.
Now, with the introduction of a hefty export duty and monitoring of exports, the tannery business is picking up again. Existing tanneries in West Africa are not prepared to invest in order to produce leather beyond wet-blue, or even only wet-blue. The reason is that hides and skins are exported raw at better prices than local tanners can afford. Nigeria provides tanners with export incentives for crust leathers, which allow them to import raw materials from neighbouring countries at prices that are inaffordable to the tanners in these countries.
Ghana, Benin and Ivory Coast buy hides from surrounding countries for food,
paying a better price than local tanners can afford for industrial transformation. As an aggravating factor hides that enter the food market can have brands, flay cuts, insect bites, scars and holes, which are not acceptable to the leather industry.
On top of these regional problems, the developed world has bound developing countries hand and foot by extorting free trade concessions. Free trade serves only the developed countries by enabling them to obtain cheap raw materials, but is ‘contra indication’ for developing local industries.
Only those developing countries that defied the free trade imposition such as Ethiopia, India, Pakistan, Brazil, Kenya, Nigeria, Burkina Faso and many others, risking penalties from the WTO (provided they are part of WTO), are doing reasonably well to excellent. Hence it pays to be disobedient.
The playing field should be level. As said Nigeria has an export ban on raw materials and wet-blue leathers. It provides incentives on crust and finished leathers.
That's all fine in the domestic market, but when surrounding countries have no protective barriers in place due to WTO and Doha Round rules, then the playing field is not level anymore. As a consequence Nigerian tanners have an unfair advantage over domestic tanneries in surrounding countries that have no protective and incentivisation measures in place.
The situation in the Indian subcontinent is the same. Imports of raw materials are unrestricted and exports of raw materials, wet-blue and crust leathers are restricted. It is cheaper to buy Brazilian finished leather than to buy the same leather in wet-blue.
Countries that recognize and adhere to the free trade rules can request a temporary suspension of these rules, but the time frame is rather short, definitely not enough to set up a properly working industry that is solid enough to compete with countries that don't adhere to these rules. I wonder whether free trade is really what we all want for developing countries?

Sam Setter   
samsetter@limeblast.org