Although Egypt has long been a leader in leather manufacturing and tanning, a number of challenges continue to halt its dominance. These include a lack of capacity to expand, with export opportunities left as the only survival, according to Reuters. Egypt generates $1 billion worth of revenues from exporting leather products, according to a report published by the Industrial and Mining Projects Authority (IMPA).
Egypt’s industrial sector makes up 33% of the GDP. The leather industry’s contribution amounts to 0.4% of that, making it one of the weakest contributors to the country’s economy, according to data released by the Central Agency for Public Mobilization and Statistics (CAPMAS) in 2017.
Over 300 registered tanneries who mainly operate on exports in Egypt are present to this day; 80% of the high-quality Egyptian semi-finished hides and skins (raw material) is exported while the remaining 20% is sold in the local market.
Leather market performance
Egypt currently produces 125 million square feet of tanned leather, 75% of which is produced in 320 private tanneries in Old Cairo’s Magra El-Oyoun workshops, which are run by 8,000 workers.
The industry’s supply chain is comprised of suppliers of animal hides and skins and tanneries who turn those supplies into leather products.
Around 550 registered and unregistered tanneries were set to be relocated to a new leather industrial city in Robeki, 10th of Ramadan City, as per a government plan to increase leather production to 250 million square feet a year. The Ministry of Trade and Industry is targeting an annual increase in exports to over $1 billion by 2020, according to Reuters.
According to the IMPA, the relocation aims to reduce waste and production costs, increase foreign cash inflows, promote vocational educational levels and increase job opportunities in the industry.
“It was impossible to reduce pollution and chemical hazards discharged from tanneries at Magra El-Oyoun. Therefore, relocating to Robeki was a plausible solution to maintain strong quality control over the chemicals used in the production process,” industry expert and assistant professor in marketing and supply chain management at the Arab Academy for Science, Technology and Maritime Transport Sandra Haddad tells Business Forward.
The problem with Robeki
The leather tanning activity itself is curbed by the flow of irregular water supply and sewage services in the new leather city of Robeki.
“Tanneries also face obstacles in importing certain production accessories and tools that are banned by the state for being considered ‘weaponry’,” Haddad says.
A delay in delivering housing units to workers who moved to Robeki caused a high rate of absent workforce on site.
“Not all producers were able to relocate to Robeki because they needed a certain capital to kickstart their businesses at the new location,” Haddad elaborates.
Despite Robeki being a positive outlook for the leather industry, the government has not begun building infrastructure works for the second phase to this day, making it difficult for enterprises at Magra El-Oyoun to relocate.
Is Robeki enough to strengthen Egypt’s leather industry?
While the contribution of the leather sector to the GDP is minimal, Robeki is portrayed as a beacon of hope that would propel the industry forward. However, the lack of the sector’s dominance is not solely caused by the circumstances at Magra El-Oyoun.
Although Egypt has over 17,000 facilities involved in the leather industry production, 5,000 factories have been closed down, according to a CAPMAS report from 2016. In efforts to tackle that drawback, the Ministry of Trade and Industry issued a decree reviewing Egyptian standards for imported leather products and introducing a customs tariff on imported leather products.
The lack of technological innovation and fashion design centers contribute to the sector’s challenges. The centers should be in charge of improving the final products’ quality. Currently, only one center – a subsidiary of the Ministry of Trade and Industry – provides such services to the entire sector, according to a report by the Federation of Egyptian Industries (FEI) in March.
“Egypt’s leather sector lags in market performance due to several challenges, including buyers favoring cheaper leather products from abroad over the local one,” Haddad explains.
The import of low quality products and smuggled Chinese footwear overcrowding the market remain a core driver for a possible industry collapse, according to the FEI.
To reduce the current gap in providing specialized services in the leather sector, an Erasmus+ project has been introduced in 2018 under the name “Innovation for the Leather Industry in Jordan and Egypt”. It aims to establish four leather centers in local universities in both countries.
To embark on a promising future in the leather industry, Haddad suggests that the government needs to implement regulations and stricter monitoring and penalty policies on exported and imported leather. Other suggestions include establishing an official body to ensure quality control.
“The government needs to encourage producers through incentives, awareness sessions, managing a good quality control team or unit and training producers,” Haddad concludes.