Aug 30, 2012
Tata Tannery processes raw hide mainly sourced from small-scale traditional cattle farmers collected through an intermediary for export to the UK and India. Unlike other tanneries who have a captive supply of hide from affiliate commercial cattle farms, Tata Tannery relies on hide from these small scale farmers who husband about 83% of the total national herd, estimated at 3.49 million cattle.
There is significant demand for wet blue (processed hide) in Tata's main export destinations and the Tannery currently has sufficient capacity to process raw hide to meet this demand. However, both quantity and quality of current supply by the farmers/ abattoirs is inadequate and does therefore not allow for making full use of Tata's capacity as well as to respond to existing demand. Quality for instance could be improved by reducing delays (the fresher the hide the better the quality) and/or improving care of the cattle at farmer level (e.g. farmers paying attention to placement of branding stamps). The project aims to address these supply chain inefficiencies by better integrating farmers and intermediaries into the Tannery's value chain and creating incentives for farmers and abattoirs to improve quality and quantity of supply.
The main commercial opportunity in this project is to raise Tata Tannery's revenues by increasing production and sales of wet blue. The main commercial driver to achieve this is to increase efficiency of Tata's existing supply chain for cattle hides. In addition, Tata's also intends to enter new markets by starting to add value to wet blue via manufacture by crust (tanned but not coloured leather) and finished leather products. Securing additional supply sources such as goat hides is another strategic commercial driver for the company.
Small scale cattle farmers are the main direct beneficiaries of this project, at the moment approx 17,000 farmers are involved in TATA's supply chain and about 25% of these are estimated to be female headed households. Through the expansion of the supply chain into further Zambian provinces and other types of livestock (e.g. goats) Tata aims to increase this number significantly.
Better integration of farmers and abattoirs (mostly SMEs) in Tata's value chain has various potential benefits. Currently, farmers merely sell their cattle to the abattoirs for slaughter but do not receive any extra compensation for their hides. This means they have no incentives to ensure the hide meets high quality standards. Similarly, at the abattoir stage where the dehiding and preservation of the hide happens, there are problems with the processes as well as equipment which impacts quality negatively. The abattoirs sell the hides to an intermediary (which then delivers the hides to Tata's processing plant). By directly working with farmers, abattoirs and its intermediary Tata aims to build capacity and create incentives to produce and supply more and higher quality hide.
Ultimately, the project will result in the improvement of livelihoods of largely rural based small-scale cattle farmers and increased profitability of the various SMEs in the tannery's value chain.
BIF support will focus on
•Assessing the local cattle value chain to identify roles and challenges of players and developing a sustainable supply chain strategy for improved quantity and quality of supply for the tannery.
•Developing a partnership strategy for capacity building and incentivising farmers and other SME players in the supply chain.
Pursuing innovation and scale in inclusive business.
The Zambian tannery sector is largely characterised by tanneries with a captive supply of hide from affiliate commercial cattle farms. Thus sourcing hide from small scale farmers is innovative in the Zambian context. Whilst aiming to improve the efficiency of its procurement through the abattoirs, Tata also wants to look at other new ways of consolidating and collecting hide through farmer groupings such as cooperatives.