Mike Redwood

Columnist

International Leather Maker

The UN Trade and Development (UNCTAD) reports that 95 of 143 developing economies, around two thirds, were commodity-dependent in 2021-23. Sometimes known as “commodity dependence” or the “resource curse”, it occurs when countries fail to build up local industries and infrastructure and find its natural resources vulnerable to global price drops or totally depleted. In both cases, they fail to create secure jobs for citizens or lasting wealth to fund their economy. Sometimes, it just gets called the “billion dollar trap”.

Nigeria is probably the best-known example of getting trapped up this dead-end street. Their immense resources of crude oil should have created societal advancement, but refined petroleum products capacity has not been built, and those for everyday use are still imported. Entrenched groups have enjoyed the benefits from exporting the oil unprocessed and partly because large sections of a growing population are left unemployed and destitute, theft of oil from pipelines has left the delta highly polluted. Moreover, corruption has greatly increased.

Given it assets, the Nigerian leather industry should have passed the US$1 billion mark before the 21st century began but it has never come close. Notably, Nigerians like eating cowhide (known as ponmo), but aside from this creating an unreliable raw material supply, basic issues with electricity and with capital, keeps the Nigerian leather industry exporting raw or lightly processed raw material while importing finished goods. For an industry with a famous ancient leather history related to Moroccan leather and the complex cross-Saharan trade, this is a heartbreaking failure.

Leather industries all around the world, not only in Africa but Latin America and even parts of Asia such as Bangladesh, are in the same situation. While there are a few constant factors, each leather producing country is different. Reading through the projects done by UNIDO and some World Bank reports, three areas are repeated:

  • Raw-material trap: Hides are left unprocessed or as wet-blue/crust, while finished products are imported. This is the case with Nigeria and many other African countries.
  • Compliance trap: Tanning and manufacturing exists, but poor effluent treatment, traceability, labour conditions or chemical management bar firms from premium export markets. This is most notable in Bangladesh where the last two decades have been a nightmare of waste issues from which the industry has not yet escaped. Traceability has become a feature for even a more successful leather country like Brazil.
  • Contract-manufacturing trap: Finished articles are exported in volume, but foreign buyers retain the design, brand, sourcing authority, distribution and retail margin. This is largely, albeit not totally, the case in countries such as Tunisia, Vietnam and Indonesia. It is better than the other two but still falls short of control of the part of the chain with the highest value.

Ethiopia is another surprise with a raw material base and leather history that ought to have made it a global leather player alongside Italy, India and Brazil. It is thoroughly discussed in the latest September/October 2026 ILM print edition. Ethiopia shows that comparative advantage in raw materials does not automatically become competitive advantage in manufacturing. Reading the books written by the Ethiopian economic adviser and academic Arkede Oqubay, the problem has been one of “path dependency” which in this case is an industry that has accepted that much of its raw material is not very good quality, especially the cattle hides, getting itself trapped in a doom loop. They should neither accept poor husbandry and collection nor that hides and skins with blemishes cannot become top grade via imaginative processing.

Having abundant raw materials

Having raw materials gets you into the game, and decent tanneries put you in the centre of the pitch, as long as they are compliant regarding waste and modern labour laws. Like Ethiopia, Argentina has never quite made it through to the positions they should have. From my first visit to Argentina in 1978, it’s clear it has a good supply of high-quality hides from a major livestock base, but it has consistently underperformed Brazil in turning that advantage into higher-value leather industries.

Certainly, Argentina exported large volumes and values of leather, but mostly as wet-blue or semi-processed, and the expansion towards local added value did not evolve to have great success. Industrial and economic policies that keep changing and export taxes to try and keep rawhides at home have not prevented a major decline in capacity. The current government has freed up raw material exports to the delight of the hide traders and there seems little prospect of any serious tannery renewal in the country.

Argentina might be a classic version of the trap with good raw material with much better farm to tannery supply lines for the raw hides and skins than Ethiopia, some industrial processing, but not enough investment in downstream manufacturing, brand development and stable supply conditions exits.

The South Korean example

Historically, one of the major solutions to pulling these partially functioning leather ecosystems through has been to obtain access to the brands. It was not quite this simple for South Korea as they had already moved their agriculture workforce into garment manufacture and rubber footwear before Nike or Adidas existed. But when in the late 1980s I stood in the Nike Pusan (since 2000 called Busan) office looking down into the port where ships were loading and departing for the U.S. with the speed and precision you then only saw in airports, I recognised the importance of global brands. In fact, in the 1970s and 1980s as Korea found itself making items for top brands such as Nike and Reebok, the concept of the “virtual corporation” that owned no manufacturing started to occur in academic papers.

With other big footwear companies such as Clarks following the Nike model, attracting such brands became important for countries wanting to find employment for growing young populations. For many, it has been very successful in pulling tens of millions out of poverty. The leather trade should be proud of that.

Yet at the same time, South Korea pulled away as their wealth and wages rose. When I began tracking comparative costs in 1987, total hourly compensation in footwear was about US$1.26 in South Korea, against roughly US$0.40 in China; Taiwan was around US$1.83 and Hong Kong US$2.36. In the glove and footwear trades, wages were already several times the Chinese levels. The likely relocation of labour-intensive production was therefore becoming clear. South Korea was not too upset as it felt that textiles and leather were not enough to drive the economy forward. They replaced dominant foreign footwear brands with domestic automobile companies Kia and Hyundai, and the electronics business Samsung. It had escaped the trap first with leather but then used further development for further advancement: perhaps it should have started an Asian luxury goods business as well.

One of the major distinguishing features about South Korea was the developmental-state policy: export discipline, performance requirements and withdrawal of support from underperforming firms. The government would never have permitted the repeated errors in Savar that leaves so many Bangladeshi tanners unable to obtain LWG accreditation.

Leather is a technological and industrial challenge 

In this lies some of the answers. Leather should not be considered as merely an agricultural byproduct to which value should be added. It is much more complex and needs to be approached as an industrial/technology challenge. Infrastructure such as electricity grids, water supplies, functional waste plants, full international compliance and the logistics needed for prompt importing of chemicals and spare parts and exporting are all required. Nations that succeed also push through into design and branding.

The nations left behind often remain bottlenecked by weak infrastructure and fractured domestic supply chains. Properly lining an improving animal husbandry sector into an export-disciplined manufacturing base with strong clusters and stable policies that must come together.

Are traditional brands on the way out?

In the current period of constant volatility, my expectation is to see the global brands lose their place as we go forward. Consolidation and brand bullying of consumers has gone far enough. The use of AI to create false personas and greedy companions to persuade consumers how to vote and what to buy is already causing a backlash. I think Elon Musk is entirely wrong that AI will be in control by 2036, that work will no longer be done by humans who will be given a so-called living wage and expected to do nothing.

The old brand model is losing its legitimacy

As I meet with young people, I can sense change happening and I think a reaction to brands pushing us to extract too much, consume too much and throw too much away will soon be with us. Traditional brands are in danger of losing their legitimacy and a new structure is needed to replace them; one that is more human, less greedy, less wasteful, more honest and less talkative.

So, here is what I say to leather industries trapped in this billion dollar cage around the world. Build your own brands to fit your own culture and with proper morality. Build new trade routes that recognise how consumption will look like in the future rather than relying on historic routes. And from your citizens, find ways to discover, develop and deploy all their creativity that is as much needed in the leather industry, as in any other aspect of the Arts and Sciences.

mike@internationalleathermaker.com

You can find Dr Mike Redwood across social media at @michaelredwood.

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