Industry structure
Why is this important? The structure of an industry is a fundamental aspect that shapes its growth, competitiveness, and overall performance. A comprehensive grasp of industry structure offers invaluable insights into the various layers, segments, and market players that make up an industry. This knowledge not only enables businesses, investors, and policymakers to make informed decisions but also helps identify opportunities for growth, innovation, and collaboration.
The industry within the SIC code system
In South Africa, the leather industry falls under the broader category of Manufacturing (SIC Code 3000). Within the Manufacturing sector, the leather industry can be classified under the following SIC codes:
- Tanning and dressing of leather; manufacture of luggage, handbags, saddlery and harness (SIC Code 1512)
- Manufacture of footwear (SIC Code 1520)
- Manufacture of other articles of leather; manufacture of saddlery and harness (SIC Code 1531)
These SIC codes are used by Statistics South Africa and other organizations to classify businesses and industries in the leather sector for data collection and analysis purposes.
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The leather and footwear value chain was divided into six sub-sectors in 2011 due to diverse marketing, manufacturing and operational requirements:
Domestic market oriented:
Leather sub-sector
Footwear sub-sector
Leather Goods, General Goods, Handbags and Luggage subsector
Export market oriented:
Crocodile leather sub-sector
Ostrich leather sub-sector
Taxidermy sub-sector
The broader industry structure
- Market Dynamics: The South African leather industry is characterized by a high degree of fragmentation, with numerous small and medium-sized enterprises (SMEs) involved in various stages of production. The industry’s competitive intensity is driven by factors such as product differentiation, quality, and pricing, with both local and international players vying for market share. Barriers to entry are relatively low, encouraging new entrants and contributing to the market’s dynamism.
- Opportunities and Threats: The leather industry in South Africa presents several opportunities for growth and innovation. The increasing demand for high-quality, sustainable, and ethically-sourced leather products creates room for differentiation and value addition. Additionally, the potential for export markets and regional integration provides opportunities to expand the industry’s footprint. However, the industry faces challenges such as rising input costs, competition from synthetic alternatives, and changing consumer preferences, which may impact growth and profitability. More information
- Regulatory Environment: The South African leather industry operates within a legal and regulatory framework that seeks to promote economic development, environmental sustainability, and fair labor practices. This includes regulations pertaining to waste management, chemical usage, and occupational health and safety. Compliance with these standards is crucial for businesses to maintain their license to operate and avoid potential penalties. More information
- Competitive Landscape: The competitive landscape of the leather industry in South Africa comprises a mix of local and international players. These businesses range from raw material suppliers, tanneries, and manufacturers to retailers and exporters. The market is characterized by a mix of established brands and emerging niche players, each offering unique value propositions in terms of quality, design, and sustainability.
- Supply Chain Dynamics: The leather industry supply chain in South Africa encompasses a wide array of activities, from the sourcing of raw materials, such as hides and skins, to the processing, manufacturing, and distribution of finished leather products. Key components of the supply chain include livestock farming, tanning and processing facilities, leather goods manufacturers, and retail outlets.