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Kenya Business News

Kenya’s Leather Industry Exports On The Rise, Creating Jobs

Due  to an increase in exportation of Kenya’s leather products, the Kenya Leather Development Council said that it would put up tanneries in six towns including Garissa, Isinya, Mogotio, Wote and Kajiado at a cost of Sh150 million.  The cost will be covered by  the the Economic Stimulus Package funds and factories are expected to be complete before the end of the year.

Dr Mwinyihinja Mwinyikione, the chief executive at the Kenya Leather Development Council indicated that the council expects to increase returns per tonne of leather through value addition to avoid losses from exports of raw material.The tonnage of semi-processed hides and skins exports increased by 600 per cent from 322 tonnes to 2,250 tonnes last year. This was partly spurred by a 35 per cent increase in the price per tonne of the commodity in the international market. The proposed tanneries are expected to boost value addition and increase finished product exports.

Kenya’s leather industry which now accounts for  about four per cent of Kenya’s gross domestic product, received a boost  last April with new policy changes which raised  taxes on the exports of raw hides and skins by 20-40 per cent with the  of encouraging the leather processing industry.. The policy has been strikingly successful, at least according to the available figures. In the year after introducing the 40 per cent duty, Kenya’s leather exports rose 54 per cent. Now, nearly 98 per cent of skins produced in the country (and 96 per cent of hides) are semi-processed to wet blue or finished leather compared to 56 per cent in 2004. Production of raw hides and skins declined by a factor of six from 2003 to 2007 while finished leather production increased more than four-fold: in 2007, Kenya produced 20,000 metric tonnes of leather compared to around 5,000 in 2003 and 10,000 in 2005.

As a result of these policies, there has been an increase in employment. Statistics show that as much as 1,000 direct jobs and 6,000 indirect jobs have been created since the introduction of the export duty. There is also the income boost to  peripheral industries who benefit from the boost to the leather sector. The new jobs range from technical to skilled positions in areas such as quality control, tanners and mechanics, and unskilled as well as casual laborers. The industry currently employs about 16,000 people with an annual turnover of  Sh6 billion.

Despite the rise in productivity and exports, Kenyan manufacturers still face high cost of production resulting in high prices of finished products. For instance, the average price of shoes made locally average Sh1,200 a pair while imported shoes cost about Sh800. These has led to Kenya’s leather products being largely uncompetitive in the international market. There is also the notion that local manufacturers do not produce quality shoes that can compete effectively on the global market.

The world’s total earning from the leather industry stands at about Sh6 trillion but Africa whose current livestock contribution is 21 per cent only contributes 14 per cent of the hides and skins and earns a paltry two per cent or Sh120 billion.

It is Kenya’s hope that the government will adopt similar policies in other industries to encourage local manufacturing and hence, limiting mass importation of items that can be locally manufactured . Kenya needs to also create”buy local policies” with perks like tax holidays for items manufactured in the country.

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