Bring back the shine - Kenya Vision 2030

20 February 2015

With Kenya Vision 2030, the country aims to transform into a new industrialised, clean and secure, middle-income country providing a high quality of life to its citizens. Within this, Denis Gathanju examines how Kenya is embarking on reviving its leather industry.

Kenya is currently applying a polish to its once-vibrant leather industry that was brought to its knees in the 1990s when the economy was liberalised and an export duty that was meant to protect the local leather industry was removed.

Through the Ministry of Industrialization, the Government of Kenya has mapped out a clear path that is meant to revive the sector and push it to be among the leading leather-producing nations in Africa. Through a purposely constituted taskforce named the Leather Development Council, Kenya intends to bring back the shine to its leather industry through protection of local leather industries, and added investments by the government, and private investors drawn locally and internationally.

The taskforce includes leading leather shoemaker Bata Shoe Company and the Leather Development Council of Kenya (LDCK) among others. The rejuvenation strategy is a five-year plan that is meant to not only set the leather industry on a path to recovery, but is also aimed at making Kenya a regional leather hub in the wider East and Central Africa regions.

"This taskforce has been appointed with a clear brief to share its wealth of experience on how the leather sector can be sustainably developed to create jobs and facilitate development of the leather sector in Kenya," says Cabinet Secretary Adam Mohammed, who is the person in charge of the Ministry of Industrialization.

Africa's first leather city

According to Mohammed, plans are already in motion to set up the first purpose-built 'leather city' in Kenya as part of the recommendations made by the leather industry revival taskforce. The new city will be situated in Machakos County just outside Nairobi, the political and commercial capital of Kenya, and will also be the first of its kind in Africa.

The proposed leather city will handle the bulk of leather processing in Kenya and the government has budgeted an initial capital outlay of approximately KSh1 billion ($11 million) to help set up the initial infrastructure works needed for the leather city. A further KSh7 billion ($77 million) will be needed to complete the infrastructure works needed to get the leather city operational.

To ensure that the sector gets back on its feet, the cabinet secretary has, in the past year, announced the government's decision to kit the Kenyan armed forces and law enforcement officers with boots made from the local leather industry as opposed to importing them from abroad. This move is mainly based on the 'Buy Kenyan Build Kenya' government initiative that encourages buying of locally produced products to help drive forward the Kenyan economy and stimulate job creation, especially for the Kenyan youth.

Cheap imports impact local industry

According to the government, the leather and textile subsectors have the potential to create between 800,000 and a million jobs if the opportunities of the subsectors are tapped to the fullest, and in launching this strategy, the government intends to realise this within the first phase of its revival strategy.

According to industry experts, the Kenyan leather industry suffered greatly when in the 1990s, the Kenyan Government abolished a 22% export compensation scheme in a market liberalisation effort that also cut tariffs on imported leather and footwear. This led to a flooding of cheap imported leather and footwear into the local market that dealt a deathly blow to the local leather industry.

"This taskforce has been appointed with a clear brief to share its wealth of experience on how the leather sector can be sustainably developed to create jobs and facilitate development of the leather sector in Kenya."

The knock-on effects were devastating as the influx of cheap imports from abroad rendered the existing leather industries in the country uncompetitive. This brought a speedy halt to operations at half of the country's 20 tanneries.

Currently, Kenya is the second-largest importer of footwear and leather products in Africa after Egypt. According to government estimates, Kenya has an annual demand of between 24 to 32 million pairs of shoes a year, but only manages to manufacture four million pairs a year and imports the rest. The rejuvenation of the leather industry under the new strategy is meant to address this.

Value addition

To curb exportation of raw materials from the leather industry - mainly hides and skins - the government first introduced a 20% export duty on all hides and skins from Kenya in 2006 and doubled the export duty to 40% in 2007. The sole purpose of the heavy export tax was meant to encourage value addition in Kenya before export.

In so doing, the government is placing an emphasis on value addition that translates to operationalising the local tanneries and, hence, creates jobs and supports other businesses through the supply chain. Statistics from the government currently indicate that since the adoption of these measures, at least five tanneries have since reopened and 7,000 jobs were created in the leather industry in 2010. These measures, according to the Ministry of Industrialization, have boosted leather exports from Kenya by as much as 55% and the sector generated more than $10 million.

According to Mohammed, processing of the hides and skins locally to finished leather and leather products would fetch the country a value addition of more than 1,000%.

"We currently have 15 tanneries and there is potential to have more, but we are held back by the huge investment required, the need for effluent treatment plant systems and export of raw materials," he says. "The leather sector generates KSh10 billion ($110 million) annually, but has the capacity to generate ten times more if we move from export of wet-blue (semi-processed) to finished leather.

"This is a critical component that will greatly benefit the leather industry in Kenya. It could also mark the entry of Kenya into the global supply chain for high-quality leather products."

Livestock abundance

Buoyed by the returns, the Kenyan Government has further embarked on encouraging the establishment of abattoirs and tanneries in the counties to help boost production of quality hides and skins. From the current 15 operational tanneries, the government intends to have this increase to 21 and complete construction of at least ten small leather-processing factories across the country.

According to the LDCK, plans are to have all 21 tanneries operational within the next year. This will mean that Kenya will boast one of the highest numbers of operational tanneries in Africa.

Kenya's abundance of livestock is a natural strength for the sector. According to the LDCK, the country boasts an estimated 18 million cattle, 17 million sheep, 28 million goats and three million camels.

This means that there is an abundance of skins and hides. In addition to this, the country has also begun processing fishskin leather from Nile perch, a fish species found in Lake Victoria. Also, skin from ostriches and farmed crocodiles are being developed as alternative sources.

If all plans come to fruition, this could provide a very polished outcome for the Kenyan leather industry.

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