East African Community partner states are losing out billions of dollars by inadequately investing in adding value to horticulture and leather goods produced in the region and not addressing bottlenecks derailing growth in the sectors, a new report shows.
The report by the East African Business Council (EABC) in collaboration with GIZ is titled, ‘Building the Leather, Fruits and Vegetable value chains in the East African Community’ was launched Thursday, October 8.
According to Sylvester Kimeu, an EABC Project Assistant, the region provides a good resource base for the production of hides and skins, having over 188.1 million livestock (cattle, sheep and goats).
And, despite the region's current monthly demand of about 600,000 pairs of industrial shoes (security, safety, industry), Kimeu noted, production is only about 60,000 shoes per month.
The report indicates that the EAC processes leather up to "wet blue stage with minimal transformation" to finished leather.
According to the EABC CEO, Dr. Peter Mutuku Mathuki, the leather industry has protracted due to the high presence of imported used footwear as well as synthetic shoes.
"These imports are priced way below the production costs of local producers, thus reducing the market for a sector that is still not getting adequate financing,” Mathuki said.
The report indicates that there is a huge opportunity for increasing economic growth in the horticulture sector as exports of manufactured goods remain limited.
As noted, most farmers have limited finances for capital investment and to purchase inputs.
Lack of processing facilities close to the sources of their produce has also deterred the region from fully exploiting the potential of the sector.
"Appropriate infrastructure for marketing and proper post-harvest handling can tremendously reduce losses that horticulture farmers face in the region, "said Mathuki.
The report recommends for EAC partner states governments to abolish import tariffs and Value Added Tax on imported seeds and seedlings plus other inputs.
The lowering jet fuel taxes and reducing the high cost of power tariffs for horticultural farmers are other recommendations.
The report indicates that the leather industry plays a major role in the global economy, with an estimated global trade value of approximately $100 billion per year, which is greater than the combined value chain of meat, sugar, coffee and tea.
"The major constraint to the growth of the leather footwear industry relates to the constrained market demand due to the high presence of imported used footwear as well as synthetic or plastic shoes which are priced way below the production costs of local producers," Kimeu said.
"The low quality of hides and skins is another intractable issue, and ranked the second most problematic factor to the competitiveness in the value chains."
Presently, he noted, close to 40 percent of raw hides and skins, purchased by tanneries, are rejected, with huge defects such as deep flay cuts, and being shapeless.