Kenya's leather sector is set to earn 108 million U.S. dollars by the year 2013, Livestock Minister Mohamed Kuti has said.
Kuti said the growth and development of the leather industry has had a very progressive trend for the last 15 years. "The leather sector posted earnings of 70 million dollars in 2010/2011 financial and we are projecting the sector to earn the country 108 million U.S. dollars by the year 2013 from both local and export sales," Kuti said on Thursday during the celebration to mark the re- launch of the Kenya Leather Development Council as a State corporation. "The livestock ministry is set to complete the construction of four tanneries by the end of this year and bring total operational tanneries to 13 in the country. This will help stimulate local production of leather products," he said. He said the government has in the recent past put in place reforms in the sector which are aimed at increasing the amount of value addition in the sector. "We have increased the export tax on unprocessed leather to 40 percent in order to encourage more value addition locally in our tanneries," the minister said.
Kuti said that following the increase of the tax, the country has increased percentage of processed leather that is exported from 85 percent in 1995 to 90 percent in 2010/2011 financial leather. "The sector also increased the number of pieces produced from 6. 3 million pieces in 1995 to 8.25 million pieces in 2011. The leather sector currently directly employs 16,000 people up from 1, 700 in 1995 due to the sector's rapid expansion," he said.
Kuti said that the government is actively looking to expand exports of processed leather, whose key destinations include China, India, Mexico and Thailand.
"The world current trends indicate a major shift on leather and leather products development from Europe to Asia, as the latter produced 12.1 billion square feet of leather compared to the former's 6.3 billion square feet," he added.
He said that projections indicate that Africa which currently produces only four percent of world production will grow to be a major player in the industry.
The livestock minister said the government is working closely with private sector in order to establish a 96 million dollars cluster development initiative which will encourage industrial development in the leather sector by locating industries dealing with leather products in close proximity with support services.
"The plans involves setting up a central hides and leather auction center which will enhance competitive and fair grading systems in all regions of the country," he said.
Permanent Secretary in the Livestock Ministry Kenneth Lusaka said that the leather cluster initiative will allow for common production facilities so that small scale manufacturers can benefit from economies of scale.
"Value addition across the leather value chain will enhance the competitiveness in the leather sector and in turn provide higher returns for all stakeholders," he said.
Lusaka said that the country is receiving a lot of interest from foreign investors especially from China, Britain, Japan, South Korea and Italy who want to set up tanneries in order to serve the domestic demand.
Kenya Leather Development Council CEO Dr. Mwinyikione Mwinyihija said that the biggest impediment in the sector is that local tanneries only have the capacity to semi process the leather. "One of the biggest challenges facing the local tanneries is that they lack the technology to fully process the leather to the final stage due to capital intensive nature of the industry," Mwinyihija said.
"Only 30 percent of raw leather is fully processed in the country," he said. The CEO said that the influx of cheap leather goods is also hindering the local leather industry. "Since the liberalization of the industry, local production was negatively impacted but the new government policies are assisting the sector achieve its full potential," he said.