Supporting Indian Trade and Investment for Africa (SITA) is a project financed by the United Kingdoms’ Department for International Development (DFID) and runs from 2014-2020.
SITA’s outcome is to improve the competitiveness of select value chains: coffee, cotton, textiles and apparel, pulses, spices, sunflower oil, leather, IT-ES BPO and emerging sectors of five East African countries: Ethiopia, Kenya, Tanzania, Rwanda and the United Republic of Tanzania through the provisions of partnerships from institutions and business from India.
The first year (April 2015- March 2016) of SITA’s implementation will see value chain road maps and sector strategies being developed in selected sectors. There will also be activities covering the scoping of trade and investment potential across sectors and solutions for added-value production being developed.
Kenya, Tanzania, and Uganda are putting much emphasis on the development of their leather industry as demonstrated by a number of development plans and strategies. Until recently, however, value addition in the livestock sector has been minimal, and most of the exports have been in the form of unprocessed, raw hides and skins.
Leather production requires significant quantities of water, land, plant protection products (e.g. fungicide) and fertilizer. These inputs can be very detrimental for the environment and even hinder the long term viability of production. Henceforth, the main cross-cutting issue in this sector is, in all three countries, the presence of strong Environmental concerns along the production process.
The tanning production process can be very detrimental for the environment and even hinder the long term viability of production.
When environmental impacts are not taken into account, the main problems identified, for different steps along the production value chain are: diminishing local water supplies, deforestation, affecting ecosystem genetics and balance, soil erosion, methane production, soil contamination and water pollution. These impacts are particularly relevant in the leather industry. These problems can directly threat human health (for example through the pollution of drinkable water supply), cause a reduction in biodiversity, flooding, decrease in agricultural productivity.
Kenya has selected leather as one of the key priorities under its Vision 2030 and its Industrialization Road Map, which demonstrate the country’s commitment to promote industrialisation and value addition in this area. Until recently, however, value addition in the livestock sector has been minimal, and most of Kenya’s exports have been in the form of unprocessed, raw hides and skins.
Given the Government emphasis on developing the leather sector, incentives have been put in place and the Government plans to build a leather city with a common effluent plant in Kinanie at the outskirts of Nairobi. The availability of raw material in Kenya has increased over the last decade, mainly due to a 66% rise in the population of bovine animals. About 70% of the production is channelled through private abattoirs, which operate on a fee basis.
Tanzania has the third largest animal population in Africa. The 2010/2011 statistics indicate that, there are about 21.3m cattle, 15.2m goats and 6.4 million sheep. A fledgling leather industry exists in Tanzania. Of the available hides and skins, about 6800 tons of hides and 400,000 pieces of sheepskins are exported. About 60% of the slaughtered hides and skins reach commercial collection centres. Often, the quality of hides is reported to be too poor to be processed for export markets. The six major tanning companies operating in the country in 2014, tan approximately 2,000 hides and 10,700 skins a day. Tanning capacities are approximately 3,550 hides and 15,600 skins a day. Tanning companies in Tanzania are currently planning to expand such capacities by 6,000 hides and 29,000 skins a day in the near future.
Uganda has a relatively large livestock population of 12.1m cattle and 3.6m sheep and 13.2million goats, providing a healthy base for the meat industry and the other sub sectors. Favourable climatic conditions with two main rainy seasons, endows the country with a high livestock carrying capacity. It is estimated that small holder farmers engaged in mixed farming and pastoralists together own 80% of the national cattle population with herds of 20-100 cattle.
The key private sector actors in leather are companies that have a network of hides and skins collection agents all over the country that collect raw hides, sun dry and deliver them to tanneries. Export of raw hides and skins attracts a tax of 70%, a drastic measure to discourage export or raw hides and encourage value addition.
Demand side: On the Demand side, India applies an ad valorem import tax of 10% to all above listed exports by from Kenya. Given their LDC status, Tanzania and Uganda benefit from total tax exemption due to India’s DFTP scheme. Given the quality and price patterns of East African finished articles of leather, the Indian market does not seem an attractive export market at this stage. Indian imports in this area are predominantly low cost articles from China (69% of total imports) or higher value articles from France in Italy (15% of total imports). In terms of wet-blue, crust and finished leather: bovine and caprine for footwear and leather goods segments as well as ovine for footwear, gloves & garments segments appear most promising for exports to India.
Indian demand for goat/kid and sheep/lamb leathers is lower than for leather of bovine/equine animals, but still significant, amounting to US$ 37 million and US$ 66 million, respectively. Arab countries, especially Saudi Arabia are fierce competitors in this sector market and are providing large volumes to the Indian market for both products. Nonetheless, Kenya stands out from other African countries by being the second top suppliers of the Indian market for sheep/lamb and goat/kid skin leathers. In terms of investment, Indian investors show some appetite for new investments overseas, given that many tanneries (with post-tanning processing capacity) in India have been closing down recently.