Newsletter No. 04                                           09 February 2018                                                                                       

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Smuggling, hides exports hurting bid to grow leather trade

By Njiraini Muchira

While Kenya has identified the leather industry as among those to push its manufacturing sector, it is struggling to stem export and smuggling of raw hides and skins.

According to the Tanners Association of Kenya, smuggling of hides and skins to China is costing governments in the East African Community (EAC) about $30 million annually in lost tax.

“Currently we don’t have a law banning raw exports of hides and skins but the government has increased export tax to 80 per cent from 40 per cent to encourage value addition,” said Kenya Leather Development Authority chief executive Dr Issack Noor.

However, the high taxes feed into a smuggling racket, denying governments millions in tax revenue.

According to its Budget Policy Statement 2018, Kenya is targeting to increase the contribution of its manufacturing sector to the economy to 15 per cent by 2022, from 9.2 per cent in 2016. This will add $2 billion – $3 billion to the GDP and about 400,000 jobs.

The leather industry is one of four subsectors —including agro-processing, textiles and apparels, and oil, mining and gas — seen as the drivers of manufacturing growth.

In the leather industry, the government plans to have all hides and skins processed locally, set up 5,000 cottage industries, invest in four leather parks and support expansion of existing tanneries.

To cushion local manufacturers from external competition, the government intends to review import rules for finished leather products. These initiatives are targeted at creating 50,000 new jobs, ensure Kenya produces 20 million shoes and increase export revenue by $500 million by 2022.

But exports of raw hides and skins continue to deny local tanneries raw materials, with the existing 14 tanneries in Kenya operating at less than 40 per cent of their capacity.

This comes at a time when Kenya is investing $164 million in a mega leather industry park that aims to transform the underdeveloped sector to a key economic contributor.

In building a leather industrial park, Kenya wants to unleash the potential of the industry that has remained stunted due to pressure from import.

In East Africa, only Kenya has manufacturers with the capacity to produce finished products while Tanzania, Uganda, Rwanda and Burundi export leather either as raw, wet blue or crust.

A report by CUTS International on The Impact of Second Hands Clothes and Shoes in East Africa, notes that all the EAC partner states process leather up to the wet blue stage, with 80 to 90 per cent of it exported, and only 10 per cent is processed to finished leather, which caters for the footwear and artisanal shoemakers.

“There is a significant demand for footwear in the region, but 80 per cent of the demand is met through imports out of which 60 per cent are secondhand shoes,” notes the report. The East African

Wuxi No. 1 Cotton Mill invests in Loepfe technology

Liu Yan, sales manager CNT Beijing, Zhou Ye Jun, president Wuxi No. 1 Cotton Mill,Thomas Sifrig, sales manager Loepfe, Joel Zou, import manager, Wuxi No. 1 Cotton Mill. 

Wuxi No. 1 Cotton Mill has invested heavily in the upgradation of all its existing Savio winders with Loepfe’s yarn clearing technology. With the increasing demand for premium yarns, the largest producer of high quality compact yarns is working towards strengthening the existing product lines and is constantly upgrading its manufacturing facilities.

“The  encouraging  message  is  that  Africa  has  some  unique  advantages  for  Chinese investors. In comparison with Asia, Africa’s location is physically closer to the European and American markets. Africa also enjoys more favourable trade  policies  with  the  European  Union  and  the  United  States. Today’s African market of  textile manufacturing has less competition as well. The huge population and immense space in the continent provide great potential for manufacturers to develop.  Africa’s rich natural resources and low labour costs are very attractive to Chinese investors as well,” said president of Wuxi No. 1 Cotton Mill, Zhou Ye Jun.

“As an investor, Wuxi No. 1 Cotton Mill is bringing advanced technology and management techniques to their southeast African partner that will help improve local production processes and finally ensuring that the investment will be sustainable and profitable for all parties involved,” added Jun.

“Loepfe Brothers Ltd. is the pioneer and worldwide market leader in foreign matter detection in yarns and we rely 100 per cent on their competence in this field. Industry 4.0 is the current trend of automation and data exchange in manufacturing technologies. Loepfe’s MillMaster monitoring system is connected to all our existing Loepfe yarn clearers on our Savio winding machines. The information provided by Loepfe’s MillMaster systems allows us to be promptly informed when there is a need to intervene and to steadily optimise the entire yarn manufacturing process in our mills. For Wuxi No. 1 Cotton Mill, we rely on this proven combination of total quality control by Loepfe Brothers Ltd. since many years,” Loepfe said in a press release. F2F

AGOA loss cost Swaziland 600mn emalangeni: FSE&CC

Losing access to the US African Growth Opportunity Act (AGOA) in January 2015 cost Swaziland nearly 660 million emalangeni (E) and resulted in massive unemployment and a 98 per cent decline in trade volume of apparel and textiles, according to an industry chamber. AGOA benefits for Swaziland, withdrawn due to human rights violations, were restored this year.

Moreover, AGOA had been severely underutilised in the past and it had been incorrectly perceived as a benefit only for the textile industry, according to Bonisiwe Ntando, CEO of the Federation of Swaziland Employers and Chamber of Commerce (FSE&CC).

Despite this underutilisation, textile and apparel imports by the United States from the country were worth nearly E 661.5 million ($55.125 million) in 2014 and declined to around E 6.744 million ($562,000) by June 2017 because of the loss of AGOA eligibility, according to a report in a Swaziland newspaper.

Ntando suggested reinitiating the textile and apparel trade at the soonest and exploring opportunities in other product lines like timber, sugar and minerals.

Urging businesses not to treat the AGOA as a magic wand, she said each potential exporter has to find links in the US market and identify the most reliable and cheapest transport means.

Following countries like Mauritius, Tanzania, Lesotho, Madagascar, Kenya, Ghana, Ethiopia and Botswana, which have developed national AGOA strategies, Swaziland should also develop a similar strategy working with the US Embassy and the USAID Southern Africa Trade and Investment Hub, she added.

Did you know……..

The difference between two nominal clothing sizes is approximately ten to fifteen pounds.

Standard women’s clothes are designed to fit women between 5’4 and 5’8 tall