Leather industry potential wasted

With Africa’s third largest livestock population, Tanzania has the potential to become the main exporter of leather products if conducive business environment is created to attract significant investments.

Low investments in value addition in the leather industry have been denying the nation earnings where around 90 per cent of exports in the sector are raw hides and skin.

Official records show that skin and hides exports earnings in recent years increased at an average of around 22 per cent, indicating that the industry is operating below capacity.

According to the Leather Association of Tanzania (LAT) Executive Secretary, Mr Joram Wakari, poor business environment have not only been discouraging investors, but also fuelling incidences of smuggling of raw hides and skins.

Although the government hiked export levies on raw hides and skins by 90 per cent to discourage smuggling practices, porous borders and corrupt practices by few officials in the tax body has made the move ineffective.

“Apart from denying Tanzanians the much needed jobs; the government is losing around 40m/- and 50m/- revenues from each smuggled container of hides and skins,” he told the ‘Business Standard.’

It is estimated that more than 50,000 pieces of hides per month are being smuggled out, through the country porous borders and ports, denying the government about 427m/- in export levy.

This amount roughly comes to 1bn/- cumulatively. The national efforts to attract investments into the leather sector are under serious threat due to some unscrupulous traders practices of smuggling raw hides and skins, thus denying prospective investors sufficient availability of raw materials.

Sources in the leather industry revealed recently that about seven to 10 containers of raw hides and skins were passing illegally only at the Dar es Salaam port, thus denying the much needed government revenues.

The sources revealed further that the same smuggling incidences were common in other border posts of Namanga, Sirari and Mtukula for which raw hides and skins crosses to the neighbouring countries where they are processed before being exported to the Asian countries.

According to Mr Wakari, it was high time for the Tanzania Revenue Authority (TRA) to act seriously on the matter, to end the smuggling incidences along the borders and ensure proper taxes are paid as directed by the government.

The government will continue missing the much needed revenues from the leather industry, if full weight is being thrown to plug all loopholes of smuggling raw hides and skins across the country’s exit points.

He added that most of the tanneries in the country were about to close shop for lacking the necessary raw materials. This has also resulted into the factories cutting down a number of employments for operating under capacity.

Tanzania is the second in Africa with the largest number of livestock having potential of producing 3.6 million hides and around 6.1 million skins, but almost all tanneries in the country have shelved production due to insufficient raw materials. The tanneries capacity is to process 74m square feet raw hides and skin.

There are eight leather processing plants with a total capacity of 73.9 million square feet, but it produces only 34.3 million square feet which is equal to 46.4 per cent of the installed capacity.

The plants include Moshi Leather Industries, Tanzania Leather Industries, Afro Leather, Kibaha Tannery, Himo Tanners and Salex Tanners - which can process 40 square feet of leather.

Most of these factories operate at below 50 per cent. Stakeholders say improvement in hides and skins handling can enhance the role of the leather industry in creation of employment and poverty reduction.

However, poor animal husbandry due to inadequate and poor quality feeds diseases and the practice of branding with hot iron for identification purposes.

Some reports indicate that all high quality leather products are being smuggled to neighbouring countries, leaving those of inferior value for the domestic factories.

Consequently, the quality of raw leather products and revenues are declining. For example, the findings revealed that most local factories received raw hides and skins of grade 5 & 6 instead of the highest grade of Tannery Run (TR) supplied before July, this year when the government introduced the new fees.
Source: Daily News, reported from Dar es Salaam, Tanzania
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