East African partner states are losing billions of dollars by inadequately investing in adding value to horticulture and leather goods produced in the region instead of addressing bottlenecks derailing growth in the sectors.
According to a recent report released by the East African Business Council (EABC) in collaboration with GIZ Program, titled ‘Building the Leather, Fruits and Vegetable value chains in the East African Community’, the region provides a good resource base for the production of hides and skins, having over 188.1 million livestock. Despite East Africa currently having a monthly demand of about 600,000 pairs of industrial shoes, production is only about 60,000 shoes per month.
The report also indicates that EAC states process leather up to the wet blue stage with minimal transformation to finished leather. On the international market, the price of finished leather costs about US$5 (Ksh. 543) per square feet while wet blue leather is sold at US$1.5 (Ksh. 163) per square feet. This suggests that the EAC, which exports mainly wet blue leather, loses as much as US$3.5 (Ksh. 380) per square foot which translates to the regional body losing close to $3.2 billion (Ksh. 347.2 billion) in the last 4 years from 2014-2018.
Speaking during the launch of the report, EABC CEO, Dr. Peter Mathuki similarly noted from the report findings, that the regional 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,” said Dr. Mathuki.
The report also finds that there is a huge opportunity for increasing economic growth in the horticulture sector as exports of manufactured goods remain limited. According to the report findings, most farmers have limited finances for capital investment and to purchase inputs. Inadequate processing facilities close to the sources of their products 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,” Dr. Mathuki added.
The report recommends for EAC partner states governments to abolish import tariffs and Value Added Tax on imported seeds and seedlings plus other inputs as well as lowering jet fuel taxes, reducing the high cost of power tariffs for horticultural farmers and trade facilitation.