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The East African : Dec 26th 2015
32 INDUSTRY CURRENTLY GENERATES $100M ANNUALLY The EastAfrican BUSINESS DECEMBER 26, 2015 - JANUARY 1, 2016 Uganda’s impo≥t bill declines in fi≥st qua≥te≥ By MARTIN LUTHER OKETCH Special Correspondent UGANDA SPENT less in the first quarter of the current financial year (from July to October) compared with the same period last year, due to the decline in oil prices and a reduction in imports, which saw the value of imported goods fall by $153.7 million. The Bank of Uganda said the The Zingo Tannery in Kenya. The government wants to increase the leather industry’s income generation. Picture: File Kenya looks to grow leather export sector with 500ha industrial park The count≥y can ea≥n 10 times mo≥e by expo≥ting mo≥e finished p≥oducts By KENNEDY SENELWA Special Correspondent K enya plans to construct a 500 hectares leather indus- trial park hosting tanneries and value addition facilities at Kinanie in Machakos County. The Ministry of Industri- alisation has given the Export Processing Zone Authority (EPZA) the go-ahead to build the park in Athi River, 35 kilometres from Nairobi and 17km off the Nairobi-Mombasa highway. The country’s leather sector generates Ksh10 billion ($100 million) annually and is projected to earn 10 times more by exporting more finished products than the current wet blue (semi-processed) leather. There are 14 active tanneries in the country with a capacity of processing 2.28 million hides and 18.6 million skins. Industrialisation Cabinet Secretary Adan Mohamed said the leather industrial park at Kinanie is one way to address the trade deficit and raise exports by about $1 billion. The master plan proposes phased development of 36 tanneries on 1ha plots, complemented by eight leather value addition parks. The initial phase will target 20 tanneries, each with a production capacity of about 10 The leather industrial park at Kinanie is one way to address the trade deficit and raise exports by about $1 billion.” Adan Mohamed, Industrialisation Cabinet Secretary tonnes of raw hides and skins daily, and an output of 10,000 pairs of shoes, hand bags, leather garments and industrial gloves. Kenya, through the EPZA, will invest about Ksh7 billion ($70 million) in the leather industrial park, which will have a common tannery effluent pre-treatment plant, serviced plots, electricity and roads. A tannery requires huge amounts of water, power and an effluent treatment plant. This hinders many firms from venturing in value addition, resulting into about 90 per cent of skins and hides being exported as raw or semi-processed. Firms in Kenya have been struggling to find specialised effluent and solid waste pretreatment facilities at a reasonable cost to treat tannery waste and maintain a clean environment. Mr Mohamed said the facili- ties at Kinanie will enable investors in the sector to move from exporting wet blue leather to finished products. While some tannery opera- tors are ready to transfer their operations to Kinanie, to take advantage of the subsidised effluent treatment facilities, the majority favour remaining at their current bases. The leather industrial park will have a trade centre, logistics and Customs offices that will host various government regulatory authorities and organisations facilitating movement of goods, an administra- HIGHLIGHTS There are 14 active tanneries in the country with a capacity of processing 2.28 million hides and 18.6 million skins. The master plan proposes phased development of 36 tanneries on 1ha plots, complemented by eight leather value addition parks. The initial phase will target 20 tanneries, each with a production capacity of about 10 tion centre and a housing estate with 1,200 units. However, consulting firm Repcon Associates in its strategic environmental assessment, which was submitted to the National Environmental Management Authority recommends that the leather industrial park be resized. Repcon’s strategic environ- mental assessment team leader Michael Wairagu said buying locally processed wet blue grade leather for value addition was the best way to realise economic transformation. He added that local demand for hides and skins largely outstrips domestic supply, which is regularly supplemented with products from Somalia, Tanzania and Uganda. The strategic environmental assessment study has projected a surplus of 240,000 pieces of hides in 2018 and 620,000 million pieces in 2020, which can support one tannery of 800 tonnes per year with a capacity tonnes of raw hides and skins daily, and an output of 10,000 pairs of shoes, hand bags, leather garments and industrial gloves. The strategic environmental assessment study has projected a surplus of 240,000 pieces of hides in 2018 and 620,000 million pieces in 2020, which can support one tannery of 800 tonnes per year with a capacity of 520,000 pieces. of 520,000 pieces. The proposed 36 new tanneries at Kinanie will pose huge challenges to the environment as the effluent load will affect Athi River, whose quality is currently greatly stressed by pollution. from Nairobi, Thika and other towns. The proposed common tan- nery effluent pre-treatment plant with a sanitary landfill will require a waste management system. in-build components on waste recovery as a way of creating jobs. The EPZA will also be obligated to work with other bodies to identify and develop new water sources to supply the Kinanie project. The entire Athi River basin is a water stress zone and local supply is supplemented by imports from Kilimanjaro, Sasumua dam and Ndakaini dam. The government plans to set up an additional six tanneries at Wajir, Garissa, Makueni, Isinya, Mogotio and Kanduyi. A decline in oil prices has affected Uganda’s import bill. Picture: File value of imported goods fell by 9.2 per cent from $1.68 billion for the July-October period in 2014 to $1.527 billion for the same period in 2015, due to a decline in the value of oil imports by 34 per cent, attributed to a fall in international oil prices. Executive director of research at the Bank of Uganda Adam Mugume said non-oil imports by the private sector declined by 8.1 per cent, from $1.245 billion to $1.144 billion, which could be reflective of declining private sector demand as well as the impact of global disinflation. In terms of exports, the Bank of Uganda monetary policy report shows that in the first four months of the 2015/16 financial year, the value of goods exported fell by 4.6 per cent compared with the same period in 2014/15, due to a reduction in the price index, which declined by seven per cent, as opposed to the volume index, which increased by 2.5 per cent. While presenting the monetary policy statement for December, the BoU Governor Emmanuel Tumusiime-Mutebile said the projection for the real economic growth for 2015/16 remains at five per cent, with a low inflation rate. However, there are downside risks to the projected growth, including those from the external economic environment. “The major risk factors may include: Slower growth in major emerging market economies; further decline in global commodity prices; reduced access to external finance for developing countries due to heightened perceptions of risks, and possible monetary policy tightening in the US. Consequently, our balance of payments in the short to medium-term will remain vulnerable to external shocks,” said the governor.
Dec 19th 2015
Jan 2nd 2016