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Firms stare at losses as leather park takes shape

Mixed reactions have greeted the government-backed Sh10 billion Leather Industrial Park, with handicraft makers saying it could push them out of business.

The Kinanie Leather Industrial Park Project, a flagship Jubilee initiative, has attracted interest from multinational firms dealing in processing and manufacture of leather goods that will enjoy direct, tax-free entry into Kenya.

The 500-acre park, to be granted export processing zone status, is expected to revolutionalise the leather value chain, creating a new market for skins and hides usually processed into blue leather and exported as raw materials.

Leather Articles Entrepreneurs Association executive secretary Beatrice Mwasi said Small and Medium Enterprises (SMEs) are apprehensive that they could be “snuffed out”  by the project.

“A leather business park that enjoys tax incentives and other amenities like land, water and electricity, with an express line to both local and export markets, will disrupt our businesses,” she said.

Ms Mwasi said the expected 10-fold increase in leather products could also see prices of goods fall, with raw leather usually sourced from tanneries vanishing from stores since many cattle owners will prefer to sell to multinationals based at the industrial park.

She said the government should set aside land for them at the park.

“Given that the park is positioned to increase production of value added products, it will be difficult for those operating outside the park to access inputs such as finished leather from tanneries,” she said.

The association leader said pro-active measures should be taken to assist handicraft makers, such as allocating them space within the park.

The park has reserved space for 15 tanneries, while leather products manufacturers have been allocated about 200 plots within the enclosed area. The front section is reserved for stalls selling finished leather products such as belts, shoes, bags and phone covers.

“The Kenya Leather Development Council should devise a formula that will ensure SMEs are guaranteed support to thrive both inside and outside the park, thereby taking care of over 60 per cent of handicraft makers,” said Ms Mwasi.

In an earlier interview, Industrialisation Cabinet Secretary Adan Mohamed said the park would unleash the potential of the leather sub-sector to create employment and increase production of new products for sale in Kenya.

This, he added, would greatly reduce export of raw leather, with finished products exported directly from Kinanie.

The government has since conceptualised the establishment of a leather design institute that will power innovation on various products to be promoted locally and across Africa.

The leather association said the government should facilitate small firms to acquire tools, the right training, high quality leather and financial incentives to prepare them for the expected competition.

Incoming companies setting shop at the facility will enjoy a 10-year corporate and withholding tax holiday on remittances to non-residents, stamp duty exemption, import duty waiver and VAT exemption on raw materials, machinery, and other business inputs.

There will also be a 100 per cent investment deduction over 20 years for buildings and imported machinery.
Shoes from the park will also be sold locally without payment of duty and VAT.

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