Governments in East Africa are losing about $30 million in unpaid taxes to a hides and skins smuggling racket.
As a result, tanneries in Kenya and Tanzania are reducing their output while laying off employees.
According to documents seen by The EastAfrican, rogue traders are colluding with Customs officials, exporting hides and skins to China without paying the right duty.
The documents show that at least 65 containers leave the Port of Mombasa every month with hides and skins that are exported as damaged material.
The traders and custom officials also under-declare the weight of containers in which a 20-foot container with a capacity of 25 tonnes is registered as weighing 13 tonnes.
The traders also declare the free on board prices at $0.4 per kg instead of $1.4 per kg, thus robbing the government of $24,000 per container. Annually, the Kenyan government is estimated to be losing $18.7 million in unpaid tax.
“There is rampant smuggling of hides and skins, something that has caused a severe shortage of raw materials for local tanneries,” said Robert Njoka, Tanners Association of Kenya chairman.
He added that despite the government increasing duty on exports of raw hides and skins from 40 per cent to 80 per cent in 2015 to discourage exports, smuggling continues unabated.
Kenya Leather Development Authority chief executive Dr Issack Noor promised The EastAfrican that he would investigate.
“I took office recently so I cannot comment,” said Dr Noor.
The revelations come at a time Kenya has rolled out plans for a $164 million leather park to revive the industry.
In Tanzania, smuggling is also on the rise with the Tanzania Tanners Association, saying unscrupulous traders in Tanzania are using the Holili border point in Taita Taveta and Tarakea in Kajiado to smuggle hides and skins into Kenya.
Although Tanzania has the potential of producing at least four million hides and around 6.1 million skins annually, 90 per cent is exported as raw.
Like Kenya, Tanzania has imposed a 60 per cent duty on exports of raw hides and skins.
Smuggling of raw hides and skins in Rwanda and Uganda is also on the rise, something that has crippled efforts to grow local industries.