The expansion of the local leather industry has provided a lucrative alternative market for local hides and skins traders who previously exported the raw materials to other countries.
Many traders have been selling hides and skins to neighbouring countries especially Kenya and Uganda, which has caused a scarcity and affected the nascent tanning industry.
In the past, these traders cited lack of a viable market for locally-sourced hides and skins, hence exporting them despite the high cost of transportation.
“There was no ready market for hides and skins, which is why we opted for outside markets, but things are changing as we now have a number of factories and we shall be selling to these factories” said Hassan Hakizimana, a hides and skins trader.
They said there is no major difference in price, but they will not be incurring huge transport costs incurred when exporting.
The government previously came up with ways to protect the local leather industry through increased tariffs on exports of hides and skins, but some traders continued to export.
“These factories need a steady supply of hides and skins to operate, so if dealers don’t comply, the government will take other measures,” said Francois Kanimba, the Minister of Trade, Industry and East African Community Affairs.
Late last year, the Cabinet waived taxes on imported raw materials and accessories for the garment and footwear industries, because the taxes were making the final products too expensive for local buyers.
The government’s move was in line with a concerted plan to grow local footwear and garment industries to curb the burgeoning trade deficit through import substitution.
There was also a region-wide decision to phase out importation of second-hand clothing and footwear, which Rwanda duly implemented by raising import duty on these items from $0.20 to $2.50 per kilogramme. Import tariffs on used footwear was increased from $0.50 to $5 per kg starting July 1, 2016.
“Our main markets used to be China, Kenya, but selling locally reduces the loss of economic value, which is lost when we export,” said Joel Birasa, another trader.
Among the leading leather-processing factories in the country is Kigali Leather Ltd, a Rwf6.5 billion investment with a capacity of making 200 pairs of shoes daily and employs 150 workers.
Last year, Italian investor Pluripell signed a deal with the government to build a shoe manufacturing factory and a tannery in the Bugesera industrial park. However, the plans were delayed after the government failed to deliver on a water treatment plant, according to a local consultant working with the shoemaker who recently talked to Rwanda Today.
A Burundian leather products manufacturer Rwantan Ltd also secured land in the special free economic zone, where the company is building a factory that will make footwear for the local market and for export.
About 15ha has been earmarked in Bugesera Industrial Park for a Tannery Park.
Kigali Leather Ltd started its operations in 2015 and processes and exports almost 1,000 tonnes of wet blue leather. However, this will change after the firm made an additional investment of $4 million in 2016, which will see its capacity increase to produce between 1,000-2,000 pairs of shoes per day, and employ up to 300 people.
“This year, with the new additional machinery in place, the factory plans to process wet blue leather into finished leather and therefore reduce imports,” read a statement from the Ministry of Trade and East African Affairs.