Rwanda is seeking a way out for dealers of hides and skins who have grappled with a lack of reliable market for their products in the East African region, and at the same time struggling to access other markets beyond the region due to restrictive trade rules.
The Minister of Trade and Industry, Prudence Sebahizi, has said that the country is going to officially submit the issue to the East African Community (EAC) Secretariat in hope for a resolution.
He was speaking during a meeting that brought together members of the private sector.
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The industry defines hides as "skins” of large animals such as cows, while skins refer to "skins” of smaller animals such as goats, sheep, deer, pigs, among others.
Kigali Leather Cluster, which brings together more than 3,000 dealers in hides and skins in Rwanda, says that there are currently more than 100 tonnes of hides and skins in stores that are rotting away due to lack of market in the EAC market.
"We have a rule preventing us from trading hides and skins outside the EAC market, yet the EAC market is too small to buy our products, and attempting to sell outside the EAC results in an 80% tax,”said Germaine Mukashyaka, an accountant for Kigali Leather Cluster.
According to the cluster, tonnes of hides and skins are rotting away in stores yet demand from buyers in African countries and the rest of the world is high due to our product quality.
"We need the EAC to remove restrictions for us to trade under the African Continental Free Trade Area and globally,” Mukashyaka said.
Due to lack of reliable market for hides and skins, the value of hides and skins has shrunk from Rwf1,500 per kilogramme of cows&039; skin in 2015 to between Rwf100 and Rwf200, while that of goat and sheep decreased from Rwf3,000 to between Rwf500 and Rwf600.
Dealers also point out that the shortage of tannery parks to process hides and skins into finished products, coupled with the lack of leather manufacturing plants in the region, including Rwanda, makes it difficult for them to sell.
"The restriction from selling hides and skins outside the EAC market should be enforced only if we have a market through such facilities. Otherwise, we should be allowed to trade on the AfCFTA market which covers the whole continent,” she noted.
EAC market restricted
According to a 2020 report, EAC needs at least 600,000 pairs of shoes per month, but most of them are imported due to lack of tannery and manufacturing plants.
Denis Karera, the Vice Chairperson of East African Business Council (EABC), said the proposal to trade hides and skins outside the EAC market is currently the only solution as a tannery park is expected within two years in Rwanda.
"Hides and skins dealers should not be collapsing. Private sector should always be part of decision making in EAC,” he said.
As Rwanda seeks to diversify its market for hides and skins, finding a lasting solution could enable dealers to trade beyond the EAC. Without such a solution, the hides and skins industry risks becoming obsolete.
The trade minister said the revenues collected by Rwanda Revenue Authority have gone down by more than 1,000 per cent since 2015, which has not only affected the business in the sector but also deprived the authority of more revenue.
Sebahizi revealed that they plan to approach the East African Community to temporarily ask the Secretariat to allow Rwandans to export hides and skins outside the region.
"That is a temporary solution we are looking for," he said, adding that the government is working to fast-track the establishment of a tannery industrial park that will be able to buy such hides and skins to process them into finished products.
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The minister highlighted that the government is looking for potential developers for a tannery park, and that it was working to incentivise and lure private investors to take the lead.
"Developing a tannery plant is very expensive because of effluent treatment. We are discussing with operators from Ethiopia. They have a model which we are looking for. Developing a tannery park could take two years," he noted.
The proposed investment for an integrated hides and skins processing plant, complete with effluent treatment facilities, is estimated to require an initial outlay of $15.1 million (approximately Rwf 19.7 billion).
If the tannery park and leather manufacturing factories are set up in Rwanda, Esperance Kanani, the President of Rwanda Live Animals and Meat Export Organisation (RAMEO), said exporting live animals to DR Congo could stop so that they are locally slaughtered to be able to sell hides and skins on the local market.
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"We export 120 cows, 80 sheep and 150 goats per day. This means we lose money from using and adding value to our hides and skins,” Kanani said.
The dealers involved in hides and skins trade have raised concerns about challenges, particularly regarding market access to the EAC Secretariat.
Veronica Nduva, the EAC Secretary General admitted that the Secretariat is aware of the concerns, saying that the official communication is forthcoming, which will be processed through the standard EAC decision-making channels.