adminHarare Bureau
THE Government has stepped up measures to curtail the exportation of raw hides by introducing a $0,75 export tax on every kilogramme of raw hide in a move that is expected to boost value addition in the leather industry.
During the past 10 years, the leather sector has been failing to absorb all raw hides and skins that are produced leading to more hides being exported from Zimbabwe in their raw form.
In 2011 alone, a total of 5 440 tonnes of raw hide including crocodile skins worth $28 million were exported.
During the same year, a total of 2,2 million pairs of foot wear were produced while four million pairs of mainly cheap synthetic shoes were imported, essentially making Zimbabwe net importer of footwear.
Minister of Finance and Economic Development Patrick Chinamasa during the presentation of the 2014 National Budget last week said the introduction of export tax would help revive the sector which was operating at less that 50 percent capacity.
“The leather industry currently operates at capacity levels of between 25-40 percent due to inadequate raw material supply, since leather merchants prefer to export the hides in raw form. I propose to levy an export tax of $0,75 per kg on raw hides, in order to encourage value addition,” he said.
This move by Government is expected to support the Zimbabwe Leather Sector Development Strategy which was launched in June and expected to make the country’s leather sector a vibrant and internationally competitive industry.
The strategy seeks to improve the leather sector in Zimbabwe and generate $116 million in revenue by 2017 compared to $82 million in 2011 at current sales and margins by 2017.
The main objective of the strategy is to transform the Zimbabwe leather value chain from the production and export of raw materials and semi processed products to the production and export of value added products such as finished leather footwear and other garments.
Leather producers in the country include Gweru-based Bata Shoes (Pvt) Ltd which nearly ground to a halt about three years ago and Conte Shoes (Pvt) Ltd which was put up for sale after being placed under liquidation early last year.
At its peak, Bata employed more than 5 000 workers, but has trimmed its workforce to about 1 500 due to viability problems caused by the country’s more than a decade-long economic crisis.
In October, Industry and Commerce minister Mike Bimha said Government would adopt a cluster approach to value addition in the manufacturing industry in an effort to revive the areas that have been most affected by the demise of the sector.
“The sectors that have been prioritised inter-alia include Leather and Allied products, Clothing and Textiles and Pharmaceuticals manufacturing,” he said.
The manufacturing industry under which the leather industry falls, reached its peak in 2011 with average capacity utilisation of 57,2 percent but this plunged to 44,9 percent 2012 and continued to drop to 39,6 percent this year.
According to the Confederation of Zimbabwe Industries manufacturing sector survey, leather and allied remained the worst performing operating sub-sector this year recording capacity utilisation of 11,3 percent down from 27 percent last year.
Online Reporter