Smuggling and corruption hold back leather sector

Tanzania
Published:  21 January, 2014

With Africa's third largest livestock population, Tanzania has the potential to become a major exporter of leather products if a conducive business environment is created to attract significant investment.

Low investments in value addition in the leather industry have been denying the nation earnings where around 90% of exports in the sector are raw hides and skin.

Official records show that hide and skin export earnings in recent years increased at an average of around 22%, indicating that the industry is operating below capacity.

According to the Leather Association of Tanzania (LAT) Executive Secretary, Joram Wakari, a poor business environment has not only been discouraging investors, but also fuelling incidences of smuggling of raw hides and skins.

Although the government hiked export levies on raw hides and skins by 90% to discourage smuggling practices, porous borders and corrupt practices by a few officials in the tax authorities has made the move ineffective.

"Apart from denying Tanzanians the much needed jobs; the government is losing around millions in revenues from each smuggled container of hides and skins," he told the 'Business Standard.'

It is estimated that more than 50,000 pieces of hides per month are being smuggled out, through the country porous borders and ports, denying the government about TZS427 million (US$264,000) in export levies.

This amount roughly comes to TZS1 billion (US$620,500) cumulatively. The national efforts to attract investments into the leather sector are under serious threat due to some unscrupulous traders smuggling raw hides and skins, thus denying prospective investors sufficient availability of raw materials.

Sources in the leather industry revealed recently that about seven to 10 containers of raw hides and skins were passing illegally from Dar es Salaam port, thus denying the much needed government revenues.

The sources revealed further that the same smuggling incidences were common in other border posts of Namanga, Sirari and Mtukula where raw hides and skins cross to neighbouring countries where they are processed before being exported to Asia and elsewhere.

Source: All Africa

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