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KENYA LEATHER INDUSTRY Public Disclosure Authorized Diagnosis, Strategy and Action Plan Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized KENYA LEATHERINDUSTRY Diagnosis, StrategyandActionPlan MINISTRY OFINDUSTRIALIZATION AND ENTERPRISEDEVELOPMENT REPUBLIC OFKENYA KENYA LEATHER INDUSTRY DIAGNOSIS, STRATEGY AND ACTION PLAN June 2015 Prepared for: Ministry of Industrialization and Enterprise Development Prepared by: World Bank Group, Economic and Transformation Group Sponsored by: DFID and the Netherlands Disclaimer: This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Copyright Statement: The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/ The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, Telephone 978-750-8400, fax 978-750-4470, http://www.copyright.com/ All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail [email protected]. ACKNOWLEDGEMENTS his report, funded through the generous sponsorship of DFID and the Netherlands, has been prepared Tby a team from the Economic Transformations Group, Inc. (ETG), led by Dr. Eric Rolf Hansen (President of ETG) and including Ronald Kopicki, Young Moon, Marcela Miceli, Samuel Gerstin, as well as Fred Ogana and Anne Waweru from East Africa Market Development Associates Ltd. The team worked under the overall guidance of Maria Paulina (Ina) Mogollon (Finance and Private Sector Development Specialist, East and Southern Africa Region of the World Bank) and benefited from the comments and support of World Bank team colleagues, Ganesh Rasagam, Karuna Ramakrishnan, Douglas Zhihua Zeng, Aref Adamali, and Kennedy Mukuna Opala. The team would like to thank those who provided support with data gathering and review of report drafts, especially Adan Mohamed (Cabinet Secretary), Wilson Songa (Principal Secretary), Julius K. Korir and Hezekiah Bunde Okeyo of the Ministry of Industrialization, Sam Kiruthu (Chair, Leather Task Force), P.V. Sambasiva Rao (Alpharama), Charles Mwangi Ndung’u (Kenya Leather Development Council-KLDC), Beatrice Mwasi and Maurice Omondi (Leather Articles Entrepreneurs Association—LAEA), and Nicholas Mutisya and Peter Kitheka (Nairobi County Cobblers Association). Finally, the team would like to thank the many leather industry stakeholders interviewed for this study. TABLE OF CONTENTS ABBREVIATIONS ........................................................................................................................................................................................... i EXECUTIVE SUMMARY .............................................................................................................................................................................. iii INTRODUCTION AND BACKGROUND TO THE STUDY ................................................................................................................x 1. GLOBAL TRENDS IN THE LEATHER INDUSTRY .............................................................................................................................. 1 1.1 Demand for leather and leather products is growing faster than supply ................................................................. 1 1.2 Chinese tanneries facing increasingly stringent environmental regulations .......................................................... 2 1.3 Growing push towards clean production technologies .................................................................................................. 2 1.4 Implications for Kenya .................................................................................................................................................................. 3 1.4.1 Capitalize on global trends ............................................................................................................................................... 3 1.4 Key finding of chapter 1 .............................................................................................................................................................. 4 2. KENYAN LEATHER PRODUCTS AND MARKETS ............................................................................................................................. 7 2.1 Kenya’s leather products ............................................................................................................................................................. 7 2.2 Kenya’s export and import of leather footwear .................................................................................................................. 11 2.3 Kenya’s export and import of leather bags, travel ware, corporate items ................................................................. 13 2.4 Domestic footwear market ......................................................................................................................................................... 14 2.5 The second-hand mitumba market .......................................................................................................................................... 15 2.6 Key findings of chapter 2 ............................................................................................................................................................. 19 3. KENYA’S LEATHER SECTOR .................................................................................................................................................................. 21 3.1 Overall structure of Kenya’s leather sector ............................................................................................................................ 21 3.2 Leather product manufacturers in the formal sector ........................................................................................................ 28 3.3 Leather product manufacturers in the informal (Jua Kali) Sector - Kariokor Market (KM) ................................... 33 3.4 Tanneries ........................................................................................................................................................................................... 37 3.5 Institutions supporting the leather sector ............................................................................................................................ 39 3.6 Key findings from chapter 3 ....................................................................................................................................................... 42 4. COMPETITIVENESS ANALYSIS ............................................................................................................................................................ 45 4.1 SWOT analysis of Kenya’s leather industry ............................................................................................................................ 45 4.2 Benchmarking and gap analysis ............................................................................................................................................... 49 4.3 Value chain analysis ....................................................................................................................................................................... 51 4.4 Competitive positioning analysis of Kenya’s leather products ...................................................................................... 55 4.5 Key findings from chapter 4 ...................................................................................................................................................... 59 5. IMPLEMENTATION RECOMMENDATIONS & ACTION PLAN ..................................................................................................... 61 5.1 Strategic targeting of leather products and markets ....................................................................................................... 61 5.2 Promote the dynamic restructuring of the leather industry by improving governance and strengthening collaboration (Strategy 1) ........................................................................................................................................................... 63 5.3 Increase access to markets and induce greater demand for Kenyan leather and leather products (Strategy 2) ....................................................................................................................................................................................... 66 5.4 Build
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