Final Feasibility Study Report (Public Version) - · PDF filepage!2" consultancy services in the feasibility study for the kenya leather park proposed for (kinanie) machakos county

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CONSULTANCY SERVICES IN THE FEASIBILITY STUDY FOR THE KENYA LEATHER PARK

PROPOSED FOR (KINANIE) MACHAKOS COUNTY

Final Report

Repcon Associates

April 2016

Feasibility Study for the Kenya Leather Park (Machakos)

Repcon Associates Page 3

EXECUTIVE SUMMARY BACKGROUND

The Government of Kenya (GOK) through its implementing agency, the Export Processing Zones Authority-‐EPZA is developing a Kenya Leather Park (Machakos) in the Kinanie area of Athi River in Machakos County as a flagship project under the Economic Pillar of Kenya Vision 2030, the National Economic Policy Blue Print targeting to deliver a globally competitive Kenya with a high quality life for citizens by year 2030. Selection of leather as an economic driver to Kenya Vision 2030 is informed by the observed high potential of the sub-‐subsector currently endowed in a livestock resource base standing at (in millions) 17.5 cattle, 27.7 goats, 17.1 sheep and 4 camels whose off-‐take yields hides and skins with a currently undeveloped contribution standing at 0.18 and 1.9% of the National and Agricultural GDPs respectively. Development of the Kenya Leather Park (Machakos) therefore is in line with ongoing government initiatives to promote value addition in the sector towards maximizing economic impact in terms of attracting Foreign Direct Investment in export oriented manufacturing while expanding the local job market. Specifically, creation of the LIP is aimed at removing certain capital and operating such as through provision of centralized effluent treatment, technology development, etc so as to create a globally competitive leather industry targeting manufacture of high end leather goods for both local and export markets.

THE FEASIBILITY STUDY

This study sought out to determine and document the commercial feasibility and viability of investing in an Kenya Leather Park (Machakos) at Kinanie. From a study process that entailed administration of questionnaires to 1200 respondents scattered in 12 Kenyan Towns including all former provincial capitals supplemented by extensive literature surveys and expert consultations, the Study has determined that the LIP is entirely feasible with a 1st Year Value Addition to leather estimated at Ksh 92 billion and in the process, increase Leather Sector GDP contribution to 1.9% up from the current 0.18%. It is entirely feasible. Other major findings from this study are highlighted below.



FINDINGS FROM THE STUDY

Trends in Leather Production

As at base year 2015, Kenya produced 2.62 and 20.33 million pieces of Hides and Skins respectively equivalent to 112,000 tons of leather. This is the national leather resource base with potential to grow at 2.1 and 1.3% annually for bovine and shoat material respectively. Availability of hides and skins is currently constrained by smuggling to external markets and high non-‐recovery rates for cattle hides, sheep and goat skins estimated at 14%, 34% and 29% respectively. The installed tanning capacity in Kenya stands at 3.1 and 31.2 million pieces of Hides and Skins respectively implying a capacity utilization of 85 and 65% for bovine and shoat material respectively. This mitigates against any plans to establish any new primary tanneries.

Trends in Leather allocation

Based on questionnaire returns from Tanners, this study has documented that 90% of all wet blue leather produced in Kenya is exported mainly to China, Italy, India and Pakistan among others while the bulk of the reminder 10% tis also exported either as crusted or final grade leather leaving only 16,367 pieces of hides and an equivalent weight in skins to enter value addition in leather goods manufacturing, in the process, exporting all jobs and starving local manufacturers of badly needed raw material.

Demand for leather

Demand for leather is projected at 80,637 tons assuming a per capital shoe consumption of 2.2 of which, all leather is manufactured locally. However, this is currently difficult to realize given that local manufactured shoes command only 14.01% of the national shoe market. Shoes in the price range of Ksh 2000 and below account for the bulk (77.02) of national shoe market with 47.84% being accounted for by non-‐leather shoes. Further, contrary to popular opinion, mitumba only commands a 35% share of the market and is facing stiff competition from imported new shoes which, at 37.35% command the lion’s share of the shoe market.

Potential Impact of the LIP

Manufacture of leather into leather goods is reputed to add upto 850% the value of hides and skins. This were all the 119,000 tons of leather to undergo full value chain processing, a



net revenue equivalent to Ksh. 94 Billion is possible. This alone can push the GDP contribution of leather to 1.9%, up from the current 0.18% and in the process,

create numerous jobs and business opportunities. The LIP Model is therefore entirely feasible.

The LIP Model

The LIP Model targeting secondary processing of locally produced wetblue into leather goods at Kinanie is conceived in this study. Investments in the LIP will target capital Infrastructure, Support Infrastructure, Support Institutions and a Community outreach programme occupying 47.83ha of land at an estimated Ksh 11.8billion. Realization of the Model will however require back up as follows:-‐

Intervention to increase access to raw materials

Intervention here should target long-‐term focussing of livestock breeding to curb inbreeding backed up by streamlining to the H/S sector to curb production and collection related losses and defects.

Policy level intervention

Need to curb dumping of cheap imports: Kenyan leather footwear manufacturers are persistently struggle to ward off a severe onslaught from cheap shoes dumped into the market from China, Ethiopia and other competitors while the mitumba factor strongly puts in check attempts to manufacture high end leather shoes. Policy intervention to legally seal all loopholes exploited by unscrupulous traders is required as safeguard to national investments in the LIP. Policy Intervention to locally secure Kenyan Wetblue leather: There is need for policy intervention probably through introduction of stiff Export Duty on wetblue exports towards retaining the resource locally. Legislative barriers to non-‐export manufacturers at Kinanie: The EPZ Act caters primarily for exporting enterprises licensed under section 19 of the EPZ Act, CAP 517 but does not allow for accommodation of domestic market oriented manufacturers, including thise that will back up value addition in leather. The proposal here is to allow co-‐location of EPZ enterprises, EPZ business service permit holders and domestic industries in the LIP, but in adequately segregated sections.



Export Duty levied on exports of raw hides and skins destined for EPZ tanneries: The proposal here is exemption of export duty on raw hides and skins sourced from domestic market and supplied to the licensed EPZ tanning industries. Absence of Sector Specific Incentives for the leather and leather goods sector: There is currently no specific incentive framework for the leather and leather goods sector, other than the 80% export tax on sales of raw hides and skins to export market. Sector-‐specific incentives proposed to be available to all players including domestic industries operating in the LIP include:-‐

• Reduced power tariff under the Electricity cost reduction scheme operated by the Ministry of Industry, Investment and Trade

• Access to ready trained manpower from among graduates of a special leather and leather goods training scheme to be established

• Access to cheaper, serviced land and buildings on lease-‐hold basis from EPZA, in the Park, when compared with other competing locations within Kenya

• Day to day facilitation and after-‐care support for enterprises operating in the park from the industrial park management unit.

The Conclusion

In the View of this study, the proposed investment in the LIP is entirely technically and economically justified. Care has to be taken to put in place a CETP to mitigate potential impact from the LIP and other neighbourhood operators.



EXECUTIVE SUMMARY .............................................................................................................. 3

List of Acronyms .................................................................................................................... 7

1.0: INTRODUCTION ............................................................................................................... 1

1.1: Background ...................................................................................................................... 1

1.2: Sectoral background ....................................................................................................... 1

1.3: Feasibility Study for the Kenya Leather Park (Machakos) .......................................... 2

1.3.1: Objectives of the Study .............................................................................................................. 2

1.3.2: Tasks in the Study ...................................................................................................................... 3

1.3.3: Study Procedure ....................................................................................................................... 4

1.3.4: Output ....................................................................................................................................... 6

2: DISCLOSURE OF THE MASTER PLAN FOR THE LEATHER PARK (MACHAKOS) ...................... 7

2.1: The Vision and Mission ...................................................................................................... 7

2.2: Objectives of the Kenya Leather Park (Machakos) ................................................... 7

2.2.1: The nature of Export Processing Zones .................................................................................... 7

2.2.2: Objectives of the Kinanie Leather Park (Machakos) .................................................................. 8

2.3: Scope and Scale of the proposed Kenya Leather Park (Machakos) ....................... 9

2.3.1: Geographic Scope ..................................................................................................................... 9

2.3.2: Current land-‐use on LR 23961 ................................................................................................... 9

2.3.3: Components of the proposed Masterplan .............................................................................. 12

2.4: Justification of the Master Plan .................................................................................... 14

2.5: Institutional Context ........................................................................................................ 14

3.1: Policy Framework for Development Planning in Kenya ............................................ 16

3.2: The Legal Framework .................................................................................................... 22

3.2.1: Legal foundation to development planning in Kenya .............................................................. 22

3.2.2: Tariff Structure in the leather sub sector ................................................................................ 26

CHAPTER 4: THE PRE-‐PROJECT BASELINE ............................................................................. 28

4.1: The Biophysical Baseline ................................................................................................ 28

4.1.1: Administrative jurisdiction for the Masterplan ....................................................................... 28

4.1.2: Physiography, geologic and site soil conditions ...................................................................... 28

4.1.3: Climate and agro-‐ecology ........................................................................................................ 29

4.1.4: Vegetation: ............................................................................................................................. 31

4.1.5: Hydrology and Drainage .......................................................................................................... 31



4.2: Socio-Economic Baseline ............................................................................................. 33

4.2.1: Administrative jurisdiction ...................................................................................................... 33

4.2.2: Population and settlement patterns ........................................................................................ 33

4.3: Baseline profile specific to Kinanie ............................................................................... 35

4.3.1: Population and settlement patterns ....................................................................................... 35

4.3.2: Physical Infrastructure ............................................................................................................ 36

4.3.3: Status of Socio-‐welfare ............................................................................................................ 37

5.0: LEATHER, HIDES AND SKINS SUB-‐SECTOR IN KENYA ...................................................... 38

5.1: Analysis of local and national economic trends ....................................................... 38

5.1.1: The Perspective ....................................................................................................................... 38

5.1.2: Review of economic performance ........................................................................................... 38

5.1.3: Potential of the Livestock sub sector ....................................................................................... 39

5.2: ............................................................................................ The Leather Industry in Kenya ................................................................................................................................................. 43

5.3: Production patterns ........................................................................................................ 44

5.3.1: The African Perspective ......................................................................................................... 44

Africa’s resources of 230.6 million cattle are estimated to have provide 26.9 million hides (and calf skins) At off-‐take rate of 8.4% for the cattle. The off-‐take rate in Africa is however, much less that the 16.6% observed among developing countries in general, and the 21.2% of the world as a whole. ........................................................................................................................................................... 44

The countries responsible for producing most of the hides in Africa are those already renown for their livestock resources; namely: -‐ Ethiopia, Kenya, Nigeria, South Africa, Sudan and Tanzania which, together with Egypt, account for 63% of all the hides produced in Africa. .......................... 44

Africa’s resources of 241.0 million sheep are estimated to provided 82.8 million skins at 34.4% offtake which is is however much less that the 50.8% observed among developing countries in general, and the 50.1% of the world as a whole. The countries responsible for producing most of Africa’s sheep skins are Algeria, Ethiopia, Morocco, Nigeria, Somalia, South Africa and Sudan, together with Egypt, Libya and Tunisia which account for 65% of all the sheep skins produced in Africa. ................................................................................................................................................ 44

Africa’s resources of 209.3 million goats produce 67.7 million at 32.3% offtake , much lower than the 46.8% observed among developing countries in general, and the 47.2% of the world as a whole. The countries responsible for producing most of Africa’s goat skins are Ethiopia, Morocco, Nigeria, Somalia, South Africa and Sudan, together with Niger, Tanzania, Burkina Faso, Kenya and Egypt accounting for 70% of all goat skins produced in Africa. ........................................................ 45

5.3.2: Kenyan prodcution patterns ................................................................................................... 45

5.3.2: The Tanning Industry .............................................................................................................. 46

5.4: Footwear manufacturing ............................................................................................................ 59



Many formal and informal producers are engaged in the production of school shoes, sandals, military/security boots, and men’s shoes for two reasons: First, there is a high demand. A signifcant share of the Kenyan population is in school and in the working age bracket. Also, rising security concerns due to terrorism and other factors has led to an increased demand of military/security boots over the last few years; Second, these items are considered more as “uniform” products that do not require advanced design capacity or sophistication. These Kenyan-‐made products seldom have high variety and the ones from the informal sector share a similar rudimentary design. This explains the reason behind the meager production of women’s shoes, which tend to be highly trendy and require sophisticated design. ......................................................................................... 62

5.4.3: The Kariakor Cluster ................................................................................................................ 62

5.4.4: Domestic Footwear Market ..................................................................................................... 62

5.4.5: Footwear Exports in Kenya ..................................................................................................... 63

5.4: Manufacture of other leather goods .......................................................................................... 64

5.5: Employment in the Leather Sector in Kenya ............................................................... 67

6.0: LEATHER DEMAND ANALYSIS ......................................................................................... 69

6.1: Overview .......................................................................................................................... 69

6.2: Demand for Leather Products ...................................................................................... 69

6.2.1: Shoes ....................................................................................................................................... 69

6.2.2: Bags .......................................................................................................................................... 75

6.2.3: Jackets ...................................................................................................................................... 76

6.2.4: Wallets ..................................................................................................................................... 78

6.2.5: Belts ......................................................................................................................................... 81

6.2.6: Other leather products ............................................................................................................ 83

6.3: The national demand for leather ................................................................................. 83

6.3.1: Consolidated demand for base year 2015 ............................................................................... 84

6.2.3: Demand/Supply model for base year 2015 ............................................................................. 84

7.0: THE MASTERPLAN FOR KENYA LEATHER PARK (MACHAKOS) ........................................ 86

7.1: Objectives of the LIP ....................................................................................................... 86

7.2: Potential Economic Impact from the LIP ..................................................................... 86

7.2.1: Basis for assessment of economic impact ............................................................................... 86

7.2.2: The potential Economic Impact ............................................................................................... 87

7.2.3: The Need for a holistic focus in the Kenya Leather Park (Machakos) .................. 88

7.3: Priority Intervention in the Kenya Leather Park (Machakos) ..................................... 94

7.3.1: Provision for Primary tanneries ............................................................................................... 94

7.3.2: Capacity building for secondary tanning ................................................................................. 94

7.3.3: Value Addition Parks ................................................................................................................ 94



7.3.4: Installation of Support Infrastructure ..................................................................................... 95

7.3.5: Support Services ...................................................................................................................... 95

7.4: The Investment Schedule .............................................................................................. 96

7.4.1: The Capital Infrastructure Programme .................................................................................... 96

7.4.2: Support Institutions ............................................................................................................... 100

7.4.3: Support Infrastructure ........................................................................................................... 100

7.4.4: Community Support Service .................................................................................................. 101

7.4: Land requirements in the LIP ..................................................................................... 101

7.4.1: Proposed Land Use Plan for the LIP ....................................................................................... 101

7.4.2: Categories of Kenya Leather Park (Machakos) tenants ........................................................ 102

7.4.3: Current provision in the Land use Plan: ................................................................................ 103

7.4.4: Rationalized Land requirement ............................................................................................. 105

7.5: Provisional budget for capital Investment ................................................................ 106

8.0: REQUISITE POLICY SHIFT AND INTERVENTIONS ............................................................ 108

8.1: Policy Challenges ........................................................................................................ 108

8.1.1: Land User Classification ......................................................................................................... 108

8.1.2: Need to curb dumping of cheap imports .............................................................................. 108

8.1.3: Policy Intervention to locally secure Kenyan Wetblue leather .............................................. 108

8.1.4: Legislative barriers to non-‐export manufacturers at Kinanie ................................................ 108

8.1.5: Duty levied on exports of raw hides and skins destined for EPZ tanneries. ......................... 109

8.1.6: Absence of Sector Specific Incentives for the leather and leather goods sector .................. 110

8.2: Proposed Policy Interventions .................................................................................... 110

8.2.1: Towards resolution of Land Use classification ...................................................................... 110

8.2.2: Clarification under Cap 517 ................................................................................................... 110

8.2.3: Export Duty levied on exports of raw hides and skins destined for EPZ tanneries. .............. 111

8.2.4: Lack of Sector Specific Incentives for the leather and leather goods sector ......................... 111

8.3: Proposed Incentive package ..................................................................................... 112

8.2.1: Incentives provided under the EPZ Act ................................................................................. 112

8.2.2: Other requisite cushioning ................................................................................................... 113

i) Provision of a Common Effluent Treatment Plant to cut down on investment costs ............... 113

ii) Provision of shared production equipment especially for clusters based in the Value Addition Parks. ......................................................................................................................................... 113

iii) A skills upgrading programme to support EPZ Investors .......................................................... 113

9.0: CONCLUSSION AND RECOMMENDATIONS ................................................................... 114



9.1: Overview ........................................................................................................................ 114

9.2: Other major findings .................................................................................................... 114

9.2.1: Trends in Leather Production ................................................................................................ 114

9.2.2: Trends in Leather allocation .................................................................................................. 114

9.2.3: Demand for leather ............................................................................................................... 114

9.2.3: Potential Impact of the LIP .................................................................................................... 115

9.4: The LIP Model ................................................................................................................ 115

9.4.1: Intervention to increase access to raw materials ................................................................. 115

9.4.2: Policy level intervention ........................................................................................................ 115

APPENDICES ......................................................................................................................... 117

List of Acronyms AGDP Agricultural Sector GDP

ASDS -‐ Agricultural sector Development Strategy

Asl -‐ above sea level

BOQs -‐ Bill of Quantities

CIDP -‐ County Integrated Development Plan

CETP Common Effluent Treatment Plan

ERS -‐ Economic Recovery Strategy

EPZA -‐ Export Processing Zones Authority

EPZs -‐ Export Processing Zones

EU -‐ European Union

FDI -‐ Foreign Direct Investment

GDP Gross Domestic Product

GoK -‐ Government of Kenya

HIV -‐ Human Immune-‐deficiency Virus

IMP -‐ Impact mitigation plan

KeNHA -‐ Kenya National Highways Authority



KIRDI -‐ Kenya Industrial Research Development Institute

KITI Kenya Industrial Training Institute

KLDC Kenya Leather Development Council

LIP/KLP -‐ Leather Industrial Park/Kenya Leather Park

LN -‐ Legal Notice

LR Land Registration

MCG -‐ Machakos County Government

MDG Millennium Development Goal

MSMES -‐ Macro, Micro and Small Enterprises

MTP -‐ Medium Term Plan

MOIIT Ministry of Industry, Investment and Trade

NEMA -‐ National Environment Management Authority

PET -‐ Potential Evapo-‐transpiration

PSDS Private Sector Development Strategy

TPCIS Training Center

TOR -‐ Terms of Reference

SRA -‐ Strategic for Revitalizing Agriculture

WRMA -‐ Water Resources Management Authority



1.0: INTRODUCTION

1.1: Background The Government of Kenya (GOK) through its implementing agency, the Export Processing Zones Authority-‐EPZA is developing a Kenya Leather Park (Machakos) in the Kinanie area of Athi River in Machakos County as a flagship project under the Economic Pillar of Kenya Vision 2030, the National Economic Policy Blue Print targeting to deliver a globally competitive Kenya with a high quality life for citizens by year 2030. Selection of leather as an economic driver to Kenya Vision 2030 is informed by the observed high potential of the sub-‐subsector currently endowed in a livestock resource base standing at (in millions) 17.5 cattle, 27.7 goats, 17.1 sheep and 4 camels whose off-‐take yields hides and skins with a currently undeveloped contribution standing at 0.18 and 1.9% of the National and Agricultural GDPs respectively. Development of the Kenya Leather Park (Machakos) therefore is in line with ongoing government initiatives to promote value addition in the sector towards maximizing economic impact in terms of attracting Foreign Direct Investment in export oriented manufacturing while expanding the local job market. Specifically, creation of the LIP is aimed at removing certain capital and operating such as through provision of centralized effluent treatment, technology development, etc so as to create a globally competitive leather industry targeting manufacture of high end leather goods for both local and export markets.

1.2: Sectoral background Hide, skin and leather development service was formed within the British Protectorate of East Africa in 1905 with principle objective of providing high quality raw hides and skins for export to service the British shoe industry. The first such supply occurred in 1909 earning £3000 worth of export revenue for the protectorate. By 2008 the leather sector had grown progressively and was estimated to earn the country about 4% to the Agriculture GDP (approximately 1.5% GDP). However, the potential in the leather sector has not been realized as the sector has largely targeted export of both raw and semi-‐processed leather. The core defining feature of the Kenyan leather subsector is that currently, all tanneries manufacture wet blue grade leather for export as the main end-‐product-‐in the process, denying the country resources needed for local industrialization, would be profit margins (taxes) from value addition and attendant jobs. To cope with the induced deficit of leather goods, the country has to contend with a market choking with cheap imports of both second-‐hand and synthetic goods all of which compete unfavorably with locally manufactured goods, thus further constraining the local manufacturing sector. It is with this scenario in mind that the thrust of main policies developed over time, emphasized on the need to transform the leather sector from a raw hides and skins export oriented Industry, to focus primarily on value addition, improve national consumption and



regional/ international marketing development for leather/leather products as now envisioned in the proposed Kenya Leather Park (Machakos).

1.3: Feasibility Study for the Kenya Leather Park (Machakos) The Study on Feasibility Study for the Kenya Leather Park (Machakos) was commissioned upon successful conclusion of the SEA Process which thus moved the Masterplan to the next quantum level focusing on investment which requires, among other things, for the EPZA to obtain guidelines on the way forward in operationalizing the LIP to ensure a sound footing. This is the main motivation for the Feasibility Study as proposed. Value addition in the leather sub-‐sector is well recognized in the national policies and it is estimated that an additional 20% value addition in raw hides, wet blue, crust and finished leather would earn an addition Kshs.0.9 billion. In the Industrial Transformation Strategy (SPN-‐2 of 1996), leather is placed in phase one of industries for immediate promotion while the Economic Recovery Strategy (ERS 2003-‐2007) puts strong emphasis on facilitating livestock-‐based industries. The Strategy for Revitalizing Agriculture (SRA 2004-‐2014) puts strong emphasis on value addition in the agricultural sector and argues for agro-‐industrial development to be prioritized in the investment code. Both the Private Sector Development Strategy (PSDS 2000-‐2010) and the Sessional Paper on Development of Micro and Small Enterprises for Wealth and Employment Creation for Poverty Reduction (SPN-‐2 of 2005) put emphasis on the private sector in macro, micro and small enterprises (MSMEs) as engines of growth, employment creation and poverty reduction. The newly released Vision 2030 (2007) emphasizes that value addition in the agricultural sector is capable of adding Kshs.80-‐90 billion to GDP and puts increased emphasis on crop and livestock products value addition as one of its flagship projects.

1.3.1: Objectives of the Study According to the ToRs, the FS Study will facilitate achievement of the overall goal of the Kenya Leather Park (Machakos) project namely, to establish a globally competitive leather sector with major positive impacts on both the Manufacturing Sector and National level GDP Growth respectively. Specifically, the FS Study will:-‐

i) Establish economic and financial viability of the Kenya Leather Park (Machakos) at Kinanie, recommending options for its development and provide a plan to implement the project.

ii) Assist the project achieve acceptable financial returns and a positive economic rate of return

iii) Establish optimal utilization of the land for the intended economic purpose and in line with physical planning guidelines while also providing adequate, open green areas for arbor cover, vegetation and recreation.

iv) Ensure development of the industrial park is consistent with market needs and is timed to satisfy demand to achieve acceptable occupancy levels



v) Support economically, socially and environmentally sustainable development of the leather sector through use of best available leather technology within the Kenya Leather Park (Machakos).

1.3.2: Tasks in the Study The TORs have identified a total of nine tasks to be executed by the Consultant towards achieving objectives of the FS for the Kenya Leather Park (Machakos). In recognition that the FS was born out of the SEA process, an attempt was made to determine Gaps between the SEA Study and the FS with a view to identifying areas that require more focused attention at the Feasibility Study. The result is presented in the Gap Analysis Matrix provided below. Essentially, all TORs tasks have major gaps in coverage which will require resolution either through supplementary or full scale investigations. Gap Analysis Matrix in the FS SN TOR Tasks Gap Analysis Proposed Resolution

Review all relevant laws, regulations, treaties, policies, programs, initiatives and institutional arrangements related to the leather sector, to industrial investment, to establishment of industrial parks in Kenya,

The legal Legislative framework for LS was documented under SEA Study. Legislation relating to Investment climate, Export based manufacturing, Export Duty, Institutional framework will require review.

Review of legislation pertaining to Investment, Export based manufacturing, Export Duty among others

Review similar leather industrial parks

This was studied under SEA but never documented

Study of cases studies of Industrial parks in Brazil, India among others

Assess requirements for and estimate market demand for various services, facilities, infrastructure in the LIP

Only demand for water was computed under SEA

Will make projection on service requirement in the LIP based on projected scope of investment

Conduct stakeholder mapping and develop a stakeholder engagement strategy for the project.

This was fairly covered by both the EPZA and SEA Study. Additional stakeholders, more so Utility Providers will be looped in.

Additional mapping of SHs based on projected demand for services (external roads, water, power supply, internet, banking services, etc) will be undertaken.



Develop a financial model for the development and operation of the industrial park

This was never addressed under the SEA Study.

A business plan for the LIP will be developed based on available input base (HS or Wet Blue) identifying different investment cycles.

Estimate the economic benefits of the projects and also calculate the economic rate of return of the project (ERR)

This item was never addressed under the SEA

IRR and ERR schedules for different models of the LIP will be developed and screened for sensitivity to diverse business parameters

Identify significant risks and propose measures to mitigate them

This item was not covered under the SEA

A risk map for the entire LIP will be developed.

Recommend the institutional framework for development and operation of the industrial park.

This item not covered under the SEA

The EPZA has reviewed diverse options in institutionalising the LIP and the same will be analysed to package a suitable framework.

Develop entry criteria for industrial park clients as are consistent with the economic objectives of the project

This proposal was made under the SEA

The SEZ Bill has developed criteria for investors in SEZs and the same will be scrutinised for applicability under the LIP

1.3.3: Study Procedure The Feasibility Study adopted a three pronged study approach entailing three stand-‐alone studies as follows:-‐ (i) Documentation of production capacity of Wet blue Grade Leather Ideally, this assignment would have called for a complete baseline survey to generate data on Hides and Skin production down from county level. However, given that Counties are still reorganising, a quick baseline was conducted based on survey of past and current production data from the 14 operational tanneries which were polled through use of a questionnaire to generate data on their 5 year production patterns. Towards this, a questionnaire survey was administered on all tanneries so as to document their past trends in hides and skins sourcing and processing. Projected supply of wet blue will provide an indication of the number of tanneries and value addition parks that can be supported at Kinanie.

(ii) Documentation of market demand for leather and leather goods



Focus of the market study: The second study targeted to document the local demand for leather based on a survey of the local market for leather goods. Accruing data would provide an indication of the potential market share for leather goods and by extension, the potential demand for raw materials including wet blue grade leather. Geographical coverage: This study covered 15 major towns including all former Provincial Headquarters but included Thika, Kisii, Narok and Machakos. Target sample: The questionnaire survey targeted three strata of the market namely;-‐ consumers, traders/ distributors and manufacturers based in all the 19 towns covered. Towards this, three structured questionnaires were developed, pretested and administered on 711 respondents comprised 395 consumers, 245 traders/ distributors and 71 manufacturers respectively. Based on responses from this sample, the market demand and consumption patterns for leather goods in Kenya has been modelled. Results re unveiled in Chapter… below.

(iii) Support Studies Alongside demand supply modelling, a third study focused on the soft aspects of the LIP to include, the policy legal framework, comparative analysis, taxation schedules, institutional framework among others. This component mainly relied on desktop research and stakeholder engagement. (iv) Synthesis Data from the three studies were synthesised to provide an indication of the following:-‐

• The Potential availability of Leather • The potential market for leather • The Optimum investment profile for secondary tanneries, Value Addition

Parks, etc • Optimum demand for services, water, power supply, CETP, Housing,

Institutional Support, among others. • Economic viability of the LIP



Conceptual framework for the Feasibil ity Study

1.3.4: Output The core output of the FS is a rationalised Model of the LIP with specifications for systematic investment. The FS should has identified the optimum number of secondary tanneries and the value addition parks that can be supported by available Wet blue grade leather. Based on the projected number of secondary and tertiary investments in the leather value chain, the required level of support services has been recommended.



2: DISCLOSURE OF THE MASTER PLAN FOR THE LEATHER PARK (MACHAKOS) In this section, the Masterplan for the Kenya Leather Park (Machakos) proposed for Kinanie as currently conceived and designed is disclosed. The basis of disclosure is the Land-‐use allocation plan document prepared for the Kinanie Site.

2.1: The Vision and Mission The purpose of the Masterplan is to create a State of the Art Leather City to be a center of excellence in tanning, manufacture of finished leather goods, and leather related services.

2.2: Objectives of the Kenya Leather Park (Machakos)

2.2.1: The nature of Export Processing Zones An Export Processing Zone (EPZ) is a specific type of FTZ, set up generally in developing countries by the governments to promote industrial and commercial exports. Most EPZ located in developing countries: Brazil, Colombia, India, Indonesia, El Salvador, China, the Philippines, Malaysia, Bangladesh, Pakistan, Mexico, Costa Rica, Honduras, Guatemala, Kenya, Sri Lanka, Mauritius and Madagascar have EPZ programs. In 1997, 93 countries had set up export processing zones employing 22.5 million people, and five years later, in 2003, EPZs in 116 countries employed 43 million people.

The Export Processing Zone (EPZ) program was established in 1990 to provide an attractive investment opportunity for export oriented business ventures within designated areas or zones. The objective was to help the economy through increased productive capital investment, jobs creation, technology transfer, backward linkages development and export diversification. Kenya is a fiscally sensible destination for assured returns on investments while engaging in planned and sustainable development of the national economy and providing employment to the country’s workforce.

The EPZ is managed by the Export Processing Zones Authority (EPZA). EPZA is a state corporation established by the Government of Kenya through an Act of Parliament -‐ the Export Processing Zones Act (Cap 517 of the Laws of Kenya) for the promotion and facilitation of export-‐oriented investment and the development of an enabling environment for such investments.

EPZ offers a range of attractive incentives to ensure low cost operations, fast set up, smooth operations and high productivity of the businesses. There is an effective one-‐stop-‐shop service at the EPZA which facilitates the investment process.

Over the years, the Export Processing Zones Program has registered impressive growth. This growth has enabled the program to achieve its objectives of employment creation, expansion and diversification of exports; increase in productive investment, generation of



foreign exchange earnings, technological transfer and creation of linkages with the customs territory. This has been achieved through initiating, promoting and providing attractive investment opportunities for the export –oriented business ventures in the country.

To attract foreign investors, the EPZA continues to implement a range of appealing fiscal, logistical and administrative incentives to ensure lower cost operations, rapid set-‐up and smooth and hassle-‐free functioning of businesses operating within the EPZs. The EPZA has conceived programmes and policies that are intended to foster a bright investment for investors and further encourage them to take advantage of the numerous opportunities the country offers which include, extensive business regulatory reforms, the investor friendly fiscal and monetary policies, supportive political frame work, well established private sector and the entrepreneurial facilities and social amenities and the quality of life in the country.

The EPZA welcomes all export-‐oriented investments but is particularly keen to develop projects and attract companies in the areas of food processing, fresh produce, packaging for shelf ready product, wooden products, leather and animal based products, jewellery and gemstones, pharmaceutical products and herbal medicines, medicinal supplies, cosmetic and personal care products, packaging products, textiles, commercial handicrafts, transport equipment, electronic and electrical goods, building materials & furnishings, data processing & audio-‐visual services and consultancy and professional services.

There are seven EPZs strategically located across the country, all managed and promoted by EPZA. The individual EPZs are located in the Nairobi, Athi River, Mombasa, Kilifi, Malindi, Voi and Kimarer in Rift valley.

Tax benefits under EPZA

The following are tax benefits for investors:-‐

• 10 year corporation tax holiday and 25% tax thereafter

• 10 year withholding tax holiday

• Stamp duty exemption

• 100 % investment deduction on initial investment applied over 20 years

• Perpetual duty and VAT exemption on company input including machinery, spare parts, construction materials, office equipment, packaging, heavy diesel and fuel oil excluding other petroleum based fuel, motor vehicles that are from outside the zone and motor vehicle spare parts

2.2.2: Objectives of the Kinanie Leather Park (Machakos) The overall objective of the Masterplan is to facilitate the development of an economically, socially and environmentally sustainable Kenya Leather Park (Machakos), an objective to be served through pursuit of goals as follows (Appendix 2.2):-‐

• Increase productive capital investment



• Generate jobs • Transfer of Technology and skills • Development of backward and forward linkages • Diversification of Export products

2.3: Scope and Scale of the proposed Kenya Leather Park (Machakos) Brief highlights of the LIP Concept are provided in sections below.

2.3.1: Geographic Scope The Kenya Leather Park (Machakos) targets LR No. 23961, a 301.1ha property franking the Mbagathi River within the Kinanie Location of Kinanie Division under Athi River Sub County within Machakos County. In terms of elective jurisdiction, LR 23961 which is wholly owned by the EPZA falls within Kinanie Ward and Mavoko Constituency and can be accessed through the Mutonguni (C434) Rd about 16 kilometres east of Athi River Town (Fig 2.1). Appendix 2.1 provides a copy of the Title Deed to LR 2396.

2.3.2: Current land-‐use on LR 23961 Two land uses predominate on LR 23961 namely:-‐

The EPZA Sewage Treatment Ponds: Sewage from the EPZA complex at Athi River is conducted through a 16km long pipeline to oxidation ponds located just past Kinanie Market where it is treatment before discharge into Mbagathi River. Most of the water however is utilised for horticultural farming within vicinity. Associated with the sewage works is a housing estate and a small office for site staff.

Eucalyptus Plantations: An estimated 500acres on LR 23961 is occupied by a semi-‐ mature plantation of Eucalyptus camaldurensis currently being salvaged for fuelwood.



Plate 2.1: Blue gum Plantations on LR 23961



Site for proposed Leather Industrial

Kinanie Division

Daystar University Athi River Town

Kangundo Rd



Fig 2.1: Location and access Map for LR 2961 Source: National Physical Planning Department, 2015

2.3.3: Components of the proposed Masterplan MOIIT, EPZA and KLDC intend to establish a Kenya Leather Park (Machakos) as an eco-‐friendly, world-‐class production facility, incorporating best practice in economic and social facility design, cluster formation, export promotion, effluent treatment and pollution control.

Fig 2.2 provides a proposed land use map for the Kenya Leather Park. A total of 11 components are proposed for the LIP as follows:-‐

i. Infrastructure

ii. Tanneries

iii. Value Addition Parks

iv. SME Park

v. Trade Centre

vi. Research and Development Centre

vii. Administration Centre viii. Logistics and Customs Offices

ix. Housing estate

x. Utilities and Services

xi. Common Effluent Treatment Plant (CETP) and Landfill



Fig 2.2: Proposed land use plan in the Leather Industrial Park



2.4: Justification of the Master Plan The Kenyan leather industry is a prime agro-‐based sector with a high potential for economic development and promotion for employment opportunities. The industry will have strong backward and forward linkages that will provide opportunities for value addition using locally sourced raw materials.

The proposed Kenya Leather Park (Machakos) is in line with the objectives of the national industrial policy framework of creating an enabling environment for industrial development, enhancing value addition, and promoting development of SMEs. It will also be an attempt at addressing the current challenges faced by the sector.

2.5: Institutional Context Ministry of Industry, Investment and Trade: The Kenya Leather Park (Machakos) as conceived for implementation at Kinanie is an undertaking of the GOK through the EPZA, a State Corporation operating under auspices of the Ministry of Industry, Investment and Trade-‐MOIIT. The Export Processing Zones Authority-‐EPZA: Development of the Kenya Leather Park (Machakos) at Kinanie is an undertaking by the EPZA, a Body Corporate established under te Export Processing Zones Act (Cap 517) of the Laws of Kenya. In its Strategic Plan, the EPZA seeks to make a significant contribution to national economic and social objectives through industrial growth and job creation as proposed in the Kenya Leather Park (Machakos). The Leather Development Council: The Kenya Leather Development Council (KLDC) was formed vide an Executive Order gazetted under Legal Notice number 114 under Cap 446 (State Corporations Act) through Kenya Gazette Supplement No. 113 (Legislative Supplement No. 113) dated 9th September, 2011. This is a body to represent the interest of the leather sub sector in the country drawing its representatives from the value chain in the sub-‐sector. The representations is drawn from Kenya livestock marketing council; Slaughter houses association; hides and skins traders; tanners; footwear manufacturers; leather goods manufactures; informal leather manufacturers; academia; long standing in the subsector and the environment. LDC will be a state agency under the Ministry of Livestock Development and will be subject to other appropriate legislation and protocols governing State owned Corporations. Three



other Ministries will also be key to this council and whose representation is of necessity, these are: Trade; Industry and Finance. The mandate of the Kenya Leather Development Council -‐ The principal function of KLDC is to oversee and advice the Government generally on the matters relating to the processing of and trade in hides, skins, leather and leather goods and shall in particular but without prejudice to generality of the principal function;-‐ -‐Promote, direct, coordinate and harmonize all activities in the leather subsector; -‐ Oversee the licensing of the leather subsector; -‐ Guide the implementation of the Council’s policies and strategies; -‐ Advice the Minister on national strategies and policy in respect of leather sub-‐sector; -‐ Undertake research and development activities; Organize and supervise capacity building in the leather sub-‐sector; -‐ Set standards and enforce compliance in collaboration with other relevant institutions; -‐ Collect, store, analyze and disseminate data on leather sub-‐sector; -‐ Mobilize technical and financial support for the leather sub sector



3: POLICY, LEGAL AND INSTITUTIONAL FRAMEWORK This chapter defines the policy, legislative and institutional frameworks which will govern development, implementation and operationalization of the Kenya Leather Park (Machakos) at Kinanie which, by design cuts across many sectors of the economy, some of which enjoy protection under diverse local, national, regional and global policy/ legal tools. An analysis of requirements of such tools has been undertaken as part of the SEA process to ensure that the Master Plan output attains the goals of social acceptability, economic viability and technical sustainability in line with internationally accepted standards for good practice. A detailed analysis of potential inter-‐phasing of the Master plan with diverse legal instruments is briefly highlighted in sections below.

3.1: Policy Framework for Development Planning in Kenya Sessional Paper Number 10 of 2012 on Kenya Vision 2030 Sessional Paper Number 10 of 2012 on Kenya Vision 2030 is the National Policy Economic Blueprint that entrenches Kenya Vision 2030 -‐the country’s development blueprint which aims to transform Kenya into a newly industrializing, “middle-‐income country providing a high quality life to all its citizens by the year 2030”. The Vision is anchored on three key pillars: Economic; Social and Political; and had as one of its goals the realization of the Millennium Development Goals (MDGs) by the year 2015.1 Strategies of the Economic Pillar are aimed at generating sufficient resources to attain the Vision and MDGs which required, among others, a 25-‐ year GDP Growth averaging 10% per annum. Towards this, the Economic Pillar has identified six key sectors to spearhead the drive to attain high and sustainable economic growth namely tourism, agriculture, wholesale and retail trade, manufacturing, business process outsourcing and financial services and finally, Oil, Gas and Mineral Resources.

The proposed Kenya Leather Park (Machakos) is a Flagship Project under the Economic Pillar of Kenya Vision 2030 Manufacturing which is identified as one of the key drivers and aims at achieving a “Robust, Diversified and Competitive Manufacturing Sector.”

The Second Medium Term Plan (MTP) 2013-‐2017

1 MDGs have since lapsed and have been replaced by the Sustainable Development Goals (SDGs)



The Kenya Vision 2030 is being implemented in five year successive Medium Term Plans. The first plan covered the period 2008-‐2012. The 2013-‐ 17 MTP is the second in a series of successive 5-‐year plans and draws on lessons learnt in implementing the first MTP. It seeks to implement the flagship projects identified under Vision 2030 over the five year period together with incomplete flagship and other projects and programmes in the previous Medium Term plan. It will also take due cognisance of the devolved structure of government following promulgation of the Constitution of Kenya 2010 and recent discovery of oil and mineral resources. For the manufacturing sector, the Vision and MTPII focus on the establishment of special economic zones in Lamu, Mombasa and Kisumu; the development of SME parks and industrial parks in each of the 47 counties in order to attract foreign direct investment (FDI), to promote value addition, and to develop technical skills. All this is necessary in order to address the acute challenges of poverty, joblessness, and inequality and to facilitate faster realization of Kenya Vision 2030.

The Second Medium Term Plan (MTPII) of the Vision advocates for the development of SMEs and Industrial Parks in each of the 47 counties to attract new companies and expand employment opportunities to citizens and attract FDI. The parks will offer infrastructure and shared resources such as power supply, telecommunication hubs, management offices, and internal transportation, market-‐oriented research, value addition, and marketing of region specific products through the support of academia, the private sector, and related actors. The Sector will pursue the development of three clusters, which include:

• Meat and leather cluster through establishment of meat processing plants;

• Tanneries and other related industries in Isiolo, Garissa and Kajiado; and

• Promotion of dairy products processing in Kiganjo (Nyeri)

The establishment of the Kenya Leather Park (Machakos) is therefore consistent with the requirements of the second Medium Term Plan that is under implementation. The National Industrilization Policy: The NIP recognises Kenyan leather industry as a prime agro-‐based sector with a high potential for economic development and promotion for employment opportunities. The industry has strong backward and forward linkages that provide opportunities for value addition using locally sourced raw materials. The leather industry in Kenya is made up of four main sub-‐sectors, Raw material base (hides and skins), Tanneries, Footwear, and Leather goods manufacturing. The challenges facing the sector include; low recovery of hides and skins due to poor slaughtering and flaying practices; and poor animal husbandry among others. Other challenges include export of raw hides and skins; and importation of second hand leather products.



Policy Intervention is proposed as follows:-‐ 1. Strengthen the Leather Development Council. 2. Revive and mainstream the Training and Production Centre for the Shoe Industry (TPCSI) to promote technical capacity in processing of leather products. 3. Strengthen the leather training and incubation programmes in KIRDI and KITI. 4. Ban importation of used leather products. 5. Ban the exportation of raw hides and skins. The National Industrialization Strategy: Development of the Kenya Leather Park (Machakos) is seen as major milestone in the operationalization of the National Industrialisation Strategy recently issued by the MOIIT under the banner “An aspiration to attain Vision 2030”. The strategy recognises that the country must grow its GDP by between US$ 4 and 6 billion per year for 17 years to 2030, increase the manufacturing base to deliver 20% of GDP, increase FDI 5 times over the current level, create an additional 5 million jobs, and attain global top 20 ranking in ease of doing business rankings by 2020. The Ministry’s strategy is one of job creation and industrialisation built on foundations of improving the ease of doing business; supporting enablers of growth such as skills development, infrastructure provision, and access to finance; unlocking the potential of small and medium enterprises (SMEs); developing a compelling FDI attraction plan and building strong government delivery capability. The key components of the Ministry’s strategy are sector-‐specific and include:-‐

• Growing critical (agro-‐processing) sectors where Kenya has scale – tea, coffee, flowers, horticulture

• Leveraging natural advantages to create competitive sectors -‐textiles and cotton, leather, agro-‐processing, beef and fishing

• Building local industries to support resource and infrastructure investments in oil, gas, mineral, infrastructure (e.g. steel) and geothermal

• Transforming government industry (public sector enterprises including Pan Paper Mills, sugar factories, coffee millers, coconut and cashew nut processors, livestock processors and Pyrethrum Board of Kenya).

Sessional Paper No. 3 of 2009 on National Land Policy The National Land Policy was formulated with the aim of securing rights over land and provide for sustainable growth, investment and reduction of poverty in line with Government overall development objectives. The policy will offer a framework of policies and laws designed to ensure the maintenance of a system of land administration and management that will provide:

• All citizens with opportunity to access and beneficially occupy and use land; • Economically viable, socially equitable and environmentally sustainable allocation

and use of land;



• Efficient, effective and economical operation of land markets; • Efficient and effective utilization of land and land-‐based resources; and • Efficient and transparent land dispute resolution mechanisms.

Sessional Paper No 1 of 1996 on Environment and Development: Sessional Paper No 1 of 1996 is the official statement on national policy on environment and was released in 1996 following on recommendations of the National Environment Action Plan (NEAP) of 1994. The NEAP Process had been launched earlier on in 1992 following the Country’s participation in the United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro during which Kenya alongside other nations became signatory to Agenda 21 which called on all nations to pay closer attention to environmental management at national level. Through Sessional Paper No 1 of 1996, the Kenya Government guarantees every citizen the inalienable right to a clean and healthy environment and commits to pursue a policy strategy of integrating environmental sensitivity into national development planning process and sets broad policy objectives as follows:-‐

• Optimal use of natural land and water resources in improving the quality of human environment;

• Sustainable use of natural resources to meet the needs of the present generations while preserving their ability to meet the needs of future generations;

• Integration of environmental conservation and economic activities into the process of sustainable development;

• Meeting of national goals and international obligations by conserving bio-‐diversity, arresting desertification, mitigating effects of disasters, protecting the ozone layer and maintaining an ecological balance on earth.

Among other provisions, Sessional Paper No. 1 of 1996 also sets out sectoral priorities for environmental sustainability which in most cases have been operationalized through formulation of guidelines for quality and environmental management in respective sectors. A National Environmental Law (EMCA, 1999) has since also been enacted to secure implementation of the national policy on environment. The Millennium Development Goals for 2015: The Millennium Development Goals (MDGs) are eight goals to be achieved by 2015 that respond to the world's main development challenges. The MDGs are drawn from the actions and targets contained in the Millennium Declaration that was adopted by 189 nations-‐and signed by 147 heads of state and governments during the UN Millennium Summit in September 2000. They include:-‐

i) Halving extreme poverty and hunger (1990-‐2015); ii) Achieving universal primary education (by 2015); iii) Promoting gender equality (by 2015);



iv) Reducing under-‐five mortality by two-‐thirds (1990-‐2015); v) Reducing maternal mortality by three quarters (1990·2015); vi) Reversing the trend of HIV/AIDS, malaria and TB (by 2015); vii) Ensuring environmental sustainability (by 2015); viii) Developing global partnership for development with clear targets for aid, trade and

debt relief (by 2015). Nationally, the GOK has taken bold steps to domesticate the MDGs as exemplified by investment in the PRSP process through which participatory mapping of poverty incidence at both District and National Level was undertaken, implementation of the Economic Recovery Strategy for Wealth and Employment Creation and implementing projects that directly confront specific aspects of the MDGs. By anchoring the Economic Pillar of Vision 2030 which seeks to generate resources needed to address MDGs, implementation of the Master Plan for the Kenya Leather Park (Machakos) remains attuned to the national and indeed global agenda for social development. The Economic Recovery Strategy (ERS), the Strategy for Revitalising Agriculture (SRA) and Agricultural Sector Development Strategy (ASDS) In 2003, the NARC Government developed and launched the ERS, as the blue print for setting the country back on the growth path. The strategy was a shift from previous planning documents that sought to reduce poverty, instead of creating wealth and employment. It elaborates the role of agriculture and recognizes that for the economy to grow to create wealth and employment as the backbone of the economy, agriculture has to grow even faster. Under the ERS, agriculture was given high prominence and priority contingent to which, in 2004, the Government developed and launched the SRA with a Vision “to transform Kenya’s agriculture into a profitable, commercially oriented and internationally and regionally competitive economic activity that provides high quality gainful employment to Kenyans”. The SRA set the target of agricultural growth at an average annual rate of 3.1 percent during 2003-‐2007 to reach over 5 percent by 2007. The implementation of the SRA was generally successful;-‐ by 2007, agriculture and was growing at an average of 5.2 percent reaching a high of 6.4 percent in 2006 and had thus surpassed the SRA target; the reduction of food insecurity and poverty by over 12 percent and 10 percent respectively from 2003 to 2007; the increase in the productivity of key commodities such as tea, maize, sugar, horticulture, milk and meat each by an average of over 6 percent per annum from 2003 to 2007; and, the revival of most agricultural institutions. While the foundations for these gains are still intact, the growth trend was interrupted in 2008 by external forces, which included the post-‐election violence, global food price crises, escalating fuel prices, and the global financial meltdown. It is, therefore, imperative that



this interruption is removed so that the sector can go back to the increasing growth path. The ERS was a five-‐year plan that was to expire during the financial year 2007/2008. Hence, by early 2007, the Government started developing a new strategy to take over from the ERS. In June 2008, the Government launched Kenya Vision 2030 as the new long-‐term development blueprint for the country. Its Vision is ‘A globally competitive and prosperous country with a high quality of life by 2030’. The Vision 2030 has identified agriculture as one of the key sectors to deliver the 10 percent annual economic growth rate envisaged under the economic pillar. With the achievement of most targets of SRA and the formation of a new Government in 2008, it became imperative for the revision of SRA to capture these new developments. The new strategy is required to position the agricultural sector strategically as a key driver for delivering the 10 percent annual economic growth rate envisaged under the economic pillar of the Vision 2030. It provides a guide for the public and private sector’s effort towards overcoming development challenges facing the agricultural sector. n the last five years, the sector has been revitalized and placed on a path for further development; hence, this strategy is perceived as an “Agricultural Sector Development Strategy”. Although much has been achieved during the period, food security, poverty reduction and transformation of agriculture from subsistence to farming as a business – agribusiness, markets, efficient use of inputs and agricultural credit – still remains a challenge. The ASDS therefore, seeks a progressive reduction in unemployment and poverty and spurs agriculture back to growth trends Since the agricultural sector is still the backbone of Kenya’s economy – and the means of livelihood for most of the rural population – it is inevitably the key to food security and reduction of poverty. The Vision of the sector is, therefore, “A Food Secure and Prosperous Nation.” The overall agricultural sector goal is to achieve an average growth rate of 7 percent per year over the next 5 years. Given the critical strategic issues that need to be addressed, the strategic Mission for the sector is “An Innovative, Commercially oriented and Modern Agriculture”. The overall development and growth of the sector is anchored in the following two strategic thrusts:

1. Increasing productivity, commercialization and competitiveness of the agricultural commodities and enterprises and;

2. Developing and managing key factors of production. Assuming an external environment that is conducive and with support from enabling sectors and factors, the agricultural sector has set the following key targets by 2020:

i) Reduction of people living below absolute poverty lines to less than 25 percent to achieve the first MDG.

ii) Reduction of food insecurity by 30 percent to surpass the MDGs. iii) Increase in the contribution of agriculture to the GDP by more than Kshs 80 billion

per year as set out in the Vision 2030.



iv) Divestiture in all state corporations dealing with production, processing and marketing that can be better done by the private sector.

v) Reforms in and streamlining of agricultural services such as in research, extension and regulatory institutions so as to be most effective and efficient.

The strategic thrust of increasing productivity, commercialization and competitiveness of the agricultural commodities will enable the sector to export more of its output and thereby earn the country foreign exchange and create employment.

3.2: The Legal Framework Legal analysis in this SEA is meant to define the legal context providing for development planning as envisaged in the Master Plan for the proposed Kenya Leather Park (Machakos).

3.2.1: Legal foundation to development planning in Kenya The Constitution of Kenya (2010)

The Constitution of Kenya (2010) identifies the State and County as the two tiers of governance in terms of public administration. According to Article 66 of the Constitution, the State may regulate the use of any land, or any interest in or right over any land, in the interest of defence, public safety, public order, public morality, public health, or land use planning. This allows the State to go into planning of national land. Also, under Article 185 of the Constitution, County Assembly may receive and approve plans and policies for the management and exploitation of the county’s resources, its infrastructure and institutions.

Also the Fourth Schedule stipulates the roles of the State and County Governments as to planning issues, which includes the State’s role for coordination of land use planning; and the County Government role in making the plan and its implementation.

Thus the constitution stipulate the main point and disciplines in regard to State and County planning, and leaves the details to be dealt with in other related acts.

Since the promulgation of the Constitution in 2010, several laws on devolution and touching on planning have been enacted including: The Urban Areas and Cities Act, 2011; The County Governments Act, 2012; The Transition to Devolved Government Act, 2012; The Intergovernmental Relations Act, 2012 and The Public Finance Management Act, 2012. Other relevant laws that have been enacted in the different sectors to support implementation and operationalization of devolution include: the National Government Coordinating Act, 2012, and the County Governments Public Finance Management Transition Act, 2013.

Relevance of such statutes to the Master Plan Process for the Kenya Leather Park (Machakos) is briefly highlighted below. The EPZA Act Cap 517



In terms of Institutional jurisdiction for the proposed Kenya Leather Park (Machakos), Cap 517 has an overriding mandate as it provides legal foundation for the establishment of export processing zones under the Export Processing Zones Authority. Under Section 3(1), the Act establishes the Export Processing Zones Authority (2) as a body corporate with perpetual succession and a common seal For purposes of (9-‐1):-‐

(a) the development of all aspects of the export processing zones with particular emphasis on provision of advice on the removal of impediments to, and creation of incentives for, export-‐oriented production in areas designated as export processing zones; and (b) the regulation and administration of approved activities within the export processing zones, through implementation system in which the export processing zone enterprises are self regulatory to the maximum extent; and (c) the protection of Government revenues and foreign currency earnings.

Under Cap 517, EPZA enjoys a wide mandate necessary for the development of exports towards generating foreign exchange for the county. It is this mandate that will be brought to bear in operationalizing the Masterplan for the Kenya Leather Park (Machakos).

The Hides and Skins Act Cap 359 of Kenya laws The first legislation towards the leather sector was promulgated in 1947 and extensively reformed between 1985 to 1987, culminating in enactment of Act No. 19 of 1987 –the Hide, Skin and Leather Trade Act assented to on 23rd December, 1987 to commence on 24th December, 1987. Cap 359 is an Act of Parliament to amend and consolidate the Law relating to the trade in hides, skins and leather; to provide for the co-‐ordination and control of the trade and development of the hide, skin and leather industry; and for connected purposes. The new dimension in that Act strengthened the position of public/private partnership through a legal provision of forming a Leather Advisory Board with powers vested at the Ministerial level. In 2005, the taskforce created under the Ministry of Finance with an objective of reviewing and reducing operational licenses in the country aimed at ensuring a friendlier, enhanced integrity, compatible and less hurdles in the country’s trading environment proposed further review of Cap 359 in resolutions adopted and implemented through the country’s budget day (2006/07) financial decree. This resulted to several licenses being abolished or amalgamated, in the process, affecting The Hides, Skins and Leather Trade Act Cap 359[7] through Act No. 17 of 2006. Legal Notice 65, Hide, Skin & Leather Trade Act (Cap 359)-‐ Kenya Gazette Supplement No 19 of May 7th 2010. One key impact of Cap 359 is that the Leather Development Council (KLDC) was gazetted vide the Legal Notice No.65 (Kenya Gazette Supplement No 28) dated 7th May 2010, under The Hide, Skin and Leather Trade Act (Cap. 359) through promulgation of the Hide, Skins and Leather Trade (Leather Development Council) Rules, 2010. The Leather Development Council (LDC) has since then been gazetted as a State Corporation vide an executive order



through a legal notice No. 114 of the Kenya Gazette supplement No. 113 effective from 9th September, 2011, under the State Corporations Act (Cap 446). Physical Planning Act Cap 268

The word physical planning denotes in general all sorts of urban and infrastructure planning, and the Physical Planning Act (2009) thus relates to various aspects of planning. The importance of the Act resides on the provision of the authority to control development activities to the local government (namely the County). Article 29 states that the County has the following authorities;

• to prohibit or control the use and development of land and buildings in the interests of proper and orderly development of its area

• to consider and approve all development applications and grant all development permissions

Also, Article 30 states that no person can carry out development within the area of a local authority without a development permission granted by the local authority. Essentially, Article 29 of Cap 286 confers on County Governments power to control development planning and essentially put the Master Plan process for the proposed Kenya Leather Park (Machakos) under the planning jurisdiction of Machakos a County. The County Government Act 2012

The County Government Act of 2012, which has adapted to the Constitution’s State and County structure in relation to devolution, stipulates on the County planning issues in Part IX.

The County Government Act declares the County integrated plan to be central to the County’s administration and prohibits any public spending outside of the plan. The Act clarifies that the County Integrated Plan to be broken down into the economic plan, physical plan, social environmental plan and spatial plan. Also, the Act states that the County Plan commands,

• County integrated development plan • County Sectoral plans • County spatial plan • Cities and urban areas plans as stipulated by Urban Areas and Cities Act

The Urban Areas and Cities Act 2011

This law passed in 2011 provides legal basis for classification of urban areas (City when the population exceeds 500,000; a municipality when it exceeds 250,000; and a town when it exceeds 10,000) and requires the city and municipality to formulate an integrated development plan (Article 36 of the Act). The integrated development plan as stipulated in the Act has to reflect;-‐

1) vision for the long term development of the city or urban area;



2) an assessment of the existing level of development; 3) any affirmative action measures to be applied; 4) development priorities and objectives; 5) development strategies which shall be aligned with any national or county

sectoral plans and planning requirements; 6) a spatial development framework; 7) operational strategies; and 8) applicable disaster management plans; 9) a regulated city and municipal agricultural plan; 10) a financial plan; and 11) the key performance indicators and performance targets (Article 40).

The integrated development plan thus formulated has to be submitted to the county executive committee, and the committee has to submit the plan to the county assembly with an opinion within 30days (Article 41). Under Article 36, the integrated development plan so developed is required to be the central pillar in public administration of the city or municipality this forming the basis for;-‐ i) the preparation of environmental management; ii) preparation of valuation rolls for property taxation plans; iii) provision of physical and social infrastructure and transportation; iv) preparation of annual strategic plans for a city or municipality; v) disaster preparedness and response; vi) overall delivery of service including provision of water, electricity, health,

telecommunications and solid waste management; and vii) the preparation of a geographic information system for a city or municipality.

The strategy plan as stated in 4) above denotes an annual plan to be adopted in the county assembly following the integrated development plan, and the Act requires the board or town committee to formulate the strategy plan soon after the adoption of the integrated development plan (Article 39). The Urban Areas and Cities Act is thus a powerful strategic tool designed to inject order into the planning and management of urban areas. A CIDP for Machakos as anticipated in the Urban Areas and Cities Act 2011was developed in 2013.

The Environmental Management and Coordination Act (EMCA) 1999



Strategic Environmental assessment is part of the regime of Environmental assessments which are mandatory in Kenya under section 58 of EMCA 1999. More specifically, Regulations 42 and 43 of Environmental Management and Coordination (Regulations for EIA and Audit-‐Legal Notice 101 of EMCA) provide for conduct of Strategic Environmental Assessment in Kenya. Regulation 42(1) requires Lead Agencies in consultation with the Authority to subject all proposals for public policy, plans and programmes for implementation to a strategic environmental assessment to determine which ones are the most environmentally friendly and cost effective when implemented individually or in combination with others. Further, Regulation 42 (2) requires that, the assessment carried out under this regulation shall consider the effect of implementation of alternative policy actions taking into consideration:—

(a) the use of natural resources; (b) the protection and conservation of biodiversity; (c) human settlement and cultural issues; (d) socio-‐ economic factors; and (e) the protection, conservation of natural physical surroundings of scenic beauty as well as protection and conservation of built environment of historic or cultural significance.

3.2.2: Tariff Structure in the leather sub sector Tariffs have become Kenya's main trade policy instrument. Kenya has reduced the overall level of protection of its economy by removing most non-‐tariff restrictions, except for moral, health, security, and environmental reasons, or under international conventions to which it is a signatory. The tariff structure has been simplified through the reduction of the number of bands from eight in 1994 to five (0, 5%, 10%, 15%, and 25%), and the lowering of maximum ad valorem rates from 60% in 1992 to 25% in 1999. Mixed duties apply to around 10% of all tariff lines and specific duties to 30 lines at the eight-‐digit level of the Harmonized System (HS); virtually the same products, including mainly agricultural and petroleum products, are subject to mixed or specific duties as at the time of the previous Review. The conversion of these duties into ad valorem rates would reduce the complexity and enhance the transparency of the tariff. Except for timber and fish, Kenya has abolished export duties and taxes on all products including abolition of the export subsidies granted under the Export Compensation Scheme. Three main incentive schemes, i.e. the Export Processing Zone, the manufacturing Under Bond and the Duty Remission Schemes, are currently available to export-‐oriented companies. The Minister of Finance may, on a discretionary basis, remit duties payable on imports; import duties are remitted on specified inputs or those used by specified firms, mainly certain state-‐owned companies. However, certain agricultural products and food are subject to special export licences for self-‐sufficiency purposes.



Kenya has systematically imposed tariffs on the export of raw hides (Table 3.1) as a strategy towards encouraging domestic manufacturing by artificially lowering the cost of inputs and availing raw material for local processing and job creation. This strategy worked favorably for countries such as Ethiopia and has borne fruit with regard to Kenyan export of hides and skins. It is strongly recommended that a 20% levy on wet blue export be introduced an systematically growing to 40, 80 and 100% within a 5 year framework. Table 3.1 Tariff levied on export of Kenyan leather products

Product Levies

Export Tax Veterinary Services Development Fund

Raw hides and Skins 80% on FOB Value

2% on FOB Value

Wet blue leather 1% on FOB Value

Crust leather 0.5% on FOB Value

Leather goods

Source: http://www.embassyofkenya.it/index.php

Kenya should improve its regulatory framework as it relates to leather on two important fronts. Firstly, import duties on leather tanning and footwear production inputs should decrease from 25 percent to the more common 10 percent. This could apply to chemicals, dyes, shoe making supplies and components, shoe lasts, soles, shoe lace ringlets, and buckles, among others. As well, international leather-‐related environmental standards should be adopted and enforced, particularly at the tannery level. Presently, Kenya lacks systematic conformity to such standards provision of modalities for domesticating the same towards manufacturing green and clean leather can become an attractive part of the Kenyan leather value proposition.



CHAPTER 4: THE PRE-‐PROJECT BASELINE

This chapter presents an in-‐depth documentation of the receiving area for the proposed Masterplan for Kenya Leather Park (Machakos).

4.1: The Biophysical Baseline

4.1.1: Administrative jurisdiction for the Masterplan The Masterplan for the Kenya Leather Park (Machakos) as currently conceived is part of the national industrialization strategy spearheaded by the Ministry of Industry, Investment and Trade through the EPZA. However, the site targeted to physically locate and roll out Masterplan activities is located at Kinanie whose administrative jurisdiction is provided in 2.3.1 above.

4.1.2: Physiography, geologic and site soil conditions Physiography: The Kinanie area falls within the general dissected Kapiti Plateau at an altitude of 1400m asl. The site is gently undulating plateau with an east-‐facing slope of between 1 to 2 %. Geology and Soils: Geology for the Kinanie area has been described based on available documentation and reports [Sombroek; et al, 1982]. The Kapiti plateau is underlain by volcanic rocks of the deriving from the Cenozoic era which, in geo-‐chronological order, consists of three formations;-‐Upper Athi Series, Kapiti Phonolites and Basement System. Upper Athi Series: The Upper Athi Series forms part of the extensive Athi tuffs and lake beds deriving from consolidation of fragmental volcanic material which was deposited shallowly into water after eruption. Geaverts, 1964, classify the series as all the sediments and tuffs lying between the Nairobi and the Kapiti phonolite and include beds of the Kerichwa Valley series where the phonolite and trachytes are absent. The extensive occurrence of the series in the area indicates the former presence of an extensive swampy country. The Upper Athi series consists mainly of sandy sediments, tuffs and welded tuffs, with clays being subordinate. Kapiti Phonolite: Wherever the contacts of the Kapiti Phonolite are present, the unit underlies associated volcanic rocks and is consequently the oldest lava of the succession. The rock is distinctive in hand specimens by its large white crystals of feldspar and waxylooking nephelines which are set in a fine grained dark green to black or dark bluish-‐grey groundmass. This is the oldest lava flow in the area and lies directly on the Basement.



The Kapiti phonolite is exposed in the valleys of Athi River, Stony Athi, Mbagathi and along Kitengela River. This is therefore, is the formation underlying the Kinanie site of the Masterplan. Rocks of Mozambique Belt: These are crystalline rocks of Precambrian age which are exposed in the south west of Kitengela where the volcanic cover has been removed by erosion. They are predominantly biotite gneises, frequently migmatitic and rich in hornblende. Soil data for the project site is based on a previous description of the Machakos district based on Jaetzhold and Schmidt (1983). Local soils are mainly pellic Vertisols, otherwise termed black cotton soils which are basically imperfectly drained, very deep, dark grey to black, friable soils but underlain by cracking clays at 50cm depth.

4.1.3: Climate and agro-‐ecology Rainfall occurrence: Rainfall occurrence in tropical Africa is associated with Inter Tropical Convergence Zone (ITCZ) which separates the north-‐ eastern and south-‐eastern trade wind systems with the belt of maximum rainfall following the position of the overhead sun with a time lag of about 4 to 6 weeks. This cycle yields two rainfall seasons centred on April-‐May (long rains) and October-‐November (short rains) with intervening dry seasons associated with monsoonal dry air masses. From December to March, the persistent north easterly monsoon brings clear sunny weather with only occasional showers while, during the period of south easterly monsoon from June to October, the weather is duller and cooler with occasional drizzle which is more persistent at higher elevations. Annual Rainfall Distribution: Table 4.1 and Fig. 4.1povide details of distribution of annual rainfall in the Kinanie area based on rainfall data recorded at Rohet Sisal Estate (9137082) located within 6 kilometres of the LR 23961 at an altitude of 1529m above sea level. On account of the low lying nature of the Kinanie area, far removed from any relief barrier, annual rainfall is generally low, averaging 600mm. Annual rainfall follows a double maxima pattern with “long rains” falling from March to May and “short rains” from October to December. In terms of rainfall content, April, May and November are the wettest months accounting for over 54% of the annual rainfall inputs. The period October to January however promises some favourable moisture regime which is only separated from the long rains by a bare 2 month drought. The short rain season is thus the most viable for establishment of rain fed investment. On the contrary, the long rains are followed by a long dry season lasting June to September during which, moisture limitation poses a major constraint to ecological productivity. Overall, analysis of moisture indices indicates that the area generally suffers a moisture deficit. Table 4.1: Climatic data for the project area based on Rohet Sisal Estate



Rohet Sisal Estate

Month Annual Mean (mm)

J F M A M J J A S O N D

Rainfall 51 35 59 113 97 17 6 9 16 41 120 51 614

PET 221 218 233 172 134 114 113 123 165 216 172 192 2073

Agro-‐climatic potential: In terms of long-‐term moisture balance, the project area experiences high evaporation demand estimated at 2073mm annually. Rainfall never exceeds potential evaporation in any one month implying that the area suffers a perennial moisture deficit throughout the year (Fig 4.1). The climatic value of rainfall has been analysed based on computation of the climatic index as determined by the ratio of rainfall (r) to potential evapo-‐transpiration (Eo) based on the method of Sombroek et. al, 1982.2 With a mean annual rainfall of 614 mm and a corresponding potential evapotranspiration of 2073 mm, Kinanie area has an aridity index (r/Eo ratio) of 0.29 implying prevalence of a semi-‐arid climate while the agro-‐ecological potential (AEZ) based on agro-‐climatic zonation as refined by temperature belt is given as upper Midland Zone Six-‐ UM6 (Upper Midland ranching Zone). The implication of such climatic classification is that inadequacy of moisture is the single most important constraint to rain fed crop production; a factor that accounts for the previous land-‐use pattern dominated by ranching and sisal production and the current practise of irrigated agriculture in sections of the project area. In terms of the local hydrology, inadequacy of moisture greatly undermines recharge of ground water from direct rainfall and recharge possibly takes place from further up in the Lukenya escarpment where seasonal moisture regime is more favourable and where occult precipitation is also likely to occur. Indeed, this is confirmed by the apparent artesian nature of all boreholes operational in the Kinanie area. Some recharge also probably occurs from the rocky bed of the Athi especially in sections where the rock is fractured.

2



Source: This Study Fig 4.1: Agro-‐climatology of the Kinanie area

4.1.4: Vegetation: The vegetation of the area is originally savannah bushland dominated by Acacia /Commiphora trees in association with Themeda triandra grass. Overtime, the original woodlands have been thinned out to create generally open savannah grassland devoid of trees. Part of LR 23961 is however under an Eucalyptus plantation whose performance is also constrained by aridity.

4.1.5: Hydrology and Drainage Drainage System: The Kinanie site proposed for development of a Lather Industrial Park is situated within the drainage of the Mbagathi tributary (3AA) of Athi River (Fig 4.4). Downstream of Kinanie, Mbagathi joins the Stony Athi to form the Athi River which is later on joined by the Nairobi river upstream of Donyo Sabuk and later receives the Kaiti/ Thwake System and the Tsavo River upon which it continues flow as the Galana and later enters the Indian Ocean North of Malindi as the Sabaki. Mbagathi tributary therefore, is among the major contributors of flow which sustains economic and ecological systems in downstream areas of Drainage Basin Three. Specifically, the Athi River downstream of Donyo Sabuk traverses semi-‐arid country in Machakos, Kitui, Makueni and Kilifi Counties where it provides a critical lifeline as a source of water for domestic and agricultural use in addition to supporting wildlife and tourism in the Tsavo National Park while the Baricho well field supplies the bulk of water consumed in Malindi, Kilifi and parts of North Coast Mombasa.

Flow characteristics Official records of the seasonal mean naturalised discharge patterns of the Mbagathi River based on the Water Masterplan (JICA, 1992) are reproduced in Fig 4.2 below. Mbagathi



flow displays a double maxima pattern with 2 flood seasons in April-‐May and November separated by a low flow period in July to October in tandem with the rainfall occurrence pattern. Thus typical of rivers draining the Kapiti plains (Kiserian, Isinya, Stony Athi and others), the Mbagathi experiences flash floods during which the bulk of rainwater is lost followed by periods of low to no flow immediately the rainy season ceases, a situation associated with the poor water holding capacity of vertic clays which dominate the Kapiti plains. Such poor catchment characteristics would explain the comparatively low yield observed for boreholes in the Kapiti Plains (Section below) on account of very poor aquifer recharge.

Significantly however, though records indicate a sustained annual flow in the Mbagathi, reality on the ground however is that, flow in the river ceases immediately after the rains possibly reflecting adverse impacts of over-‐abstraction upstream.

Fig 4.2: Flow characteristics for the Mbagathi River

Source: This Study and JICA, 1992



Groundwater potential and yield

Groundwater in the Nairobi area is complex comprising a series of minor aquifers occurring within the thin overburden overlying the Nairobi trachytes, and in the interfaces and fracture zones within the various volcanic strata. The main aquifer is however within the Upper Athi series starting from depths of 120m below ground level. Though a sort of a regional aquifer within the Upper Athi series underlies the area, records indicate that borehole yields vary but generally approximate 1.5m3 /hr (Table 4.2 below) which casts doubts on their viability in meting potential demand at Kinanie.

Table 4.2: Data for boreholes within Kinaie area

Borehole

No. (C.)

Distance and bearing from Kinanie

Total depth

(m)

WSL (m) WRL (m)

Yield (m3/hr) Quality

72 2.8/SSW 135 35/130 16 2.5 Good

2527 2.5/ENE 31 17,20,24 14 1.3 Good

9954 3.0/SW 75 46,64 7 0.6 Good

Source: This study

Other concerns are centered on observed drastic increase in number of boreholes exploiting the Upper Athi Aquifer in Nairobi and environs raising fears of a possible draw down and dewatering.

4.2: Socio-‐Economic Baseline

4.2.1: Administrative jurisdiction According to the Machakos County Development Profile, Machakos County is divided into eight sub-‐counties (Machakos, Kangundo, Matungulu, Kathiani, Yatta, Masinga, Athi River and Mwala) which are further sub divided into 22 divisions, 71 locations and 233 sub locations all covering 6,208 square kilometres of land. Kinanie is situated within the Athi Rive sub county.

4.2.2: Population and settlement patterns (i) The inhabitants



The Kinaie area falls within Machakos County, naturally inhabited by the Kamba tribe. Even in the more cosmopolitan Athi River Town, the Kamba is still the dominant community.

(ii) Population dynamics

As at the 2009 population Census, Machakos County had population of 1,098,584 people spread in 215,209 households and was projected to grow by 1.58% to reach 1,238,650 by 2015 (Table 4.3 below). Mavoko SC which includes Kinanie had a population of 139,502 projected to grow to 157,288 by 2015. With the exception of Kinanie Market, potential density is moderate, generally between 150 to 200 persons per square kilometer. (iii) Age disaggregation of county level population

Fig 4.4 presents a disaggregation of population data by age cohorts based on the 2009 National Census. 62% of the population is below 24yrs and is therefore considered youthful. On pro-‐lata basis therefore, this is the population that enters the job market at a rate of 2.6% annually. Table 4.3: Projected population for Machakos County

Source: Population and Housing Census, 2009 (or higher) of total population per annum meaning that the job market has to expand in the equivalent. As it were, on account of constraints imposed by aridity, employment rates in the county are soaring high. According to the Machakos County Strategic Framework Paper, 51 % of county residents are unemployed and are therefore an economic burden. The juvenile and adolescent category aged 5-‐24 years form the bulk of the population at 59% resenting the most expensive segment of society who in addition to being fed and clothed also attend school and colleges which imposes a huge economic burden on the working population whose productivity in agriculture is constrained by aridity. This probably explains the GOK motivation to provide free primary and secondary education so as to cushion poor parents from further impoverishment by the school fees burden.



Source: Machakos County Strategic Framework Fig 4.4: Segregation of population by age

4.3: Baseline profile specific to Kinanie

4.3.1: Population and settlement patterns Background: The entire Kinanie Division is formerly a Group Ranch owned by the Lukenya Ranching and Housing Cooperative Society that used to specialize in dairy, sisal and irrigated agriculture along the Mbagathi River. The Ranch was later subdivided into 5-‐40 acre plots and allocated to members some of whom have further sub divided and sold off their land. Settlement density: Going by the 2009 National Population Census, Kinanie location had a population of 7,069 people distributed in 214 households in a land area of 129.3 square kilometres. Population data Density characteristics

Male Female Total Households Area (sq. km) Density

4024 3045 7069 214 129/3 56



Source: This Study Plate 4.5: The Kinanie Market

Land use and livelihoods:

The Kinanie area has all features of a newly settled area;-‐ barbed wire fence around properties, immature exotic trees especially around hedges and many yet to be developed land parcels. For those that are settled, agro-‐pastoralism entailing keeping of local livestock breeds supplemented both rained and irrigated agriculture are the main means to livelihood. Other economic drivers in the area include trade at Kinanie Market, irrigated commercial horticulture and employment in horticultural farms such as Waridi Ltd.

4.3.2: Physical Infrastructure Public amenities: Kinanie is currently served by 8 schools out of which, 2 (a primary and secondary school) are public sponsored (Table 4.4) and though the area does not have a single public college, the daystar University is situated within the Division.

Table 4.4: Tally of public service provides at Kinanie Nature of service provider

Public Private Total

Public Primary Schools

1 6 7

Public Secondary Schools

1 0 1

Tertiary colleges None



Churches 6

Health Centers 1 1 2

Public Water supply 1 BH 1

Source: This Study Utilities – Water and Sewerage: The dominant infrastructure at Kinanie is the sewer-‐line and sewage treatment plant operated by the EPZA. Water supply to Kinanie is mainly from community and privately owned boreholes. Power supply: Kinanie area is served by several three-‐phase electricity which serve the neighbourhoods including, homes, market, schools, boreholes and other facilities.

4.3.3: Status of Socio-‐welfare Poverty levels in the Machakos County are at 59.6 % against a national average of 47.2% based on KIHBS (2009); this positions the County at 33 out of the 47 counties, while 52% of the population lives in the urban centers, which is way above the national average of 29.9%. There is a high increase in labour force which has led to increase in unemployment and this could lead to escalation of crimes as a result of non-‐absorption of this active population in gainful employment. This scenario coupled with the fact that the 51% of the Machakos County citizen are considered as economically inactive implies that the County is in need of investments to spur growth and reverse the situation.



5.0: LEATHER, HIDES AND SKINS SUB-‐SECTOR IN KENYA

5.1: Analysis of local and national economic trends

5.1.1: The Perspective Development of the proposed Kenya Leather Park (Machakos) is motivated by the need to tap the economic potential locked-‐up in the resource as a driver towards achieving accelerated GDP Growth. In this section, an analysis of the economic background to development of the Masterplan for LIP is provided.

5.1.2: Review of economic performance Agriculture is the mainstay of Kenya’s economy, currently contributing 24 percent of GDP directly, which is valued at Kshs 342 billion and another 27 percent indirectly, which is valued at Kshs 385 billion. The sector also accounts for 65 percent of Kenya’s total exports and provides more than 18 percent of formal employment. Given this scenario, growth of the national economy in Kenya is highly correlated to growth and development in agriculture as shown in Figure 5.1. In the first two decades afer independence, the agricultural sector, and in turn the national economy, recorded the most impressive growth in sub-‐Saharan Africa at average rates of 6 percent per annum for agriculture and 7 percent for the national economy and inspite of pit falls experienced since the early Eighties, Agriculture still holds the key to unlocking economic growth in the country.

-‐2.5

0.

2.5

5.

7.5

10.

-‐2.3 0. 2.3 4.5 6.8

Na]

onal Econo

my (%

)

Agricultural Growth (%)

Correla]on between agriculture and the na]onal economy



Source: This Study Fig 5.1: Correlation between growth of Agricultural and National GDP in Kenya On this account, Kenya Vision 2030 has identified agriculture as one of the key sectors to deliver the 10 percent annual economic growth rate envisaged under the economic pillar which, among other strategies, requires transformation of smallholder farms from subsistence to innovative, commercially-‐oriented profitable enterprises to which, pre-‐market value addition is critical. Agriculture Sector comprises six sub-‐sectors;-‐ (1) industrial crops, (2) food crops, (3) horticulture, (4) livestock, (5) fisheries and (6) forestry with respective contributions Agricultural Gross Domestic Product (AGDP) and agricultural exports as tabulated in 5.1 below. In terms of economic impact, three sub-‐sectors (shaded) are critical in that, both Horticulture and Food Crops account for 65% of the AGDP while Industrial Crops and Horticulture account for 93% of agricultural exports. In terms of national food security, both the Food Crops and Livestock sub sectors are critical as they secure the daily sustenance for all households in the county. Table 5.1: Performance analysis for agricultural subsectors Sub sector Contribution

to AGDP (%) Contribution to Exports (%)

Industrial Crops 17 55

Horticulture 33 38

Food Crops 32 0.5

Livestock 17 6

Subtotal 99 99.5

Others 1 0.5 Source: The Annual Economic Survey

5.1.3: Potential of the Livestock sub sector Resource availability The Livestock sub sector has a huge potential for economic which largely remains un-‐tapped given that, of Kenya’s total landmass of 576,000 square kilometres, the 82.43% which is ASAL (Table 5.2) dominated by pastoralism and the 4.71 % recorded under grazing land use (all totalling 87.14%) is available for livestock production.



Table 5.2: Analysis of land available for Livestock production in Kenya Water Allocation Area Percentag

e

Water 11,000 1.87

Land Arable Cropland 28570 4.87

Grazing 27648 4.71

Forests 20275 3.45

Urban and rural settlements 15667 2.67

ASAL Ranches and agro pastoralism

483840 82.43

Total 587,000 100.00

Source: The Annual Economic Survey Kenya’s Livestock Resource Base and Projections In 2009 census, the Kenyan livestock resource base comprised of 17.47million cattle (14.11 million indigenous and 3.36million exotic), 17.13 million sheep, 27.74million goats and 2.971million camels (Table 5.3 below).

Table 5.3: Kenyan Livestock Resource Base (2009) Cattle % Sheep % Goats % Camels %

Nairobi 54,546 0.31 34,717 0.2 46,837 0.2 20 na

Central 1,125,905 6.4 664,237 3.9 531,209 1.9 231 na

Coast 959,965 5.5 467,439 2.7 1,570,728 5.7 51,045 1.7

Eastern 2,260,161 12.9 1,890,898 11 4,729,057 17 248,634 8.4

N. E 2,775,208 15.9 4,264,155 24.9 7,886,586 28.4 1,700,893 57.2

Nyanza 1,748,670 10.0 495,055 2.9 961,269 3.5 59 na



R. Valley 7,479,807 42.8 9,079,380 53.0 11,750,521 42.4 968,192 32.6

Western 1,063,512 6.2 233,725 1.4 263,946 0.9 2,037 0.07

National 17,467,774

100 17,129,606

100 27,740,153

100 2,971,111 100

Source: Population and Housing Census, 2009

In terms of all cattle, Rift Valley accounted for 42.8%, North Eastern 15.9%, Eastern for 12.9% and the rest in other provinces. Exotic cattle distribution showed that Rift Valley had 46.5%, Central at 23.8%, Eastern at 11% and the rest in other provinces. Of the 17.1million sheep, Rift Valley had 53% and North Eastern 25% while other areas accounted for 22% of total. Of the total goats population of 27.74million, Rift Valley accounted of (42.4%), North Eastern (28.4%) and Eastern (17%) accounted for most goats (88%), North Eastern (57.2%) and Rift Valley (32.60%) accounted for almost 90% of the camel population of 2.971 million.

This notwithstanding, contribution of the subsector to both the Agricultural and National GDP remains low at 17 and 5% respectively mainly on account of Low productivity, inefficient marketing and low value addition as 91% of agriculture related exports are mainly in semi processed form and therefore fetch low process in the market leading to poor returns. The latter is especially true for the leather industry in Kenya.

Contribution to of Livestock SS to Agricultural GDP

In-‐spite of its huge potential, contribution of the Livestock sub sector to both Agricultural and National GDP remains low at 17 and 5% respectively mainly on account of Low productivity, inefficient marketing and low value addition where products are exported in semi processed form. The latter is especially true for the leather industry in Kenya.

Contribution to Leather SS to Manufacturing GDP

Contribution of Leather SS to manufacturing GDP increased from 1.3 to 1.6% between 2011 and 2012 on account of the recent reforms in the sector later rising marginally to 1.8% in 2013-‐2014. Overall however, impact of leather manufacturing in the broader manufacturing sector remains below 2% (Table 5.4).

Table 5.4: Contribution of Leather s/sector to manufacturing GDP



Year Total Manufacturing (Ksh million)

Value addition in leather and

related products

% Contribution

2009 342,531 5,559 1.6

2010 357,957 5,449 1.5

2011 383,890 4,808 1.3

2012 381,750 6,181 1.6

2013 403,128 7,200 1.8

2014 416,891 7,376 1.8

Source: Kenya National Bureau of Statistics (Various Economic Survey Reports)

Contribution to National GDP

As indicated above, in 2012, the Government started putting measures and strategies to save the sector from total collapse. These measures include, increasing export tax from 40 to 80%, buying boots for the Kenya Armed Forces from local manufacturers and construction of 6 additional tanneries to increase the number to 20 to mention a few. As a result, the sector has shown signs of recovery with the gross value added from the leather sector increasing by 28.6% from Ksh. 4,808 million in 2012 to Ksh. 6,181 million in 2013 (Table 5.5). The Sector’s contribution to GDP remains low at 0.2% annually indicating the need for concerted effort to exploit this available potential.

Table 5.5: GDP Contribution by the Leather Sector

Year National GDP at Market Prices (Ksh. Million)

Value Added for Leather Sector,

gross (Ksh.Million)

%GDP Contribution

2009 2,863,750 5,559 0.19

2010 3,104,303 5,449 0.18

2011 3,294,026 4,808 0.15



2012 3,444,066 6,181 0.18

2013 3,639,938 7,200 0.20

2014 3,833,876 7,376 0.19

Source: Kenya National Bureau of Statistics

5.2: The Leather Industry in Kenya

The Leather Industry in Kenya comprises of three dominant activities namely; -‐ Raw Hides and Skins, Tanning, and Manufacture of Leather Goods for local and export markets all relying on the local livestock resource base estimated at 17.5 million Cattle, 27.7 million goats, 17.1 million sheep and 3.0 million dromedaries which produce the slaughter stock of which, Hides and Skins are the by product. More recently, the Industry also derives skins from emerging sources namely fish (Nile perch), farm ostriches and farm crocodiles.

The leather industry started off as purely a production base for raw hides and skins to serve the British shoe industry but this has systematically transformed to relatively modern industry starting in 1950 when Bata Shoe Company opened the first tannery and leather factory at Limuru. To date, the Industry is highly developed into a complex value chain comprising farmers, abattoirs, tanners, leather good manufacturers among others (Fig 5.1) whose engine is the Tanneries which consume local raw hides and skins to generate raw materials in the manufacture of leather goods. An important player in the Industry, though not directly involved in the value chain is import of leather goods which directly competes with local manufacturing.



Source: This study

Fig 5.2: Simplified leather value chain in Kenya

5.3: Production patterns

5.3.1: The African Perspective

Africa’s resources of 230.6 million cattle are estimated to have provide 26.9 million hides (and calf skins) At off-‐take rate of 8.4% for the cattle. The off-‐take rate in Africa is however, much less that the 16.6% observed among developing countries in general, and the 21.2% of the world as a whole.

The countries responsible for producing most of the hides in Africa are those already renown for their livestock resources; namely: -‐ Ethiopia, Kenya, Nigeria, South Africa, Sudan and Tanzania which, together with Egypt, account for 63% of all the hides produced in Africa.

Africa’s resources of 241.0 million sheep are estimated to provided 82.8 million skins at 34.4% offtake which is is however much less that the 50.8% observed among developing countries in general, and the 50.1% of the world as a whole. The countries responsible for

Raw Hides and Skins

The Export Market Tannerie

s

Leather Goods Manufacturers

Local market for leather goods

Imported leather

Imported Hides & Skins

Crust/Final grade

Imported Leather Goods

Wet blue



producing most of Africa’s sheep skins are Algeria, Ethiopia, Morocco, Nigeria, Somalia, South Africa and Sudan, together with Egypt, Libya and Tunisia which account for 65% of all the sheep skins produced in Africa.

Africa’s resources of 209.3 million goats produce 67.7 million at 32.3% offtake , much lower than the 46.8% observed among developing countries in general, and the 47.2% of the world as a whole. The countries responsible for producing most of Africa’s goat skins are Ethiopia, Morocco, Nigeria, Somalia, South Africa and Sudan, together with Niger, Tanzania, Burkina Faso, Kenya and Egypt accounting for 70% of all goat skins produced in Africa.

5.3.2: Kenyan prodcution patterns Projection of yield of hides and skins is normally based on off-‐take rates which are known to vary widely. Annual off take rates range from 9-‐15% for cattle, 12-‐36% for sheep, 15-‐33% for goats and 10-‐12%for camels depending on production systems and demand for meat products. Official slaughter records normally do not reflect the actual off-‐take as they never capture data on home based slaughter and natural attrition. For purposes of this study, supply projection has assumed off-‐take rates of 12% for all cattle (14% for indigenous cattle and 7.9% for dairy cattle), 36% for sheep, 33% for goats (15% for combined sheep and goats), and 12% for camels. Table 5.5 provides the projected livestock off-‐take in Kenya up to year 2020.

Table 5.5: Projected livestock off-‐take, 2010-‐2020 All

Cattle Sheep Goats Camels

OR% 12 36 33 12

2010 2.16 5.29 9.79 0.36

2011 2.2 5.45 10.48 0.37

2012 2.31 5.61 11.21 0.38

2013 2.39 5.78 12.00 0.39

2014 2.47 5.96 12.84 0.39

2015 2.55 6.14 13.73 0.4

2016 2.64 6.32 14.7 0.41

2017 2.72 6.51 15.72 0.42



2018 2.80 6.7 16.83 0.43

2019 2.90 6.90 18.00 0.43

2020 2.995 7.10 19.20 0.44

Source: This study

At a 12% off-‐take rate for cattle, annual production of hides and skins is estimated at 2.64 million in 2016. However, at 14% for indigenous cattle, the off take is 2.401 million while for exotic cattle at 7.9% is 0.3221million giving a combined off-‐take of 2.722 million and an average of 2.634 million. Using an off-‐take rate of 15% for sheep and goats gives an off-‐take of 9.312million. The camel off-‐take at 12% is 0.40 million.

5.3.2: The Tanning Industry Historical perspective

In-‐spite starting off as a purely raw material supply industry, the leather sector grew and modernized tremendously with the first three tanneries, Bulleys Tanneries Ltd, Dragon Tannery and Bata Shoe Company opening between 1940-‐1950 thereafter growing rapidly since independence and at its peak, there were 21 tanneries (5 involved in hides only, 6 in tanning of skins and 10 involved in tanning of both hides and skins) with a combined installed capacity of 3.5million pieces of hides/month and 11.6 million pieces of skins/month far in excess of national supply of raw hides and skins supply.

Various factors contributed to the growth of tanneries prior to 1990. Firstly, there were no strict environmental controls in relation to pollution control and effluent treatment. Secondly, there was a 40% cess on the value of exports of raw hides and skins introduced in 1980 but abolished in 1986, as well as a surcharge of 2% on exports of raw hides and skins which gave incentives to increased processing. Thirdly, the tax regime on exports of leather was light with wet blue attracting 2% tax and crust and finished leather attracting 0.5% tax. Lastly, there was 20% export compensation on export of tanned leather but its abolition in 1990 caused the start of the collapse in the tanning sub-‐sector. Liberalization of the leather market in 1990’s which came with the abolition of the 22 percent export compensation scheme, resulted in export of 80 percent of the total raw materials causing a major shortfall in the local market. This resulted in closure of some of the factories and unutilized capacity due to adequacy of raw materials. Tens of thousands of jobs and incomes were lost as the tanneries closed, and the government lost revenues.

Table 5.6: Chronology of the Kenyan Leather Sector Phase Pre 1985 1985-1995 1995-2000 2001- 2006-2011 2011-



2005 current

Defining features

Production of quality hides and skins for export. Payment of export subsidy

Liberalization in 1990Export compensation removed

Many tanneries closed triggering import of cheap products

Export tax on raw H/S introduced

Leather industry dominated by processing wetblue for export

Number of tanneries

17 17 5 9 15 13

Production 6.3million 7.82 million

8.25 million

10.6 million

Export ratio (Processed to raw) -%

Over 90%exports

15:85 75:25 90:10 95:5

Revenue earnings (Ksh Billion)

2.0 2.8 7.86 13.6

Source: This Study

In 2012, the Government started putting measures and strategies to save the sector from complete collapse. Export tax on raw hides and skins was increased from 40 percent to 80 percent, following which, exports of raw hides and skins dropped to 3 percent of leather



exports, with the share of tanned leather product exports increasing substantially. With declining exports, it is expected that the local factories will have enough raw materials for manufacture of leather products and the GoK has put in place corresponding measures such as promoting the culture of buying locally manufactured shoes with the intention of creating a market for the finished leather products. To create local demand, the Government announced that the Kenyan armed forces will be buying boots from local manufacturers. The Government has also developed a five-‐year plan to make Kenya the leather hub for East and Central Africa using the export duty model.

In addition, the government plans to introduce import duty on all second hand shoes, instead of using the current weight per consignment method. This is expected to raise the cost of second hand shoes and hence reduce demand and subsequently increase that of locally manufactured shoes.

Current Scenario Table 5.7(a) shows the number and location of tanneries registered in Kenya. Out of 15 tanneries (exclusive of Bata Shoe Company) , 13 are clustered around Nairobi and neighbouring towns of Thika and Athi River and only 2 are located far away in Nakuru and Sagana mainly on account of commanding the major terminal market for livestock and slaughtering.

Table 5.7(a): List of tanneries operation in Kenya No Name of the Tanner Postal Address Emails

1. Bata Shoe Limited (Limuru Town)

P O Box 23 – 00217 LIMURU

bata.marketing@ bata.comcustomer.service.kenya@ bata.com

2. Alpharama Ltd(Off Namanga Road, ATHI RIVER)

P O Box 167 -‐ ATHI RIVER

[email protected]

3. Leather Industries of Kenya(Off Garissa Road, THIKA)

P O Box 79 -‐ THIKA [email protected]

5. New Market Leather Factory (Nanyuki Road – NAIROBI)

P O Box 14579 -‐ NAIROBI

[email protected]

6. Aziz Tanneries Ltd (Off Kangundo Road, Njiru Market)


[email protected]

7. Sagana Tanneries Ltd (Sagana Town)

P O Box 94 -‐ SAGANA [email protected]

8. Nakuru Tanneries Ltd (Shabab Estate – NAKURU Town)

P O Box 225 -‐ NAKURU [email protected]



9. Dogbones Ltd (Dandora Market, NAIROBI)

P O Box 78010 – 00507 viwandani

[email protected]

10. Nairobi Tanneries Ltd (Nanyuki Road, NAIROBI)

P O Box 689 – SARIT CENTRE

[email protected]

11. East Africa Tanneries Ltd (Off Kangundo Road, Njiru Market)


[email protected]

12. Faaso Import and Export(Lunga Lunga Road – NAIROBI)

P O Box 78010 – 00507 NAIROBI

13. Athi-‐ River Tanneries (Off Mombasa Road – ATHI-‐RIVER)

P O Box 503 – 00204 ATHI-‐RIVER

[email protected]

14 Abdulwadood tanners LTD Po Box 41695 Nairobi [email protected] [email protected]

15 MAS Trading Company Po Box 71460-‐00622 Nairobi

Mohamed-‐[email protected] Mohamed-‐ [email protected]

16 Ondiri Tannery Kikuyu Town

Source: Kenya Embassy in Rome (http://www.embassyofkenya.it/index.php)

As at December 2015, there were 15 tanneries of diverse capacities in Kenya, 13 of which were operational (Table 5.7b).

Table 5.7(b) Data on Tannery operations in Kenya SN Name of tannery Location County Level of production (hides)

Wet blue

Crust Final grade

Products

1 Bata Shoe Limited Limuru Kiambu Shoes

2 Alpharama Ltd Athi River Machakos X X X slippers

3 Leather Industries of Kenya Thika Kiambu X X X

4 Aziz Tanneries Ltd Nairobi Nairobi X X boots



5 Sagana Tanneries Ltd Sagana Kirinyaga X X X

6 Nakuru Tanneries Ltd Nakuru Nakuru X

7 Dogbones Ltd. (Nairobi) Nairobi Nairobi X

8 Nairobi Tanneries Ltd Nairobi Nairobi X X X boots

9 East Africa Tanneries Ltd Nairobi Nairobi X X X boots

10 Faaso Import and Export Nairobi Nairobi X X X

11 Athi River Tanneries Athi River Machakos X

12 MAS Trading Company Nairobi Nairobi X

13 Zingo Tanneries (Nairobi) Nairobi Nairobi X X X shoes

14 Ondiri Tannery (Kikuyu) Kikuyu Kiambu X X X

15 Adbulwadood Tanners Ltd. Nairobi Nairobi

Tally 15 (13)

7 8 5

Source: This study

Raw material sourcing Most tanneries target wet salted hides and skins all locally sourced from Kenya. The exception is Azziz and East African Tanneries who import 30% of their hides and skins respectively from outside Kenya. Prices vary greatly especially for skins (see summary below) but average Ksh 144 and 152 for sheep and goat skin respectively and Ksh 95 for a Kg of hide translating to direct revenue income in excess of Ksh 6.75 billion annually.

Price by type of material

Kg of hide Pc of sheep skin Pc of goat skin

Mean price 95 144 152



Price range 80-‐120 50-‐330 80-‐330

Potential revenue 3,716,302,250 3,049,303,950

Source: This study

The potential for importing Hides and skins from the region By year 2002, Africa had an estimated 629 operational tanneries with 4 in Central Africa, 92 in East Africa, 407 in North Africa, 79 in Southern Africa and 47 in West Africa. Installed capacity for hides varies from 90,000 pieces in Malawi to 3.01million pieces in Kenya. Installed capacity for skins is highest in Ethiopia standing at 32million pieces. The region has considerable installed capacity which is however inadequately utilized averaging 42% for hides (range of 9-‐80%) and 36% for skins (range of 9 to 60%) with Ethiopia, South Africa and Zimbabwe and Botswana being the best performers.

Table 5.8 shows a computation of regional production of Hides and Skins based on 2002 data exclusive of Kenyan production. At installed capacities of 42 and 36% respectively for hides and skins, it is apparently that a lot of resource is marketed in raw form which presents an opportunity to the tune of 122.8 Million Hides and 70.43 Million Shoat skins which Kenya could tap to supplement local supply. Such a resource is however technically unavailable owning to prevailing policy legal barriers to export of raw hides and skins. Countries in the region such as Uganda, Sudan, Zambia and Ethiopia have banned the export of raw materials while the Tanzanian Tanneries association has been lobbying for increased taxation on export of raw hides and skins.

Table 5.8: Regional Hides and Skins Production (000 Pcs)

Country Cattle hides Goat Skins Sheep Skins

Burundi 2,197 1,230 263

Eritrea 3,600 696 527

Ethiopia 67,449 9,846 11,351

Rwanda 3,758 1,003 281

Somalia 11,750 6,090 9,000

Sudan 58,191 30,374 23,230

Uganda 14,714 6,058 1,065

Tanzania 49,980 6,358 2,678



Total 211,639 61,655 48,395

Installed capacity 42% 42% 36%

Annual tanning capacity (average)

88,888 22,196 17,422

Surplus 122,751 39,459 30,973

Installed Capacity for Tanning

Figs 5.3 and 5.4 show the diverse tanning specialties for Tanneries in Kenya.

Hides: As at 2015, all 12 active tanneries undertook tanning of hides, of which six process upto wetblue stage with the rest processing final grade leather. By far however, wetblue for export accounts for the bulk of leather output from hides. Skins: Only 10 Tanneries are involved in skin tanning, out of which, only 4 process beyond wet blue stage.

Source: This Study

Fig 5.3: Levels of leather processing by Kenyan based tanneries



Source: This study

Fig 5.4: Installed tanning capacity for skins Combined capacity for tanning: As at 2015, the Kenyan tanning sector was still dominated by processing of wet blue hides and skins for export with installed annual capacities of 3.01 and 31.12 million pieces (Fig 5.5) respectively while manufacture of crust and final grade leather suffers in-‐adequate capacity largely on account of poor local demand. In the journey to re-‐routing wetblue leather into local processing, challenges posed by inadequacy of capacity and demand require to be addressed. By 2008, tanneries in Kenya had installed capacities standing at 60 percent for wet-‐blue, 25 percent for crust leather and finished leather taking 15percent. There are currently 14 tanneries operating in the country and more recently, the government announced plans to establish six abattoirs and tanneries in Wajir, Garissa, Makueni, Isinya, Mogotio and Kanduyi, hiking the number of tanneries in the country to 20, the largest in Africa



Source: This Study

Fig 5.5: Analysis of Installed Capacity for Tannings

Production statistics The tannery is probably the only end point for Hides and Skins generated anywhere in Kenya, in which case, an analysis of tannery intake overtime can be an indication of both past and future trends in supply. Thus, as part of this study, raw material intake by all tanneries in Kenya between years 2011 and 2015 was collated based on a questionnaire survey administered on all tanneries yielding five year means as summarized in Table 5.9.

Table 5.9: Computation of H/S availability based on tannery intake Respondent Monthly hides intake Monthly skins

intake Employm

ent

2008 (tons)

2015 tons

Growth (%)

2008 2015 2015

Respondent A 300 500 66 200000 200,000 -

Respondent B 650 650 0 400000 400,000 1,000

Respondent C 300 339 13 100000 79,019 400

Respondent D 200 240 0 150000 168, 000 70

Respondent E 300 324 8 -‐ -

Respondent F 200 400 100 50000 50,000 -‐

Respondent G Not operational 3000

Respondent H 50 50 50000 150000 -

Respondent I -‐ -‐

Respondent J 375 250000 255,000 60

Tannery K 250 375 50 100000 100,000 -

Respondent L Not operational -‐

Respondent M 100 188 88 50000 120,000 50

Respondent N 200 281 41 -‐ 180,000 -

Respondent O 300 450 50 200000 200,000 65



Monthly tons 2,850 3,273 40 1,550,000

1,694,058

Annual 34,200 (2.280 mi pcs)

39,274 (2.62 mi pcs)

40 18,600,000

20,328,693

MSME Study projection 2.722 19.87

Disparity (0.1 million pcs)

0.46 million pcs

Source: This Study;

Note: Rspondent’s names have been omitted to protect proprietary data

As at 2008, the 13 operational tanneries had a monthly requirement for wet salted hides equivalent to 2,850 MT/month or 34,200MT (2.28million hides) per year. For skins, the monthly requirement was 1.55 million pieces per month translating to 18.6million pieces per year. By the time of the tannery survey for base year 2015, the national intake for hides was 2.62 million pieces (equivalent to 39,274 MT) which was slightly lower, but within range of the 2.722 million pcs projected in the MSFS value addition survey. As well, the survey yielded an annual intake of 20.38 million shoat skins which approximates the 19.87 million pcs projected in the same study, a disparity probably explained by non-‐availability of returns from the two main players namely Alpharama and Zingo Tanneries.

The Split Factor in tanning hides

Conventional tanning of hides entails splitting after the wetblue stage to achieve desired thickness towards diverse ends and in the process, upto 2 additional layers;-‐ split, inner and grains layer are recovered as confirmed by tanners processing beyond wet blue stage. The implication her is two-‐fold:-‐

• The amount of leather available from hides increases two fold when processed locally. As such, the pieces of hide leather available after processing wetblue can increase to 5.24 million. The same quantity can potential escalate to 5.66 million pieces were the 3145 tonnes of hides processed locally.

• Current practice of exporting wetblue grade leather robs the county of the additional layers which are locally in high demand for manufacture of industrial groves, belts



and leather briefcases. In essence, exporters sell two layers at the price of one and in the process, export would be jobs.

Capacity Utilization

Utilization of capacity in tanning is apparently high at 85 and 65% for hides and skins respectively (Fig 5.6). The implication however, is that any new growth in hides production must be accompanied by expansion of tanning capacity.

Source: This Study

Fig 5.6: Capacity utilization in tanning

Allocation of processed leather

Table 5.10 shows the final allocation of processed leather in Kenya. 90% of all wet blue leather produced in Kenya us destined for the export markets in China, Italy, India, Pakistan among others. Of the 10% that remains for processing into Crust Grade leather, 75% is exported leaving the remind 25% for processing into Final grade, 75% of which ends up in the export market. The implication is that, out of 2.62 million hides tanned in Kenya, only 16,367 pieces enter the local market, the rest and all attendant jobs being exported. Such a resource can only support manufacture of 98,185 pieces pairs of shoes.

Table 5.10: Allocation of processed leather (hides)

Product Total hides

Wet blue leather Crust grade leather

Final grade leather

Destination 2,618,267 Export Local use Export Local use

Export Local use



Allocation (%)

90 10 75 25 75 25

Allocation (Pcs)

2,356,440 261, 827 196, 370 65, 457 49, 093 16,367

Shoe equivalent

98,185 pairs

Skins 20,328,693 18,295,824 2,032,869 1,524,652 508,217 381,163 95, 291

Shoe equivalent

571,744 pairs

Supportable shoe production

669,929 pairs

Deficit from the 3.3 million annual production

2,630,071 pairs

Finished leather equivalent

5,260 tons

Source: This Study

Leather good producers and industry experts in Kenya are on record that high quality hides and skins are more likely to fall in the hands of foreign leather good producers, who account for 90% of all locally produced wet blue and who are able to pay higher prices for leather products, while the domestic market can only access finished leather where low quality wetblue is available for secondary processing to final grade. Many small scale leather good manufacturers are unable to process local orders on account of inability to access raw materials. A number of leather good producers also claim that some tanneries cut corners to minimize their tanning costs leading to poor quality leather that lowers quality of final product. Indeed, some have taken to importing final grade leather from as far as Egypt.

Opportunities forgone in export of Hides and Skins Table 5.11 and Fig 5.7 provide export data and corresponding income for hides / skins and processed leather for the period 2003 to 2014. From the data, it is apparent that export of raw hides and skins from Kenya takes place albeit on a reducing scale possibly on account



of the increase in export tax from 40 to 80%. In comparison, income from export of leather and leather products has increased drastically within the same period as the tax measures started taking effect. Over the 11 year period (2003-‐2014), income from export of leather and leather goods has progressively increased from around Ksh Two Billion to over Ksh 15 Billion with a marked increase since 2009. Since 2010, leather export has overtaken footwear as the lead source of export earnings from the Industry. Table 5.11 also provides a comparative analysis of returns from units of raw hides and processed leather inclusive of accrued impact from the latter. Clearly, returns from processed leather are superior averaging 570% over those from export of raw hides implying the great potential waiting to be harnessed. Table 5.11: Past trends in export of Hide/Skins and Leather Year Hides and Skins Leather

Quantity (Tons)

Value (Ksh Million)

Return per unit (Ksh Million)

Quantity (Tons)

Value (Ksh Million)

Return per unit (Ksh Million

Value addition factor

2009 717 30 0.042 13,957 2,237 0.160 3.8

2010 322 11 0.034 22,272 4,192 0.188 5.5

2011 2,250 108 0.048 26,485 7,208 0.272 5.7

2012 10,200 504 0.049 22,698 7,036 0.310 6.3

2013 2,832 134 0.047 26,542 8,491 0.320 6.8

2014 2,560 126 0.049 26,213 7,597 0.290 5.9

Source: Kenya National Bureau of Statistics; This Study

Globally, leather is one of the most widely traded commodities with an estimated trade value of approximately US$100 billion per year, of which Kenya only accounts for a paltry 0.15% accrued largely from sale of wetblue grade leather. India, Italy, and China/Hong Kong are the biggest importers of Kenya’s wet blue leather accounting for US$63 million, 45 million and 10 million respectively in 2013. All three of Kenya’s biggest wet blue importers are major leather good producers in the global market. China is by far the most dominant leather good producer in the world in terms of production and export volume. Italy is considered as the leading and most advanced country in high-‐end leather products. India has also risen to be a major force, backed by its cheap and abundant labor, and concerted government policies. The major difference between Kenya and these three countries is that Kenya’s leather industry is not only small in size, but taps a marginal share



in the global value chain as the wealth potential and jobs are exported with the wet blue leather. This is the great opportunity forgone.


Fig 5.7: Trends in revenue earnings from export of hides, skins, leather and leather products

5.4: Footwear manufacturing 5.4.1: Regional Footwear production capacity

In 2002, it was estimated that the region had 689 footwear manufacturing enterprises but many have closed due to high importation of new and second-‐hand footwear. South Africa, Ethiopia, Sudan and Zimbabwe accounted for most of the enterprises. Installed capacity is high in South Africa (32million pairs) and Ethiopia (25mllion pairs). Utilization of capacity is between 20% and 80% with high utilization in South Africa and Ethiopia.

Leather goods manufacturing in Africa is not well developed except in South Africa and Ethiopia. In 2002, the number of enterprises was estimated at 554 units but currently, many are not operational. Utilization is from 20% to 60% and most goods are for local markets and tourist trade. There is also considerable artisanal and handicraft production.

5.4.2: Footwear manufacturing in Kenya



Table 5.12 provides a list of formal footwear manufacturers in Kenya. There are 30 enterprises engaged in formal footwear a manufacturing 15 of which are operational with a combined utilization capacity in excess of 70%. Additionally, 5 tanneries are also into manufacture of leather footwear. Formal footwear manufacturing in Kenya is dominated by Bata, United Footwear, Sandstorm, and Leather Masters who account for the bulk of the 662,400 pairs Installed capacity of which 264,960 pairs is utilised with an employment estimated at 103 people. Apart from the formal sector, there are hundreds of informal footwear manufacturing units/ small and micro-‐enterprises (SMEs) which undertake manufacturing of 55-‐60 percent of the local footwear production.

Table 5.12: Formal footwear manufacturers in Kenya

SN Name of Enterprise Products

Umoja Rubber P.O.Box 87388 -‐ Mombasa (+254) 41 22 46 30 (+254) 41 31 32 35 [email protected]

Assorted shoes

Acumen P.O.Box 67550 -‐ Nairobi (+254) 20 33 94 18 (+254) 20 21 18 17

Assorted shoes

Afrolite Industries P.O.Box 44037 -‐ Nairobi (+254) 20 54 06 38 (+254) 20 54 36 98 [email protected]

Assorted shoes

Bata Shoe Company P.O.Box 23 -‐ Limuru (+254) 27 16 20 (+254) 27 10 47 [email protected]

Assorted shoes

C & P Shoe Industries P.O. Box 46979 -‐ Nairobi (+254) 20 54 07 22 (+254) 20 55 24 84 [email protected]

Safety shoes, school shoes, PVC footwear for both adults and teens etc. Accessories include:-‐Soles, Shoe Laces, School Bags, Micro Sheets, Zippers, Rexins And PVC coated Fabrics, Zinc Oxide

Easy Shoes P.O. Box 63488 -‐ Nairobi (+254) 20 86 18 57 (+254) 20 80 35 44

Assorted shoes



Macquin Shoes P.O.Box 82512 -‐ Mombasa (+254) 41 43 25 55 (+254) 41 43 25 53 [email protected]

Assorted shoes

Shoe Wind Industries P.O.Box 70365 -‐ Nairobi (+254) 20 35 04 64 (+254) 20 54 57 47 Shoewind@Form-‐Net.com

Assorted shoes

Tex Palace P.O.Box 75609 -‐ Nairobi (+254) 20 22 29 49 (+254) 20 22 25 41

Assorted shoes

Pierre Shoes Men and back to school shoes

Ashieng Footwear Ltd Children's shoes -‐ Men's shoes -‐ Military -‐ Sandals -‐Shoes components -‐ Women's shoes

Crown Industries Ltd Boots -‐ Men's shoes -‐ Shoes components

Khan Limited Large leather goods -‐ Men's shoes -‐ Other -‐ Sandals -‐Women's shoes

Santa Teresa Shoes Ltd Men's shoes

United Footwear Ltd Boots -‐ Military -‐ Safety

Source: http://www.intracen.org/leatherline-‐portal/african-‐platform/kenya; This Study



Many formal and informal producers are engaged in the production of school shoes, sandals, military/security boots, and men’s shoes for two reasons: First, there is a high demand. A signifcant share of the Kenyan population is in school and in the working age bracket. Also, rising security concerns due to terrorism and other factors has led to an increased demand of military/security boots over the last few years; Second, these items are considered more as “uniform” products that do not require advanced design capacity or sophistication. These Kenyan-‐made products seldom have high variety and the ones from the informal sector share a similar rudimentary design. This explains the reason behind the meager production of women’s shoes, which tend to be highly trendy and require sophisticated design.

5.4.3: The Kariakor Cluster The Kariakor Market –the big, open-‐air market located on the Race Course Road in the Kariakor Area of Nairobi is home to the biggest informal (Jua Kali) leather goods manufacturing cluster estimated at 300 plus stores, over 80% of which deal in low cost shoes, sandals, wallets, belts, and others supplied by 10-‐15 leather middle men. . Other products include leather balls, accessories, and African ornaments. According to the World Bank Survey, Kariakor market alone has an annual turnover estimated at 2.7million pairs of shoes with an estimated value of Ksh 1.6 billion. At peak capacity, each of the 180 stalls involved in footwear manufacturing employ 7200 workers daily who, on a daily wage of Ksh 500 account for Kshh 3.6 million daily wages. Kariakor market is thus a huge driver in Nairobi’s Informal Sector.

Kariakor has a huge market penetration as the local shoes are popular both in Kenya which accounts for 90-‐95% of Kariokor output, with the remaining sold in neighboring countries of East/Central Africa and as far as Western African countries of Nigeria, Sierra Leone, and Ghana.

5.4.4: Domestic Footwear Market Kenyan domestic shoe market is dominated by the mitumba shoes with around 26.5 million pairs of Kenyan footwear sold annually in second-‐hand Mitumba markets as as shown in Table 5.13. Among new shoes, the majority of purchased shoes are in the low-‐cost category, with an insignificant amount of shoes in the high-‐cost category. This trend portrays the purchasing power of the Kenyan population as well as the distribution of economic class in Kenya. Non-‐leather shoes dominate in both the Mitumba and lower price range footwear, which dominate the Kenyan footwear market. Out of an estimated 42 million pairs of shoes that are purchased in Kenya annually, 15 million pairs (36 percent) are leather shoes. According to experts’ estimations, domestic producers only supply low-‐



price and mid-‐price leather shoes into the market. Around 2.6 million low-‐price leather shoes are being produced and this is the only category that Kenya is more competitive vis-‐a-‐vis international footwear importers. Experts emphasize that in the low price leather shoe market, there are still vibrant local producers, mainly the informal (Jua Kali) sector, competing against cheap imports from China and Ethiopia. In the mid-‐price category, only about 0.8 million leather shoes are made in Kenya, with the other 1 million pairs imported. Shoes in this category are mainly attributable to Bata Shoe production. Currently there are no local manufacturers of high-‐end leather footwear in the country.

Table 5.13: Data on 2014 sale of Footwear in Kenya (millions pairs)

Type of Footware Total pairs sold

Non-‐Leather

Leather imported

Leather Kenyan

Second Hand(Mitumba) 26.5 18 8.5 0

New-‐low price 12.8 8.1 2.2 2.6

New mid Price 2.5 0.6 0.9 0.7

New High Price 0.2 0 0.2 0

Total 42 26.7 11.8 3.3

Source: World Bank Group, 2015

5.4.5: Footwear Exports in Kenya Despite the country importing majority of her footwear, there is still exports footwear though in low quantities as shown in the Table5.14 below. The biggest importers of Kenyan shoes over the period has been Uganda, Zambia, Tanzania and more recently Zimbabwe. In 2012, Rwanda was the largest importer of footwear with 2,452 pairs. Outside Africa, U.S.A, Italy, Japan and United Kingdom also imports Kenyan footware although in small quantities.

Table 5.14: Top 10 destinations of Kenya Footwear

2009 2010 2011 2012 2013

1 Uganda 460 Zambia 1,575 Uganda 360 Zambia 743 Uganda 828

2 Tanzani 241 Uganda 1,292 Tanzani 313 Uganda 558 Zambia 736



a a

3 UK 182 Tanzania 294 Zambia 189 U.S 207 Tanzania 323

4 Malawi 122 UK 251 S. Africa

134 Japan 196 Zimbabwe 156

5 Israel 64 Malawi 108 Japan 131 Tanzania 155 Malawi 143

6 S. Africa

41 US 93 U.S 112 S. Africa 148 U.S 114

7 US 37 S. Africa 45 UK 109 Turkey 112 Japan 99

8 Rwanda 34 Australia 31 Rwanda 37 U.K 95 Italy 71

9 Germany

29 Austria 21 Spain 26 Zimbabwe 41 UK 55

10 Italy 25 Germany 19 Austria 25 Rwanda 2,452 S. Africa 37

Total 1,233 3,729 1,436 4,707 2,562


5.4: Manufacture of other leather goods Kenya has 30 registered leather goods manufacturers, 17 of which are operational with an installed capacity of half a million units monthly mainly for the local and tourist market.

Table5.15: Other leather goods manufacturers in Kenya

No. Company Product Range Contact Details

1. Adelphi – The Leather Shop

Diverse range of quality leather items including: Bags, Hand bags, folders, wallets, briefcases, accessories as well as Corporate Gift Items.

Tel:- +254 (20) 236 9694 Email: [email protected] www.adelphileather.biz Outlets: – Yaya and Sarit Centre, Nairobi.



2. Sanabora Design House Limited

Quality and contemporary leather items with an African touch including:- Clutch Bags, Cross body bags, hand bags, wallets, purses, travel bags, gifts/corporate items.

Murang'a Road, Opposite K.I.E, Aqua Plaza, 3rd Floor, Nairobi. Tel: +254 20 232 1853, Mobile: +254 715 774 579 Email: [email protected] or [email protected] Website: www.sanabora.com

3. Habib Leather Industry

Producers of High Quality Leather Products including:- Corporate Gift Items, Sports Items and Items for the Catering and Hotel Industry

Cell Phone: 0725 103 705 Email: [email protected] Cell Phone: 0725 760 681

4. Gonzala Leathers

Producers of a wide array of quality leather products.

Email: [email protected]

5. Rift Valley Leather

Range of production include:- Travel bags and holdalls (briefcases), Satchels, wallets and purses, belts as well as handbags and bespoke items in exotic leather.

Tembo Road, Karen – Nairobi. Contact:- +254 (0) 721 922 Email: [email protected] Website: www.riftvalleyleather.co.ke

6. Zeeban Designs

Producers of Quality Leather Accessories including:- Hand bags, wallets and purses.

Outlet: Yaya Centre, Nairobi. Cell Phone: +254 734 446 316/ +254 723 425 098 E-mail: [email protected] www.zeebaandesign.com

7. Annabelle Thom

Assorted leather goods The Junction shopping Mall, Dagoretti Corner, Nairobi Tel: +254 (020) 3864 665 Email: [email protected] www.annabellethom.com



8. African Lily Leather accessories Ngong Road P.O Box 26015 – 00100, Nairobi Cell: +254 710 492147/ +254 725 106542 Email: [email protected] www.african-lily.com

9. Adel de jak Assorted leather goods Cloud 9 Collection Mushroom Road off Kiambu Road, Nairobi Cell: +254 (0)734 399 800 www.adeledejak.com

Escon Leather Company

Producer of high quality vegetable tanned leather accessories and interior decor including:- Wallets, pouches, purses, clutch bags, handbags, ladies sandals, doormats and poofs.

Contact: [email protected] ; http://www.escon.kbo.co.ke

10. Anchor Footwear

Producers of men’s office shoes in a diverse range of tastes and preferences.

Contact: [email protected] Outlet:- Kenya Industrial Estates.

11. Kraw Leathers

Producer of leather bags, sandals, purses, footwear among other leather accessories

Industrial Area P.O Box 7637-00300, Nairobi Cell: +254 722 938 387 Email: [email protected] www.krawleathers.kbo.co.ke

12 Leather Masters Ltd

Leather bags, wallets, folders, travel ware, corporate gift items only on order

Leather Masters Ltd Likoni Rd, 10293-00400 Tom Mboya St, Nairobi- Kenya; Phone: +254-20555393 http://www.businesslist.co.ke



13 Sandstorm Leather bags, canvas bags, travel ware , brief cases wallets and car seats

Karen Road, off Ngong Road, Nairobi Tel: +254 (0)721 208 463 Email: [email protected]

14 Brasbuckle Ltd

Belts - large leather goods - Small leather goods

Brasbuckle Ltd. Contact Name: Bedan Kimeria Muraya-Managing Director. Address: Ongata Rongai. P.O.Box: 12390, Zip: 00400 Phone: +254 722391 902 Email: [email protected]

15 Crown Industries Ltd

Boots - Men's shoes - Shoes components

Address: Enterprise Road, opp Railway Yard P. O. Box 40119 Enterprise Rd, Nairobi, Kenya Phone:+254 20 650720

16 Khan Limited

Large leather goods - Men's shoes - Other - Sandals -Women's shoes

Khan Limited Contact Name: Farooq Khan Director Address: 1st Floor, Mauladad Building /Kigali Street, P.O. Box: 49027 -00100 Phone:254-20-248058254-722-527816

17 Leathertech Belts - Furniture - Large leather goods - Other - Small leather goods

Leathertech Contact Name: James Maina Kihato-Director Address : Jogoo House, Thika; P.O.Box: 6096 01000 Thika; Phone: 254-720-767 959

Source:http://www.intracen.org/leatherline-‐portal/african-‐platform/kenya; Kenya Embassy in Rome (http://www.embassyofkenya.it/index.php), This Study

5.5: Employment in the Leather Sector in Kenya According to a World Bank report (World Bank Group, 2015) Kenya’s leather industry employed 14,000 workers during peak times. With the Kariakor Market alone accounting for over 7000 employees, then the Informal sector probably accounts for well over 70% of



all leather related employment in Kenya. The future for job creation in Kenya is probably through boosting Kariakor Market type clusters which employ labour intensive production.



6.0: LEATHER DEMAND ANALYSIS

6.1: Overview Going by analysis summarized in Table 5.9 above, 90% of all wet blue leather produced in Kenya is exported leaving behind a partly 16,367 pieces of hides and probably an equivalent tonnage in skins to undergo final processing to final grade leather. This quantity supplemented by some import of final grade leather enters the value addition chain in production of shoes and other leather products for both local use and export. A policy shift in favour of value addition will require that the bulk of wetblue leather is diverted and processed locally into both final grade and leather goods targeting local and international markets.

This section provides an overview of market demand for diverse leather products with a view to mapping out the current and future demand for finished leather in the local market based on data accrued from interviews with consumers, traders and manufacturers of shoes, leather bags and belts which account for the bulk of leather consumption in Kenya.

6.2: Demand for Leather Products

6.2.1: Shoes Preferences:

A questionnaire survey administered on 1288 workers aged 18 to 55 years and resident in 12 major towns including all former provincial capitals (table 6.1) observed that, 45.6 percent of the respondents were wearing leather shoes while 50.5 percent had non-‐leather shoes on the date of interview. This implies that currently, leather commands about 46% of the shoe market nationally which presents an opportunity for growth.

Table 6.1: Market share of leather shoes in Kenya Gender of respondent

Type of shoes worn Total

Leather Non Leather Don’t know

Count % Count % Count %

Male 429 59 282 39 21 3 732

Female 158 28 368 66 30 5 556

Tally 587 45.57 650 50.47 51 3.96 1288 (100%) Source: This Study



Among either gender, however, it was observed that wearing of leather shoes is more prevalent among men (59%) compared to women (28%) who, overwhelmingly prefer non leather at 66%. Disaggregation of the same data by age sets (Fig 6.1) reveals a clear preference of non-‐leather shoes by the age category 18-‐25 years who singularly account for the 50.47% lead commanded by non-‐leather over the 45.57% recorded for leather. Beyond this age category, both leather and non-‐leather command almost similar market penetration with leather taking a lead among age category 45 and above.

Fig 6.1: Breakdown of shoe make by age category of respondents

Source: This study

Sourcing mode and origin of shoes

393 respondents provided answers on where they source sources. Of these, majority at 92.2% source shoes locally with only 6.6% reporting to directly importing shoes. In what shows the clear preference of imported shoes by Kenyans, 74.68% of respondents indicated preference for imported shoes with close to 40% (39.24%) preferring new imports. A good 22.78% of respondents expressed preference for locally made shoes.

Reasons for shoe preference:

Four reasons were identified as being behind preference (Fig 6.3) for shoes namely:-‐ Durability, Price, Design and Comfort in that order. Of these, durability is the single most important factor identified by 27% of respondents followed by price and design at 15.8 and 10.7% respectively. Among the six combinations of factors identified by respondents, durability led in three of the combinations followed by price. As such, for shoes to be appealing in the market, they must combine durability, be of the right price and confortable to use in that order.



Fig 6.2: Preference of shoes by type

Source: This Study

Fig 6.3: Reasons behind shoe preference

Source: This Study

Per capita annual turnover for shoes

An analysis of annual shoe turnover reported by respondents is provided in Fig. 6.4 below. While 7.2% of respondents buy at least one shoe annually, 78.8% reported buying between 2 to 6 shoes annually with a good 14% buying well over 6 shoes every year. Such a trending yields an annual per capita shoe turnover of 6.4 which is probably exaggerated given the urban setting for this study, but could be well representative for the urban population estimated at 11.3 million as at 2014. However, given the very low income

0.00

10.00

20.00

30.00

40.00

50.00

Freq

uency (%

)

Preference of shoes by type

Preference of shoes by origin and type

0.

7.5

15.

22.5

30.

Freq

uency (%

)

Reasons behind preference

Reasons for shoe preference

(74.68%)



bracket for some respondents which are comparable to rural incomes, the outcome may well be indicative of the national trend. Towards deriving an estimate of the national shoe turnover, the national population of 44.3 million was stratified into urban and rural segments estimated at 11.3 and 33 million respectfully, which were multiplied by per capital shoe purchase of 6.4 and 0.5 respectively yielding a national gross shoe turnover of 88.8 million and mean per capita shoe turnover of 2.2. It must however be understood that this figure represents shoes of all descriptions as offered in the Kenyan market.

Fig 6.4: Reported annual turnover of shoes by respondents

Source: This study

The price factor in shoes

Price may not be the principal factor driving preference for shoes in the market. It may however be critical in influencing economic viability of enterprises targeting leather value addition through shoes. As part of this study, a market survey on pricing of shoes of diverse makes and origin was undertaken with outcome as presented in Table 6.2 and Fig 6.4 below. Non leather imports and non-‐leather local makes are the cheapest shoes costing less than Ksh 1000 according to observations by 15, 11 and 7% respondents respectively. 17% of respondents also felt that imported non leather shoes generally cost Ksh 2000 and below with 7% reporting prices of Ksh 1000 and below. According to 12% of respondents, prices of locally made new leather shoes range from Ksh. 1000 to Ksh 3000, while 16% belief that imported new leather shoes cost less than Ksh. 2000, implying that the locally made leather shoes are more expensive than the imported ones. This scenario may be attributed to the cost of production in the local production chain and therefore need to address the cost of production to make locally produced shoes more competitive.

0.0

7.5

15.0

22.5

30.0

1 2 3 4 5 6 7 8 9 10 >10

Freq

uency (%

)

Frequency of shoe purchaze by respondents



On the other hand, some 16 % of respondents belief that imported used shoes have a price range of between Ksh. 1000 to Ksh. 5000 implying they are more expensive than both new locally made and imported new leather shoes.

Table 6.2: Price comparison for diverse shoes Price range per pair (Ksh)

Non -‐leather shoes Leather shoes Total (%)

Blocked total (%) Local

make (%)

Imported new (%)

Imported used (%)

Local make (%)

Imported new (%)

Imported used (%)

<1,000 11.27 7.23 15.49 2.24 8.43 1.89 46.56 77.02

1001-‐2000 2.32 9.55 1.98 5.42 7.75 3.44 30.46

2001-‐3000 1.81 0.17 4.82 1.12 4.48 12.39 21.52

3001-‐4000 0.17 1.38 0.26 3.53 5.34

4001-‐5000 0.43 0.17 0.09 3.10 3.79

5001-‐6000 0.09 0.09 0.86 1.03 1.46

>6000 0.17 0.17 0.09 0.43

Totals 13.60 19.45 17.64 14.03 17.90 17.38 100.00

100

50.69 49.31 100.00

Source: This Study Analyzing Table 6.2, the following can be inferred:-‐ Market for shoes: Shoes in the price range of Ksh 2000 and below account for the bulk (77.02) of national shoe market with 47.84% being accounted for by non-‐leather shoes. Leather shoes account for only 29.18% of this category. For the, price category above Ksh 2000, accounting for 22.98 % market share, leather accounts for 20.07 with the reminder 2.91% going to non-‐leather shoes. The implication here is that leather shoes are generally more expensive.

Market share for leather: Of the 49.31 market share of shoes commanded by leather, imported shoes take 35.28% with the reminder 14.03% going to local make leather shoes.



Thus, contrary to popular opinion, local leather accounts for over 14% of the national shoe market, which compares favourable with the 17% share estimated in the 2015 World Bank Study.

Price of used leather shoes: Within the price range of Ksh 2000 and below, imported used leather shoes account only 5.33% compared to imported non leather which account for 17.47%. In the price range above Ksh 2000, imported used leather account for 12.06% which compares quite unfavorably with the 0.17% commanded by imported used non leather shoes. The implication here is that, contrary to popular opinion, second hand shoes (mitumba) are not cheap.

The Mitumba Factor: It is generally assumed that mitumba account s for the bulk of shoes worn in Kenya. To the contrary however, mitumba only commands a 35% share of the market. In itself, mitumba is facing stiff competition from imported new shoes which, at 37.35% command the lion’s share of the shoe market.

The Competition: In attempting to penetrate the low end market for shoes, the most severe competition is posed by non-‐leather imports (new and used) and imported new leather shoes. Rather, mitumba does not pose any threat. However, for the middle and high end market, mitumba emerges as the main competitor. Thus, local make leather shoes are not cheap and are outcompeted by imported new shoes-‐so called cheap import. This scenario is collaborated by Bata who in a recent survey (cited in the World Bank Study) found that her primary challengers—which account for 60 percent of lost sales were offshore, low-‐cost footwear manufacturers and not the second hand shoe market. The second hand market accounts for 40 percent of Bata’s lost sales.

The opportunities: Towards enhancing market penetration by locally made shoes, opportunities present as follows:-‐

The bulk of imported shoes enter the market duty free by exploiting informal supply lines on which account, they remain cheap and competitive. Sealing of such loopholes is one means towards leveling the market for locally manufactured shoes.

A second option is to invite such manufactures (mainly chineese) to set base locally and manufacture the same for both local and off shore markets, in the process, creating employment in both the tanning and leather good manufacture process.

From analysis above, mitumba is more of an opportunity than a threat. Mitumba is indicative of an existing market for high and middle end market shoes which has not been addressed by both local manufacture (quality issues) and imported new (price factor). Indeed, from Table 6.2, mitumba is a competitor to imported new leather rather



than locally made leather shoes. Mitumba offers a second best solution to the dilemma of a market yearning for quality at affordable prices, in that, in the absence of ready supply of new quality affordable shoes, the market opts for second hand products which are readily available. Any local manufacturer who will solve this mystery will immediately effect a market substitution with the high prospects of hitting a goldmine.

6.2.2: Bags Data on sale of bags as summarized in Fig 6.6 is based on responses from 345 respondents. Apparently, leather bags command only 45.89% of the local market compared to the 51.90% accounted for by non-‐leather bags. Further, turnover of the bags ranges from 1-‐4 annually for 93.4% of respondents (Fig 6.6) giving a per capita turnover of 2.5 with locally made and imported new bags commanding the largest market share in that order. Gross national turnover for bags is likely to be quite small given an almost exclusive restriction to urban ladies.

Fig 6.6: Indicative turnover for bags

Source: This study

Market prices for bags are quite low, with 54.6% reporting prices generally less than Ksh 1000 while 96% of respondents generally think that prices for bags are in the range of Ksh 3000 and below. Any pricing framework outside of this range is likely to be out competed in the local market.



Fig 6.7: Reported price range for bags in Kenyan towns

Source; This study

6.2.3: Jackets Table 6.3 summarizes responses relating to market share for jackets based on responses from 174 respondents. Leather jackets command a clear market share at 56.9% with non-‐leather accounting for 41.4%.

Table 6.3: Market share for jackets Type Count Frequency (%)

Leather 99 56.9

Non Leather 72 41.4

Dont Know 3 1.7

Total 174 100

0.

15.

30.

45.

60.

< 1000 1001-‐2000 2001-‐3000 3001-‐4000 4001-‐5000 >5000

Frequ

ency (%

)

Price range (Ksh)

Reported price range for bags

The potential



Source: This study

Turnover for jackets can be as high as 6 annually but centers at 1 to 3 jackets for majority (80%) of respondents.

Fig 6.8: Annual turnover for jackets

Source: This study

Fig 6.9 provides the price range for jackets as reported by respondents. With the exception of imported used jackets that generally cost rest than Ksh 1000, majority of respondents (40.9%) reported market prices ranging from 1000 to 2000 Ksh for all jackets. For all other price categories, there were very few responses implying that prices are out of reach for the sample polled in this survey. However, all respondents indicated dominance of higher price categories by imported new jackets and this is probably the range patronized by the upper and middle class category who account for 44.9% of Kenya’s population.

0

10

20

30

40

1 2 3 4 5 6

Freq

uency (%

)

Annual turnover for jackets



Source: This study

Fig 6.9: Price range for jackets

6.2.4: Wallets Wallets have a very limited turnover averaging 1 piece per annum for 74.1% of respondents while 17.9% buy 2 wallets, implying that 93% buy between 1 and 2 wallets annually.

0.0

7.5

15.0

22.5

30.0

less 1000 1001-‐2000 2001-‐3000 3001-‐4000 4001-‐5000 0ver 5000

Freq

uency (%

)

Price range (Ksh)

Price range for jackets



Source: This Study

Fig 6.10: Annual turnover for wallets

Leather is the wallet of choice for 88.8% of respondents (Fig 6.11) compared to 11.2 for others.

Fig 6.11: Breakdown of wallets by make

Source: This Study

New wallets, either locally made or imported is the preference for an overwhelming majority (83.3%) of respondents. Out of these, locally manufactured wallets account for

0.

22.5

45.

67.5

90.

112.5

Leather Non leather Dont know

Freq

uency

Breakdown of wallets by make (%)



51% of market share. Indeed, this is one scenario where people have less preference of used wallets.

Source: This Study Fig 6.12: Market share of wallets by choice

83.4% of respondents belief that wallets cost generally less than Ksh 1000. Of these (Fig 6.13), 47.4% belief that locally manufactured wallets generally cost Ksh 1000 and below. In price categories beyond Ksh 1000, imported new wallets feature prominently.

0

20

40

60

80

1 2 3 4 5

Freq

uency (%

)

Market share for wallets by choice



Source: This study

Fig 6.13: Price range of wallets

6.2.5: Belts An overall 79% of respondents reported buying between 1 to 3 belts annually (Fig 6.14). On average therefore, per capita turnover for belts is 1.5. Locally made belts account for 50.7% of the market share followed by imported new 24.9 and imported used at 23.8% respectively.

Fig 6.14: Annual turnover for belts

0.0

12.5

25.0

37.5

50.0

< 1,000 1001-‐ 2000 2001-‐3000 >3000

Freq

uency (%

)

Price range for wallets



Source: This study

70.8 percent of the belts used in the country are leather made with 27.7 percent being non-‐leather.

Make Count Frequency (%)

Leather 187 70.8

Non leather 73 27.7

Don’t know 5 1.5

Total 265 100

Source: This Study

According to 86.7% of respondents (Fig 6.15), all three classes of belts (Local, imported new and used) generally cost below Ksh 1000 and only a minority 13.3% see belts costing above this. Local manufacturers should exploit the gap occasioned by lack of local belts that appeal to the premium middle class market.

0.0

12.5

25.0

37.5

50.0

1 2 3 4 5

Freq

uency (%

) Annual turnover and market share for belts



Source: This Study

Fig 6.15: Price range for belts

6.2.6: Other leather products Historically, leather has been a multi-‐ purpose fabric that met many of man’s needs including clothing, footwear, bedding, headgears, sheaths and was also used in defense (shields from hides, covers for swords), brewing (biblical wineskins), water containers, literature (Scrolls were probably made from leather), transport (ancient Greeks made boats from hides) among others with specialized uses changing depending on conditions of the day. In modern times, leather has also been used for purposes ranging from display art, Garments, Sandals, Industrial groves, Balls, Car upholstery, Furniture, Bangles, Hats/caps, Mobile phone covers, Lining for sisal bags (Kiondo) and others, artificial fishing baits among others. All these present a diversity of value addition lines which could be mobilized towards exploiting leather’s largely untapped potential.

6.3: The national demand for leather This section sets out to compute national demand for leather based on currently acknowledged industrial/ commercial uses whereby, the shoe industry emerged as the

0.

12.5

25.

37.5

50.

less 1000 1001-‐2000 2001-‐3000 over 3000

Freq

uency (%

Price range

Price range for belts



principal consumer of locally processed leather. In sections below, we attempt to compute indicative demand/ supply models based on projected needs.

6.3.1: Consolidated demand for base year 2015 Table 6.4 provides a summary of national leather demand based on consumption patterns and market penetration as computed in 6.2 above. Generally, assuming that, all the local demand for leather shoes equivalent to 47.2 million pairs was to be met from local production, about 80.6 million tons of leather would be required in the manufacture of shoes and other goods.

Table 6.4: Simulated demand for leather in Kenya (2015)

Product

Per capital consumption

Market penetration (%)

Annual demand (million pcs)

(Kg per pc)

Leather demand (tons per product)

Shoes 2.2 45.6 47.2 0.5 23,590.2

Jackets 0.2 56.9 5.4 3 16,056.0

Bags 0.75 45.9 16.2 1 16,190.1

Belts 0.45 70.8 15.0 0.5 7,491.9

Wallets 0.3 88.8 12.5 0.1 1,252.9

Others 16,056.0

Total 80,637.2

Source: This Study

6.2.3: Demand/Supply model for base year 2015 Availability of the national leather resource for base year 2015 was a computed in Chapter 5 above. Capacity of the same resource to meet a growing demand for leather as analysed in Table 6.4 above is computed in Table 6.5 below. Computation in Table 6.5 has made assumptions as follows:-‐

(i) All hides are processed locally and therefore allow for the 1.5 multiplication factor on account of splitting.

(ii) Hides and skin growth at annual rates of 2.12 and 1.33 for bovine and shoat material respective



(iii) Unit weight of hides and skins are 12.5 and 3kg respectively.

(iv) Per capital consumption of leather goods is derived from observed market penetration among the relevant consumer segment.

(v) Leather consumption in manufacture of other goods (gloves, upholstery, display, etc) is assumed to approximate quantities used in manufacture of bags.

For base year 2015, the gross leather yield is estimated at 119, 897 Tons and would therefore be way above total demand computed at 80, 637 Tons leaving behind a huge surplus equivalent to the 2015 yield of hides. However, for export based processing (at double the annual leather demand), the resource would be largely in-‐adequate.

Table 6.5: Supply/Demand comparison for leather in Kenya

Supply Analysis (Tons)

2015 2016 2017 2018 2019 2020

Leather Demand

80,637 83,004 85,440 87,947 90,528 93,185

Hides Yield (Tons)

39,274 40,099 40,941 41,801 42,678 43,575

After split (Tons)

58,911 60,148 61,411 62,701 64,018 65,362

Skins Yield (Tons)

60,986 61,779 62,582 63,396 64,220 65,055

Total H/S (Tons)

119,897 121,927

123,993 126,096

128,237 130,417

Surplus/ (Deficit)

39,260 38,923 38,554 38,149 37,709 37,232

Source: This study



7.0: THE MASTERPLAN FOR KENYA LEATHER PARK (MACHAKOS) From computations in Chapter Five, the national leather resource base of 119,897 Tons is largely exported in semi-‐processed form, in the process, starving local manufacturers of necessary raw materials, thus simultaneously robbing local youth of badly needed jobs and livelihood. In this chapter, we explore the systematic and rational intervention required towards realizing the Kenya Leather Park (Machakos) starting with an analysis of the economic justification for requisite investment.

7.1: Objectives of the LIP Creation of a Kenya Leather Park (Machakos) is motivated by a need to boost Leather Sub Sector GDP Contribution which is currently a partly 0.18%. A LIP is therefore proposed to serve as an engine to drive reforms in the Leather SS with a view to realizing target goals. This section maps out the potential economic impact accruing from leather value addition.

The LIP has been conceived with sector-‐specific objectives namely:-‐

• Create a cluster of leather-‐related industries in close proximity to each other • Expand exports of leather products to regional and global markets • Enhance global competitiveness and productivity of Kenya leather sector. • Attract investment into the sector by both large scale tanners and assorted leather

goods producers • Enhance vertical integration of the Kenya’s leather value chain, through forward and

backward linkages • Improve quality and design of products made by the leather sector • Provide employment for Kenyan workers of various cadres • Support import substitution of leather goods in the local market with locally

manufactured products largely replacing imports in the domestic market • Improve capacity of small and medium sized leather goods producers

7.2: Potential Economic Impact from the LIP

7.2.1: Basis for assessment of economic impact Computation of economic impact from leather value addition is based on the assumption that the 119, 897 tons of leather are locally available for processing and follow –up manufacture of shoes, the commodity with the highest market penetration with the surplus leather undergoing value addition in the order of magnitude of 8.3 reported by diverse leather experts including Mwinyhinja Mwinyikione. Other assumptions, particularly in manufacture of shoes, are as follows:-‐



i. Cost of producing 1 pair of Shoe is Ksh.944 ( 1 Kg of final grade sells for Ksh 800)

ii. Mark up of 20% at factory

iii. Gate Price Ksh. 1,180

iv. Retail Price Ksh.2,000

v. Value of leather is Ksh. 440

vi. Value of finished leather is 6 times that of leather

vii. GDP Growth Rate of 6 %

viii. A 2014 GDP of Ksh 5.2 Trillion ix. Manufacture of other finished leather goods assumes a value added at 3 orders of

magnitude over the 2014 export value of wetblue of Ksh 290, 000 per ton.

7.2.2: The potential Economic Impact Table 7.1 below summarizes the projected economic impact accrued from value addition upto year 2020. Thus, were the LIP operational in the base year 2015, value addition would have triggered a 10% growth in the National GDP contribution from leather, up from the current 0.18%. And, assuming stagnated growth in other sectors, growth in leather alone would have been a major jump towards securing the 10% GDP growth required to realize Vision 2030. In the process, over Ksh 100 billion would have been invested in production costs including labour (35,000 new jobs) and services, in the process generating growth in other sectors associated with leather goods manufacture. Additionally, manufacture of 47.2 million pairs of leather shoes would entirely substitute the leather shoe component of mitumba thus partly substituting a portion of the USD 86 million in shoe imports annually.

Table 7.1: Potential scope of revenue income from value addition in leather

2015 2016 2017 2018 2019 2020

Total Shoes Production (Million pairs)

47.200 60.888 78.546 101.324 130.708 168.613

Production Cost @ Ksh. 944 per pair (Ksh million)

44, 557 57,478 74,147 95,650 123,388 159,171

Factory Price with 20 % mark up

53,468 68,974 88,977 114,780 148,066 191,005



Value of shoes sold at retail level (Ksh Million)

94,400 121,776 157,091 202,647 261,415 337,226

Value Added (Ksh Million) 47,200 60,888 78,546 101,324 130,708 168,613

Surplus leather (tons) 57,047 60,470 64,098 67,944 72,021 76,342

Value of surplus leather (Ksh Million)

49,631 52,609 55,766 59,111 62,658 66,417

Total Value added (Ksh Million)

96,831 113,497 134,311 160,435 193,366 235,030

GDP (Trillion) 5.512 5.843 6.193 6.565 6.959 7.376

Potential Leather Sector contribution to National GDP

1.8 (10% growth)

1.9 2.2 2.4 2.8 3.2

Source: This study

7.2.3: The Need for a holistic focus in the Kenya Leather Park (Machakos) On purely economic consideration, intervention in developing a LIP is justifiable. The LIP however should target elimination of operational and policy barriers towards attracting a flourishing and competitive leather goods manufacturing hub in Kenya. In sections below, challenges that are general to manufacturing and specific to the leather good manufacturing subsector and which require resolution are briefly highlighted.

General Challenges to Kenya’s Manufacturing Sector

Despite numerous post-‐independence industrialization policy interventions, the manufacturing sector’s contribution to the GDP has stagnated at about 10% since independence with the share of manufactured goods in merchandise exports standing at only 35%, which is un-‐favourable if compared with aspirator countries including Singapore and Malaysia at about 70%. In 1965, the share of manufacturing in GDP for Kenya, Korea, and Malaysia were almost at par but currently, the sector’s share in GDP are in excess of 30 and 24% for Korea and Malaysia respectively compared to Kenya’s 10%. Kenya’s GDP per capita has grown only at 5.3 per cent compound rate between 1965 and 2013 compared to by 12.2 and 7.5% for Korea and Malaysia, respectively, over the same period.

Weak industrial transformation has forced Kenya to continue relying on low value commodity exports such as food, beverages and tobacco, which account for about 40 per



cent of sector GDP while diversification into high value manufactures such as electronics is still sparse. The myriad obstacles to growth of manufacturing sub sector are summarized in Fig 7.1 based on expert opinion. Core among these are high cost of production attributable to costs of electricity, fuel, raw materials, credit, transportation, and volatility in supply of power while high high operating costs, non-‐performing loans and weak competition in the banking sector all constraint access to credit on account of high costs.

Source: KPRRA Economic Report, 2016

Fig 7.1: Factors contributing to Industrial productivity in Kenya

Challenges Specific to the Leather and footwear manufacturing sub sector

A Benchmarking Study for Kenyan Leather Sector conducted recently (cited in the World Bank Study) documented a myriad challenges which disadvantage Kenyan leather when compared to the main competitors and global leaders. According to The Study summarized in Fig 7.2, Kenya falls behind competitors on all criteria with the exception of availability of



raw materials. Kenya’s leather industry, despite having a history of being a major export industry in the past few decades, not only falls behind Italy and China, but also Ethiopia in every category, except availability of raw materials and access to raw materials. While the availability of raw materials is a significant competitive advantage, this advantage is severely reduced because of Kenya’s very low quality of raw materials, ranking two points beneath that of Ethiopia. Moreover, Kenya’s access to its raw materials is further compromised by the high levels of unreported smuggling of its raw hides and skins.

Source: World Bank Study

Fig 7.2: Benchmarking Kenya’s Leather Industry Competitiveness

In comparison to more established countries, Kenya significantly lacks sustained investment in both human resources and technology. A number of training facilities in Kenya notably TPCSI, KITI among others are currently underutilized due to lack of funding and the majority of Kenyan artisans working in the industry have never received formal training.

Access to finance is also limited and hinders the capacity of SMEs to advance to the next level. Furthermore, this analysis highlights the competitive difference between Kenya and Ethiopia. Ethiopia’s leather industry has grown significantly and systematically over the last decade, and Ethiopia has excelled in creating a platform for foreign investment.



Ethiopia has distinguished its leather industry from that of Kenya and is now positioning itself as a promising player in the global market.

In the view of this Feasibility Study, investment in a Kenya Leather Park (Machakos) will partially address most of the challenges documented in Fig 7.2, but, non-‐the less, complementary action is required towards addressing issues identified in Fig 7.1 above which are deemed to be beyond scope of the LIP. Action is required as on the following areas:-‐

(i) Inadequate supply of supply of raw materials

Husbandry related problems: Most animals are produced by agro-‐pastoralists and pastoralists in arid and semi-‐arid lands (ASALs) where they are grazed on free range but suffer inadequate pasture, water and health management leading to small sized animals. The livestock producers sell whole animals and do not attach any value to the hides/skins and neither is there attempt at quality improvement. Inadequate extension services also contribute to low quality of hides. Poor animal husbandry leads to low off-‐take rates and smaller animals as follows:

• Off-‐take rates of cattle, sheep and goats are estimated at 8.2%, 28.1% and 41% respectively, compared to the global average of 20%, 43% and 43.8% for the three types respectively. Some countries in Africa, such as Libya, Egypt, Tunisia, Algeria, Morocco and South Africa among others, have achieved cattle off-‐take rates from 20-‐27% while sheep and goat off-‐take rates are 60-‐70%.

• Average hide size has fallen from 28ft2 in 1985 to 23ft2 by 1999 and about 20ft2 currently compared to about 40ft2 in the USA. This is associated with inbreeding which set in upon withdrawal of the GOK Artificial Insemination programme.

• Due to dominance in production by pastoralists and smallholders in rural areas with poor roads and collection infrastructure, the non-‐recovery rates for cattle hides, sheep and goat skins are 14%, 34% and 29%, respectively.

Slaughterhouse Related Issues: The quality of hides and skins is also affected at the slaughterhouse level. Slaughter facilities in the country are decentralized and only seven are comparatively modern. Flaying is done by knives and hand and in most slaughter facilities, slaughtering is done on the floor which contaminates the hides and skins. The



defects at this stage include flaying cuts, scores, holes and fouling with dung, urine and blood, among others. It is estimated that 60% of defects occur at slaughter level.

Hides and Skins Collection and Preservation Issues: From the slaughter level, hides and skins are collected by hides/skins collectors/traders for preservation. Hides are either sun-‐dried (on the ground or frame-‐dried) or wet salted. Defects during preservation include putrefaction, inadequate salting and curing, over-‐drying, poor fleshing, among others. Due to these defects, Kenya only realizes about 34%, 23% and 19% as Grade I for cattle hides and sheep/goat skins respectively. In terms of preservation, most hides and skins are air dried and yet wet-‐salted hides/skins fetch a higher value as discussed above. However, there has been an increase in wet-‐salting in recent years.

Value addition opportunities exist in addressing the defects. It is estimated that 14% of hides, 34% of sheep skins and 29% of goat skins do not reach the market and are either kept for home use or not marketed. This translates to a huge loss in the leather industry.

Constraints in the Tanning Component: The study administered a questionnaire with variables in the areas of market access, input supply, technology/product development, access to finance, infrastructure policy and regulations with as summarized in Table7.2.

Table 7.2: Challenges in the tanning Sector

Area of Operation

Constraints Consequences Suggested solutions

Market Access The export orders are limited to wet blue Low leather consumption locally Leather and its products too expensive

limited value added to the leather

Promote the operation to finishing of leather



Input Supply Expensive processing chemicals Low quality hides and skins Electricity bills have been very high High cost in treatment of effluent

Tannery limiting their operation to wet blue Operational cost becomes expensive Environmental problems

Duties on imported chemicals be removed Strengthen the hides/skins improvement services Lower the cost of electricity Lower the cost of water, chemicals.

Technology/ Product Development

There is no leather training institute Limited knowledge on leather finishing High load of tannery effluent

Lack trained manpower Few tanneries do finishing Environmental problems

Centre to be started for leather technology training Training on leather finishing procedure New method of leather processing

Access to Finance

High interest rate Unavailability of loans Lack of long-‐term credit facility

Limited growth of leather industry Not able to modernize the tannery No new tanneries have been started

Create a revolving fund for tannery modernization

Infrastructure Poor roads Telephone Internet connection

High cost of production

Improve and maintenance of road network.

Policy/ Regulation

Ban of hides and skins exports Enforcing of Hides and Skins Act Few small size tanneries

Promote smuggling across borders Improving of quality of hides and skins Sometimes there is surplus of hides and skins

Incentive payment of post tanning export Strengthen or privatization of hides and skins improvement services Financing of association

Source: Compiled from Field data



7.3: Priority Intervention in the Kenya Leather Park (Machakos) This section identifies the core components of the LIP based on findings of this feasibility Study.

7.3.1: Provision for Primary tanneries Going by the Kinanie Model previously prosed in the SEA Study, the Hides and Skins base is currently inadequate to support additional tanneries while existing capacity is yet to utilized to the maximum. As such, new primary tanneries are not anticipated at Kinaine. However, in order to cater for any Tanner opting to relocate to Kinanie to take advantage of the proposed CETP, an allocation for 4 tanneries has been made in the revised land use plan.

7.3.2: Capacity building for secondary tanning Capacity for secondary tanning to final grade in Kenya is currently estimated at only 10% of the 2.62 and 18.6 million hides and skins produced annually in Kenya. Diversion of the entire Hides and Skins resource for processing into final grade leather will require that capacity for secondary processing be installed. Such capacity building should be aligned to the The Kinanie Model (identified under auspices of the SEA Study) which assumes that locally produced wetblue grade leather will be exported to Kinanie for final processing and manufacture of leather goods. Capacity building should particularly target market driven manufacture of final grade leather in line with tastes of diverse consumers.

7.3.3: Value Addition Parks Intervention in value addition should be multi-‐facetted thus:-‐

Support to existing leather goods manufacturers: Secondary tanning of leather will secure an adequate supply of raw materials to local small scale manufactures who already have secure market. Other intervention here should aim at cluster-‐based targeted provision of value addition equipment which are currently out of reach to individual manufacturers on account of the price barrier. Under this regime, clusters at Thika, Kariakor and Kisumu merit supply.

Contract manufacture of footwear for export: The high production costs for Kenyan made shoes computed at Ksh 944 per pair renders Kenyan shoes un-‐competitive in the world market and could reduce anticipated local demand for finished leather. A possible way out is to secure contract manufacturing for the competing labels which could simultaneously attract FDI, create demand for local leather, create jobs in footwear manufacture and services and earn foreign exchange. Such arrangement fits in with the EPZ Model.



Value addition to plug identified supply gaps: The market survey documented in Chapter Six above identified clear gaps in the local supply of leather goods targeting the premium markets created by an emerging middle class locally re-‐known for affluence and consumerism. Such gaps could be plugged through identification of appropriate investors targeting market segments as appropriate.

Other value addition lines: Kenya is reputed to have a rather successful bag manufacturing industry with a recognized market penetration. This and other premium products such as car upholstery, safari boots, bangles among others, could easily fit in under the EPZ model.

7.3.4: Installation of Support Infrastructure Under this category, all support infrastructure identified under the Land Development Plan (Appendix 7.1) should be installed but in line with a rationalized scope as unveiled elsewhere below.

7.3.5: Support Services Support service is largely a functional intervention and should target issues such as;-‐

i. Research and Development for Tanning technology, product innovation, environmental protection, etc

ii. Skills development in Leather Tanning, Tannery management, Quality control, product design and finishing, etc

iii. Training Center

(v) Market Research

Under market research, the question of poor competitiveness of Kenyan leather products requires urgent resolution given that production costs for Kenyan leather footwear compete very unfavourable with those from Ethiopia at (US$9.44) compared to (US$ 7.28), a difference of US$ 2.16 (Table 7.3). This is attributed to high cost of leather, other inputs, labour, electricity, packaging among others.

Table 7.3: Comparison of Leather footwear production costs for Kenya and Ethiopia KENYA ETHIOPIA

Cost (US$) Percentage of cost

Cost (US$) Percentage (%)



Leather (Sheepskin)

4.40 47 3.72 51

Other Inputs 2.75 29 2.27 31

Labor 1.10 12 0.55 8

Electricity 0.17 2 0.03 0

Packaging 0.39 4 0.31 4

Maintenance 0.09 1 0.06 1

Other Costs 0.55 6 0.34 5

Total 9.44 100 7.28 100 Source: World Bank Study

7.4: The Investment Schedule In sections above, the broad focus and justification for investing in a LIP were identified. This section provides a rationalized investment schedule towards optimizing returns on money. Table 7.4 attempts to prioritize elements that will go into operationalizing the LIP. As conceived, the LIP will entail 4 broad components namely; -‐ Capital Infrastructure, Support Institutions, Support Infrastructure, and Community Support Services borrowing largely from the Land Use Plan (LUP) previously prepared by the State Department for Planning. Capital Development as previously proposed in the LUP has been cutback to reflect realities on resource availability. Brief feature as follows:-‐

7.4.1: The Capital Infrastructure Programme Investments here target the value addition centers namely tanneries, value addition parks and footwear production units. Though the core focus however is on value addition for wetblue grade into both final grade and leather goods, 4 primary tanneries have been allowed for in the event of tanners relocating to take advantage of the CETP and a ready market for wetblue leather. Main costs to the EPZA will include land and construction of Go-‐downs for the Value Addition Parks while prospective investors will lease the land and meet development and operation costs.



Table 7.4: Components of the Kenya Leather Park (Machakos)

Investment Category

Component Function Quantity Justification Costs to EPZA

Costs to Investors

Capital Infrastructure

Primary Tanneries To accommodate any Tanners wishing to relocate to Kinanie

4 Tanners may wish to relocate to Kinanie to take advantage of the CETP. A provision of 1 ha per Tannery is proposed for a 600 tonne per month tannery of 3000m2 (0.3ha) ground occupation.

Land Investment and operating costs

Secondary tanneries

To process wetblue to be imported from local tanneries into crusted and final grade leather

5 The Kinanie Model advocate


Value addition Parks

To pursues new value addition lines such as car upholstery, bags, belts, travel ware, etc

10 Value addition Is the sole justification for a LIP

Go downs Equipment and operating costs

Footwear manufacturing units

To host investment in low cost shoe production under known labels

2 Such investment will attract FDI, create jobs and earn forex


SME Park To provide a point of engagement between LIP and small scale manufacturers

2 Under the LIP, EPZA will provide equipmemt and machinery that can be accessed by SMEs on cost sharing basis.

Land and Equipment

Operation costs



Support Institutions

R&D Facility As in LUP but to include a Leather Museum

Investment and operation costs

Administration Center

As in LUP Investment and operation costs

Training Center As in LUP Ditto

Housing Centre As in LUP Ditto

Operations and Logistics

As in LUP Ditto

Convention Center As in LUP Ditto

Support Infrastructure

Road network and street lighting

As in LUP

Power supply As in LUP

Water supply 10 bore holes at Athi River connected to the LIP by Pipeline

EPZA to secure a well field along 109 road at Athi River where BH yield of 15m3/hr is possible.

Drilling equipping and connecting BHs to Kinanie

Sewerage network As in LUP Investment cost

Sanitary landfills To integrate economic recovery through recycling

Land An investor to be outsourced to build and operate sanitary land fill



Common Effluent Treatment Plant

As in LUP but with provision for connecting non Kinanie customers

Land An investor to be outsourced to build and operate

Perimeter and internal fencing

As in LUP To secure, separate and isolate all components

Fencing

Green Park As in LUP but to include a wildlife sanctuary

Investment costs

Community Support Services

Community Outreach programme

To provide linkage between LIP and Community

A liaison office staffed by local

Investment and operation costs

Source: This Study



7.4.2: Support Institutions This Study has adopted all the support Institutions anticipated in the Land Use Plan previously prepared by the State Department of Planning hereby annexed as Appendix 7.1. The only point of departure is for the R&D facility to include a Leather Museum enhance tourist attraction aspects of the Kenya Leather Park (Machakos). All costs under this component shall be borne by the EPZA.

7.4.3: Support Infrastructure This also borrows heavily from Appendix 7.1. Two exceptions however:-‐

Water supply: The LUP had proposed to develop borehole for water supply buy this may be inadequate given observed low yield for boreholes at Kinanie. Available data however indicates that the Upper Athi Aquifer has moderately higher yields in the Athi River area (Table 7.5) and the same could be tapped to supply Kinanie. In the absence of heavy investment in primary tanning, a total of 10 boreholes each yielding 10 cubic metres per hour can supply a population of 20,000 people each consuming 100 litres per day. Though such a well field could then be connected to Kinanie by pipeline, it runs huge risks of illegal connection as already befalls the EPZA owned sewer-‐line implying that, any intervention in water supply must allow for community supply.

Costs for water supply will largely be borne by the EPZA but involvement of the Mavoko Water and Sewerage Company (MAVWASCO) or TANATHI could partly offset the costs.

Table 7.5: Borehole yield data in the Athi River area



Source: This Study

The Common Effluent Treatment Plant: A CETP for Kinanie is necessary as the ultimate safeguard to water resources of the Athi River basin but, in the absence of primary tanning at Kinanie, the facility would have to outsource business from Athi River and Nairobi based manufacturers and institutions in-‐order to operate commercially. In the absence of such support, the CETP would require to be scaled down drastically.

7.4.4: Community Support Service The need to provide a formal linkage between the LIP and host community consistently emerged in course of bilateral consultations largely during the SEA process. The proposal therefore, is to establish a unit within the LIP to be collating community views and concerns for transmission and follow-‐up with the LIP management. Such unit could also spearhead identification of community felt needs such as water supply, scholarship programme, etc that could be addressed by the LIP as part of either a CSR or Trust fund programme.

7.4: Land requirements in the LIP

7.4.1: Proposed Land Use Plan for the LIP The land parcel set aside for this purpose is large enough to have three major sections whose specific size and location have been identified as follows:-‐ • An EPZ industrial and service section (say 60 % of the land) which will be

physically segregated and surrounded by an illuminated fence with the necessary gates, and where full Customs Controls apply and where leather tanners and producers of leather goods are able to operate. In this area, the market focus will be primarily export only (with 20% being sold to local market upon payment of CET and all other taxes) and thus export oriented leather tanneries will be able to import hides and skins and wet blue leather duty-‐free for further processing to crust and finished leather while enjoying the proposed exemption on export tax levied on hides and skins exports from domestic market to the EPZ. The customs controls can be focused on this portion of land which will host EPZ firms (area as defined and provided for in the LIP master-‐plan).

This portion will be securely fenced, illuminated and separated from the other sections by a road, field, garden, forest or other form of spacing to for ease of securing goods. It will contain the effluent treatment plant, power substation, water supply plant and other critical infrastructure. This same section, can host some firms operating under the EPZ Business service permit who provide assorted services to the cluster.



• A domestic industry section -‐ being another section of land (say 30%) where domestic industries not licensed as EPZ enterprises, and holders of the EPZ business service permit can locate to offer products and services to the EPZ leather and leather goods sector and also to the domestic and regional markets. This industrial, non-‐privileged category of occupant will have no tax implications under Income Tax or Customs duty other and will operate within land owned by EPZ, gazetted as an EPZ but with no tax privileged conferred by CAP 517. These firms will be physically segregated from the EPZ Firms, have a separate entrance gate but will be supplied by critical infrastructure services from the fenced EPZ area such as the power, water supply, effluent treatment plant, and sewerage. They will not be provided with a licence or permit by EPZA, but will lease property from EPZA.

• A social amenities section (say 10% which is to be used for provision of social amenities such as housing, schools, and shopping centers) which will benefit the community of employees to be engaged by the various firms operating in the Kenya Leather Park (Machakos). These facilities should be easily accessible to the community and members of the public and so will be separate from the fenced EPZ industrial and service area. However the promoters of such project will require EPZ business service permit, and the list of eligible services under CAP 517 will be expanded to include schools, housing and shopping centres. Such housing development will however not be for homebuyers but rather for rent.

7.4.2: Categories of Kenya Leather Park (Machakos) tenants

• EPZ enterprises involved in export oriented activities of tanning (supply of finished leather to foreign industries or to EPZ manufacturers of leather goods), manufacture of leather goods, as well as commercial traders in various leather supplies. They will operate under the EPZ Enterprise licence and receive EPZ related incentives and any applicable sector specific incentives.

• Domestic Industries involved in tanning up to finished leather stage (no wet

blue), and in manufacture of leather goods targeting domestic and EAC markets. These will operate under normal county business permits and sector specific licences for domestic industry and will receive sector industry-‐specific incentives.

• Business Service providers of various supporting services including product

design and development; marketing, technology consultancy, training, waste management, utility provision, supply of leather chemicals, components and inputs etc. They will operate under the EPZ business service permit.



• Providers of social amenities like rental housing and school, and shopping centres on LIP land. These will be regulated under the expanded EPZ business service permit schedule

7.4.3: Current provision in the Land use Plan: Computation of land requirements for the LIP has mainly borrowed and adjusted provision made in the LUP hereby reproduced.

i. Infrastructure

This includes: Paved roads covering an entire length of about 5Kms; 5Km Sewer line; 5Kms Street Lighting with 35M spacing between poles; a proposed power substation; Water boreholes in different areas within the zone; Storm Water drains, culverts; and Common Effluent Treatment Plant (CETP).

ii. Tanneries(200,000 M2)

Establishment of tanneries will be done in 2 phases: 20 Tanneries in Phase 1 and 16 Tanneries in phase 2. Each tannery will be on 1 ha plot.

iii. Value Addition Parks (60,000 M2)

The development of Value addition Park proposes 8 leather value addition centers each sitting on 1ha plot in Phase 1 and ten (10) leather value addition centers in Phase 2.

The value addition park is aimed at using the finished leather to add value to finished products.

iv. SME Park ( 15,000m2)

The park will house value addition activities and will target the small micro enterprises dealing with Leather products. Most of the products here will be targeting the domestic market. Sheds within this development will range from 350M squared to a maximum of 750M squared

v. Trade Centre – (8500 M2)

This will house activities that promote trade and development of the leather industry business. It will consist of: Conference facilities (1000 Pax Capacity); Exhibition Floors for the (space of approximately 1500M2); Shopping complex for



leather products-‐ shoes, belts, bags (1500 M2); Offices for institutions; Common facilities-‐ toilets, restaurants, etc.

vi. Research and Development Centre ( 5,000 M2) The center will have several departments promoting development of leather industry mainly in quality control in processing and production of quality skins and hides together with leather industry information dissemination.

vii. Administration Centre (2500M2) This will house the regional management offices for Regional Manager for the zone Managers for Support services Manager for Utilities

viii. Logistics and Customs Offices (3000 M2)

This will house government regulatory authorities and other organizations facilitating the free outward of movement of goods and raw materials: KRA Offices, Clearing and forwarding Agencies, KEBS Offices and Weights and Measures Department.

ix. Housing estate: (20,000 M2)

The park will partly cater for the accommodations needs for all level workers in Phase 1 and Phase 2. The proposed housing typologies include:

• 4 Bedroom executive Apartments-‐ 10 No. of Blocks each with 8 Units

• 3 bedroom Apartments – 10 No. of Blocks each with 8 Units

• 2 Bedroom Apartments – 10 No. of Blocks each with 16 no. of Units

• 1 Bedroom Apartments -‐ 10 no. of Blocks each with 32 No. of Units

• Bedsitters Apartments – 10 No. of Blocks each with 64 No. of Units

• Green open spaces for children’s play areas, a kindergarten school, and 3000 M 2 shopping and commercial Centre to cater for the residents.

x. Utilities and Services ( 600 M2)

This will house the power plant, the workshops, the water offices, Power offices, estates department among others.

xi. Common Effluent Treatment Plant (CETP) and Landfill



Effluent treatment from the tanneries as well as recycling of such waste will take place in the CETP while the landfill will handle solid waste from both the tanneries and the rest of the land uses.

7.4.4: Rationalized Land requirement As conceived in this Feasibility Study, the LIP will initially require 47.83ha equivalent to 117.2ha a breakdown of which is provided in Table 7.6 below. This arrangement will release substantial land which could be leased out to investors in horticulture, LIP related manufacturing among others.

Table 7.6: Computation of land requirement for the LIP

Investment Category

Component Quantity Unit land required (ha)

Total land required (ha)

Capital Infrastructure

Primary Tanneries 4 1 4

Secondary tanneries 5 1 5

Value addition Parks 10 1 10

Footwear manufacturing units

2 1 2

SME Sheds 2 1 2

Support Institutions

R&D Facility 1 2 2

Administration Center

1 2 2

Training Center 1 2 2

Housing Estate 1 10 10

Operations and Logistics

1 2 2

Convention Center 1 1 1

Support Infrastructure

Road network and street lighting

0.5 0.5

Power supply

Water supply



Sewerage network

Perimeter fencing

Sanitary landfills 1 1 1

Common Effluent Treatment Plant

Green Park 1 5 5

Community Support Services

Community Outreach programme

0.25 0.25

Total land required 43.75

Add 10% escalator 4.38

Total land required 47.83ha (117.2acres)

Source: This study

7.5: Provisional budget for capital Investment In very rough terms, construction of the LIP as conceived in this study will cost upwards of Ksh 11.8 billion (Table 7.7) while an estimated Ksh 5 billion could go into operationalization. However, compared to a projected value addition of Ksh 96.8 billion in the first year alone, the LIP becomes a very worthy undertaking. The Benefit to Cost ratio is largely promising even without need of support by additional financial computations.



Table 7.7: Projected Capital Investment costs in the LIP

Item Unit Unit cost (Ksh Million)

Total items Total to Item (Ksh Million)

Cost head

Land acres 0.5 200 100 EPZA

Primary Tanneries sqm 0.08 3000 240 Investor

Secondary tanneries sqm 0.08 1000 80 Investor

Value Addition Parks sq m 0.08 60000 4800 EPZA

SME Park sq m 0.08 15000 1200 EPZA

Trade Center sq m 0.08 8500 680 EPZA

R&D Center sq m 0.08 5000 400 EPZA

Admin sq m 0.08 2500 200 EPZA

Logistics sq m 0.08 3000 240 EPZA

Housing sq. m 0.08 20000 1600 EPZA

Utilities sq m 0.08 600 48 EPZA

CETP ls 67 EPZA

Water supply (10 boreholes and mains)

Ls 31 EPZA

Internal roads and power supply

ls 100 EPZA

Subtotal direct costs 9786

Add 20% contingency

1957.2

Gross Estimate (Ksh Mill ion)

11, 743.2



8.0: REQUISITE POLICY SHIFT AND INTERVENTIONS A discussion on investment in a Kenya Leather Park (Machakos) would be incomplete without a commentary on the prevailing policy environment especially for a sector so prone to external influence. Policy intervention will be critical in leveling the operating environment.

8.1: Policy Challenges

8.1.1: Land User Classification LR 23961 is part of a designated EPZ and was acquired as part of the sewerage treatment works site as an integral part of the development of the Athi River Export Processing Zones project. The LR 23961 land title has the specific user “sewerage treatment plant and auxiliary services relevant thereto” on the title and the conditions on the title do not permit other users.

8.1.2: Need to curb dumping of cheap imports Kenyan leather footwear manufacturers are persistently struggle to ward off a severe onslaught from cheap shoes dumped into the market from China, Ethiopia and other competitors while the mitumba factor strongly puts in check attempts to manufacture high end leather shoes. Policy intervention to legally seal all loopholes exploited by unscrupulous traders is required as safeguard to national investments in the LIP.

8.1.3: Policy Intervention to locally secure Kenyan Wetblue leather Realization of the LIP as currently conceived hinges on local retention of the national leather resource estimated at 112,000 tons annually to undergo secondary processing and value addition through manufacture of leather goods. This is the resource that will attract FDI, create jobs and raise the Leather Sector GDP contribution of 1.9% up from the current 0.18%. It is a resource that requires legally anchored measures to stifle export and allow for local processing possibly through introduction of stiff Export Duty for any ton of wet blue exported.

8.1.4: Legislative barriers to non-‐export manufacturers at Kinanie The EPZ Act caters primarily for exporting enterprises licensed under section 19 of the EPZ Act, CAP 517, Laws of Kenya. Under CAP 517, such enterprises are licensed by EPZA to



engage in manufacturing, commercial and service activities and in so doing enjoy the benefits described in Section 29 of the same law namely:-‐

• Customs duty free and excise duty free importation of inputs, • VAT exemption on goods and service imported into the zone by licensed

enterprises, • 10 year corporation tax holiday for manufacturing and service enterprises with a

further 10 years at a reduced corporate income tax rate of 25% on profits, • a 100% investment deduction allowance on investment in buildings and machinery

by the EPZ manufacturing enterprise; and • stamp duty exemption on legal instruments relating to licensed activities of an EPZ

enterprise. • Exemption from certain licenses, reporting requirements and administrative

procedures such as Statistics Act, Import Declaration Form (IDF) fees and Railway Development levy (RDL).

EPZ firms are deemed to operate outside the Customs territory and their products when sold into Kenya are deemed to be imported into the customs territory and subject to import duties (at CET), VAT, import procedures including IDF, RDL and 2.5% duty surcharge. EPZ firms operating in the zones, are principally involved in exports so only 20% of company output in manufacturing can be released to the local market in any one year, as provided by the East African Community Protocol on the Establishment of the Customs Union Article 25-‐3 as supported by the East African Customs Management Act. In the case of commercial enterprises (traders) the export quotient is 100% as provided in CAP 517.

CAP 517 also provides for persons or institutions provided holding an EPZ business service permit to provide an assortment of business related services using the zone as their base. Permits are granted by EPZA to parties with the zone tenants as their primary market. The current legislation provides assorted business services. The list of such services is quite comprehensive but may need to be adjusted to take on board specific services needed at the Kenya Leather Park (Machakos) by various players or in other large EPZ areas. Such activities not currently regulated in CAP 517, in the case of the Kenya Leather Park (Machakos), would include producers of finished leather, leather goods, accessories and chemicals for use in the leather industry who have a focus on the domestic are regional market, rather than exports.

8.1.5: Duty levied on exports of raw hides and skins destined for EPZ tanneries. The EPZ is deemed to be an export destination for Kenyan goods. The export tax that has been imposed on exports of raw hides and skins (currently at 80% or 0.52 US$/kg whichever is the higher) is designed to promote local value addition on raw hides and



skins. The tax would apply if hides and skins are sold to the EPZs, making it non-‐economical for EPZ Tanners source raw hides and skins from Kenya.

8.1.6: Absence of Sector Specific Incentives for the leather and leather goods sector There is currently no specific incentive framework for the leather and leather goods sector, other than the 80% export tax on sales of raw hides and skins to export market. There is need to have sector specific policies to address this.

8.2: Proposed Policy Interventions The foregoing policy challenges present legal and regulatory anomalies which must be addressed to effectively operate the Kenya Leather Park (Machakos) and attain the economic benefits expected.

8.2.1: Towards resolution of Land Use classification As the land on which the proposed LIP site sits belongs to the EPZA was acquired and developed to provide sewerage treatment works for Athi River EPZ Project, the Kenya Leather Park (Machakos) should be seen as an addendum or addition to the Athi River EPZ Project, which will provide specialized facilities for leather and leather goods industries, including a leather effluent treatment plant (ETP) to pre-‐treat leather effluents before they are discharge to the general sewerage treatment works. The EPZ Authority will apply for an extension of user of the land to include industrial park activities so that the new user reads : “sewerage treatment plant, EPZ industrial park and auxiliary services relevant thereto.”

8.2.2: Clarification under Cap 517 The proposal here is to allow co-‐location of EPZ enterprises, EPZ business service permit holders and domestic industries in the LIP, but in adequately segregated sections. This is rationalized as follows:-‐

1) Import substitution and job creation -‐ In the local market, the Kenyan leather sector faces challenges due to severe effect of illegal and un-‐customed imports of leather footwear and footwear made of man-‐made materials. Most of the footwear worn in Kenya is either second hand imported footwear or subsidized, cheap imports of new footwear products imported by falsely declaring them as second hand. The Kenya Leather Park (Machakos), as the first such leather park, should support the use of the facility to host some domestic production of leather and leather goods to substitute imported goods for locally produced ones.



Moreover, more jobs are created in the production of leather goods, than in the tanning stage of the leather value chain, so if the Kenya Leather Park (Machakos) is to achieve its target to create direct jobs it will be done through production within the LIP cluster, of finished leather and further manufacture of leather goods such as: bags and wallets, gloves, footwear, leather garments and leather furniture which have both local and foreign market demand. The access to product design, development and marketing support to all players in the LIP will play a key role in improving leather product design and quality and making the products more acceptable in the local market place. This implies there is a huge demand for good quality, reasonably priced leather footwear in the Kenyan market which can be cost-‐effectively produced by the domestic industries in the LIP using locally produced leather. In this way the LIP will save foreign exchange through import substitution and create many local jobs.

2) More intensive use of infrastructure and clustering – the LIP Infrastructure will include extensive serviced lands, industrial buildings and an effluent treatment plant. This significant capital expenditure will be spread over a larger number of investors, if domestic market oriented industries are allowed to occupy a minority share of the park. It will also help the park to payback over a shorter time period. The flexibility to accommodate some domestic players who are in the same sector and who could be suppliers of accessories and input as well as service providers, will support clustering.

8.2.3: Export Duty levied on exports of raw hides and skins destined for EPZ tanneries. The proposal here is exemption of export duty on raw hides and skins sourced from domestic market and supplied to the licensed EPZ tanning industries.

8.2.4: Lack of Sector Specific Incentives for the leather and leather goods sector Sector-‐specific incentives proposed to be available to all players including domestic industries operating in the LIP include:-‐







Necessary amendments will be made to:-‐

i. Schedules of the EA Customs Management Act (Customs and Excise Act) as it relates to export tax on raw hides and skins, to exempt the tax on hides and skins sold to licenced EPZ manufacturing enterprises.

ii. KRA Customs administrative guidelines to allow the Commissioner to define the limit of the customs controlled area of a public zone, to such land area advised as such by the EPZ Authority, where such land is fenced and secured for use by licenced EPZ enterprises with necessary facilities to enable proper customs control. The same area can also be used by holders of EPZ business service permit granted by the EPZ Authority. The remainder (minority) of public EPZ land may be leased for use by complementary domestic industries and for social amenities including housing, schools, hospitals and recreational areas, as the EPZ Authority may permit in writing.

8.3: Proposed Incentive package Investment in the LIP should mainly aim at creating an enabling environment leather based manufacturing with capacity to attract high profile investors targeting production of exports while simultaneously creating new employment opportunities especially for the youth who are disproportionately engaged. Further, such investors require cushioning against competition from cheap imports of new and second hand leather shoes in which case, an incentive package requires to be put in place. Recommendations as follows:-‐

8.2.1: Incentives provided under the EPZ Act

Under Cap 517, tax benefits for EPZ investors are extended as follows:-‐

· 10 year corporation tax holiday and 25% tax thereafter

· 10 year withholding tax holiday

· Stamp duty exemption

· 100% investment deduction on initial investment applied over 20 years

· Perpetual duty and VAT exemption on company input including machinery, spare parts construction material, raw materials, office equipment, packaging, heavy diesel and fuel oil, excluding other petroleum based fuel, motor vehicles that are from the zone and motor vehicle spare parts.



8.2.2: Other requisite cushioning Under this regime would include interventions aat cutting down on production costs namely:

i) Duty exemption for HS and leather products imported into the LIP. This is discussed under 8.15 above.

ii) Provision of a Common Effluent Treatment Plant to cut down on investment costs

iii) Provision of shared production equipment especially for clusters based in the Value Addition Parks.

iv) A skills upgrading programme to support EPZ Investors



9.0: CONCLUSSION AND RECOMMENDATIONS

9.1: Overview This study sought out to determine and document the commercial feasibility and viability of investing in an Kenya Leather Park (Machakos) at Kinanie. From a study process that entailed administration of questionnaires to 1200 respondents scattered in 12 Kenyan Towns including all former provincial capitals supplemented by extensive literature surveys and expert consultations, the Study has determined that the LIP is entirely feasible with a 1st Year Value Addition to leather estimated at Ksh 92 billion and in the process, increase Leather Sector GDP contribution to 1.9% up from the current 0.18%. It is entirely feasible. Other major findings from this study are highlighted below.

9.2: Other major findings

9.2.1: Trends in Leather Production As at base year 2015, Kenya produced 2.62 and 20.33 million pieces of Hides and Skins respectively equivalent to 112,000 tons of leather. This is the national leather resource base with potential to grow at 2.1 and 1.3% annually for bovine and shoat material respectively. Availability of hides and skins is currently constrained by smuggling to external markets and high non-‐recovery rates for cattle hides, sheep and goat skins estimated at 14%, 34% and 29% respectively. The installed tanning capacity in Kenya stands at 3.1 and 31.2 million pieces of Hides and Skins respectively implying a capacity utilization of 85 and 65% for bovine and shoat material respectively. This mitigates against any plans to establish any new primary tanneries.

9.2.2: Trends in Leather allocation Based on questionnaire returns from Tanners, this study has documented that 90% of all wet blue leather produced in Kenya is exported mainly to China, Italy, India and Pakistan among others while the bulk of the reminder 10% tis also exported either as crusted or final grade leather leaving only 16,367 pieces of hides and an equivalent weight in skins to enter value addition in leather goods manufacturing, in the process, exporting all jobs and starving local manufacturers of badly needed raw material.

9.2.3: Demand for leather Demand for leather is projected at 80,637 tons assuming a per capital shoe consumption of 2.2 of which, all leather is manufactured locally. However, this is currently difficult to realize given that local manufactured shoes command only 14.01% of the national shoe



market. Shoes in the price range of Ksh 2000 and below account for the bulk (77.02) of national shoe market with 47.84% being accounted for by non-‐leather shoes. Further, contrary to popular opinion, mitumba only commands a 35% share of the market and is facing stiff competition from imported new shoes which, at 37.35% command the lion’s share of the shoe market.

9.2.3: Potential Impact of the LIP Manufacture of leather into leather goods is reputed to add upto 850% the value of hides and skins. This were all the 119,000 tons of leather to undergo full value chain processing, a net revenue equivalent to Ksh. 94 Billion is possible. This alone can push the GDP contribution of leather to 1.9%, up from the current 0.18% and in the process, create numerous jobs and business opportunities. The LIP Model is therefore entirely feasible.

9.4: The LIP Model The LIP Model targeting secondary processing of locally produced wetblue into leather goods at Kinanie is conceived in this study. Investments in the LIP will target capital Infrastructure, Support Infrastructure, Support Institutions and a Community outreach programme occupying 47.83ha of land at an estimated Ksh 11.8 billion. Realization of the Model will however require back-‐up as follows:-‐

9.4.1: Intervention to increase access to raw materials Intervention here should target long-‐term focussing of livestock breeding to curb inbreeding backed up by streamlining to the H/S sector to curb production and collection related losses and defects.

9.4.2: Policy level intervention Need to curb dumping of cheap imports: Kenyan leather footwear manufacturers are persistently struggle to ward off a severe onslaught from cheap shoes dumped into the market from China, Ethiopia and other competitors while the mitumba factor strongly puts in check attempts to manufacture high end leather shoes. Policy intervention to legally seal all loopholes exploited by unscrupulous traders is required as safeguard to national investments in the LIP. Policy Intervention to locally secure Kenyan Wetblue leather: There is need for policy intervention probably through introduction of stiff Export Duty on wetblue exports towards retaining the resource locally. Legislative barriers to non-‐export manufacturers at Kinanie: The EPZ Act caters primarily for exporting enterprises licensed under section 19 of the EPZ Act, CAP 517 but does not allow for accommodation of domestic market oriented manufacturers, including



those that will back up value addition in leather. The proposal here is to allow co-‐location of EPZ enterprises, EPZ business service permit holders and domestic industries in the LIP, but in adequately segregated sections. Export Duty levied on exports of raw hides and skins destined for EPZ tanneries: The proposal here is exemption of export duty on raw hides and skins sourced from domestic market and supplied to the licensed EPZ tanning industries. Absence of Sector Specific Incentives for the leather and leather goods sector: There is currently no specific incentive framework for the leather and leather goods sector, other than the 80% export tax on sales of raw hides and skins to export market. Sector-‐specific incentives proposed to be available to all players including domestic industries operating in the LIP include:-‐





9.4.2: The Conclusion

In the View of this study, the proposed investment in the LIP is entirely technically and economically justified. Care has to be taken to put in place a CETP to mitigate potential impact from the LIP and other neighbourhood operators.



APPENDICES Appendix 1.1: Terms of Reference for the Feasibility Study

Appendix 1.2: Questionnaires for field mapping

Appendix 2.1: Title Deed to LR 2396.

Appendix 7.1: The Land Use Plan for Kinanie



CONFIDENTIAL MARKET SURVEY FOR LEATHER GOODS

USER QUESTIONNAIRE

The government of Kenya plans to set-‐up a Kenya Leather Park at Kinanie, Machakos County

as one of the Flag Ship Projects under the Vision 2030 and well spelt up in the second

Medium Term Plan (MTP). This project is being implemented by the Ministry of

Industrialization and co-‐ordinated by the Export Processing Zone Authority (EPZA). The

survey is being carried out to for the purpose of analyzing the economic viability of the

project and make recommendation of the best way of implementing the project.

Name of the Research Assistant…………………………Date……………..

Name of the County……………………………Town……………….

1. Name of the Respondent……………………………………………..

2. Sex M F Tick as appropriate

3. Age (i) below 18 Years (ii) 18 to 25 Years (iii) 25 to 35 Years (iv) above 35 Years

4. What kind of Shoes are you wearing? (i) Leather (ii) Non Leather (iii)Don’t know.

Tick

5. Where did you buy from (i) Local shops (ii) Outside the country

6. If bought from local shops, is it imported (i) Yes (ii) No (iii) Don’t Know

7. If Imported is it (i) New (ii) Used

8. Which type of shoes do you prefer (i) Locally made (ii) Imported New (iii) Imported Used

9. Why do you prefer this type of shoes (i) Durability (ii) Affordability (iii) Good design

(iv) Comfortable to use (v) other Reasons………………………..

10. How many pair of shoes do you buy per year………………….

11. Approximately how much do you pay for a pair of shoes? (i) Locally Manufactured,

Ksh……. (ii) Imported New Ksh……….. (iii) Imported used Ksh………

12. If a parent, how many children are (i) yet to start school(iii) between nursery and

secondary(iii) in college (iv) out of college but under your care



13. How many school shoes (i) d’you buy annually ……………(ii) what is the price

range……

14. Which type of shoes do you prefer for school (i) Locally made (ii) Imported New (iii) Imported Used

15. Why do you prefer this type of shoes (i) Durability (ii) Affordability (iii) Good design

(iv) Comfortable to use (v) other Reasons………………………..

16. How do you dispose of shoes you don’t need (i) sell (ii) give out(iii) throw away (iv)

any other means…………………………

17. How many shoes do you dispose this way per year………

18. Do you ever buy shoes for other people outside yourself, family and children (Y)(N).

Tick.

19. If yes, how many per year……….. and are they (i) Locally made (ii) Imported New (iii) Imported Used.

END OF THE INTERVIEW

Thank you



CONFIDENTIAL

MARKET SURVEY FOR LEATHER GOODS

QUESTIONNAIRE FOR LEATHER GOOD TRADERS

The government of Kenya plans to set-‐up a Kenya Leather Park (Machakos) at Kinanie, Machakos County as one of the Flag Ship Projects under the Vision 2030 and well spelt up in the second Medium Term Plan (MTP). This project is being implemented by the Ministry of Industrialization and co-‐ordinated by the Export Processing Zone Authority (EPZA). The survey is being carried out to for the purpose of analyzing the economic viability of the project and make recommendation of the best way of implementing the project.

Name of the Research Assistant………………………….date………………….

Name of the County…………………………………Town………..…….

1. Name of the Respondent……………………………………………..

2. Sex M F Tick as appropriate 3. Where do you buy your stock (i) Local Distributor (ii) Factory (iii) Import personally.

4. If from any of three, please give details

Nature of source Country of Origin Quantity (Pairs) bought annually

Price per pair

Local Distributor (i) (i)

Local Distributor (ii) (ii)

Local Distributor (iii) (iii)

Factory (give names) (i)

(ii)

(iii



Import personally

Others

0.

5. Are the shoes you sell (i) Locally Made leather(ii) Locally Made other (iii) Imported (iv) Both Locally made and imported

6. If imported are they (i) New (ii) Used (iii) Both New and Used

7. If imported new, are they (i) Leather (ii) Non leather

8. How many pairs of shoes do you sell per year? (i) locally made…. (ii) Imported New ……… (iii) Imported new leather……(iii) Imported Used……………………

9. On average how much do you sell per pair of

Type of shoe Locally made non leather

Locally made leather

Imported New Non leather

Imported new leather

Imported Used

Adult Male shoe

Adult Female shoe

Price for school shoe

Sandals

Safari boot

0.



10. Which is the most preferred shoes by your customers (i) locally made (ii) Imported New (iii) Imported Used

11. What do you think the buyers prefer the shoes you sell most? (i) Durability (ii)

Affordability (iii) Good design (iv) Comfortable to use (v) others

reasons………………………..

END OF THE INTERVIEW

Thank you



CONFIDENTIAL MARKET SURVEY FOR LEATHER GOODS

TANNERY COMPONENT QUESTIONNAIRE

The government of Kenya plans to set-‐up a Kenya Leather Park (Machakos) at Kinanie,

Machakos County as one of the Flag Ship Projects under the Vision 2030 and well spelt up

in the second Medium Term Plan (MTP). This project is being implemented by the Ministry

of Industrialization and co-‐ordinated by the Export Processing Zone Authority (EPZA). The

survey is being carried out to for the purpose of analyzing the economic viability of the

project and make recommendation of the best way of implementing the project.

Interviewer:-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ Date:-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ A. PURPOSE OF THE SURVEY Kenya has abundant hides and skins to develop a large leather and leather goods industry. However, the industry today faces many problems and constraints from procurement of hides and skins, through tanning to manufacture of leather goods and their marketing. The purpose of this study is therefore to identify stakeholders in the supply chain, identify the constraints and proposed interventions, identify potential business opportunities and skills needed to improve the sector. Apart from analyzing problems and constraints, the survey will also aim at bringing the various stakeholders together in an apex organization which can lobby for improvements in each segment of the chain. B. GENERAL CHARACTERISTICS OF TANNER b1) Name and Address of Tannery: -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ Address: -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ Fax No.: -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ Email: -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐



b2: Name and position of person interviewed: Name: -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ Position:-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ B3: Type of business (i) Private: -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ (ii) Partnership -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ (ii) Others (specify) -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ B4: Year tannery started: -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ B5) Installed and utilized capacity 2003-‐2007 2003 2004 2005 2006 2007

A. Installed capacity (i) Hides (ii) Skins (pieces)

B. Capacity Utilization (i) Hides (pieces) (ii) Skins (pieces)

C. PROCUREMENT OF HIDES AND SKINS C1. At what stage do you procure your hides and what percentage of each type? Stage/type Percentage

Raw

Green

Wet salted

Air-‐dried

Other (specify)

C2. What are your sources of hides and what percentage is supplied by each source?



Source Percentage Supplied (%)

1. Big Slaughterhouse

2. Small slaughterhouse

3. Largescale trader

4. Small-‐scale trade

5. Others (specify

C3. What are the purchase prices by grades? Hide (sh/kg) Sheep skin (sh/pc) Goatsking (sh/pc)

Grades

I

II

II

IV

Rejects

C4: Do you collect hides/skins from traders/source store? YES NO C5: If YES, what are the transport costs and other charges per MT? Kshs.-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐/MT



D. TANNING OF HIDES AND SKINS D1: To what stage do you tan hides and skins and what percentage or quality do you produce of each type? Type Pickled Wet-‐blue Crust Finished

Hides – Pieces - % - Sq feet

Sheepskins – pieces - % - Sq feet

Goatskins – Pieces - % - Square feet

D2: What factors influence the level to which you tan your hides and skins?

- - - -

E. COSTS OF TANNING AND VALUE ADDITION E1: Costs of tanning to wet-‐blue leather Raw Material Number

Amount tanned at ago - Hides (NO) - Sheep skins (No) - Goat skins

Purchase price Kshs/unit

- Hide (shs/kg) - Sheepskins (sh/piece) - Goatskins (sh/piece)

Tanning Costs Kshs/unit or bunch



(Estimate cost/bunch/unit) i) Chemical costs (List the chemicals)

- - - -

(ii) Cost of Labour (per unit/bunch) (iii) Cost of utilities

- Water - Power

(iv) Production overheads

TOTAL COSTS

E2) Cost of tanning to crust leather Raw materials Square feet

Please indicate amount of wet blue tanned at once)

- Leather hide – wet blue - Leather sheep – wet blue - Leather goat – wet blue

Purchase price Kshs/square foot

- Hides (wet blue) - Sheepskins (wet blue) - Goatskins (wet blue)





- - - - -


- Water - Power


TOTAL COSTS

E3: Tanning to Finished Leather Raw Material Square feet

(Please indicate amount of crust leather tanned at once)

- Leather hide (crust) - Leather sheep (crust) - Leather goat (crust)

Purchase price - Hide – Leather (crust) - Sheep leather (crust) - Goat leather (crust)

Kshs/square foot





- - - - -


- Water - Power


TOTAL COSTS

F. SUPPLIERS OF TANNING CHEMICALS F1. Suppliers (Please give the names of main suppliers of chemicals, types/names of chemicals and their prices) Name of Company/Address Type/name of

chemical Purchase price/unit



F2: Duties on major tanning chemicals (Please give the percentage of duty on major tanning chemicals) Name of Chemical Type of duty/tax Percent or Kshs/unit

F3. Suggestions on how to lower prices of tanning inputs

- - - -



-‐ F4: Employment situation in the Tannery 1. What is the total employment? -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ 2. What is employment by category? Category No.

1

2

3

4

5

6

3. Among the technical categories, what is the relevant required qualification, status of supply and need for additional training? Category of Technical Staff

Qualification Status of Supply Need for Training

Current qualification

Desired qualification

Adequate Inadequate YES NO

1

2

3

4

5



6

7

8

9

10

G. PROVISION OF BUSINESS SUPPORT SERVICES g1. To your knowledge, what are the business support services available within this sector and who are the providers of these services? S1 Services Providers

1

2

3

g2. What are the services you require and are willing to pay for? S1 Services Approximate Price (Shs)

1

2

3



g3. What associations and institutes (private and public) exist in the total sub-‐sector and what relations do you have with them? -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ g4. Are you a member of any association? Yes, Name: -‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐ No G5: What is the annual contribution? Kshs.-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐/year G6: What services does the association provide to you?

- - - -

G7: What is your opinion on forming an apex organization to represent all stakeholders? YES NO G8: If YES, what should the apex organization provide?

- - - -

G9: If NO, give reasons why you don’t favour the organization? - - -

H. SALES OUTLETS FOR TANNED LEATHER hi: What are the sales outlets for wet-‐blue leather

Wet-‐Blue Leather (Hide) Wet-‐Blue (Skins)

a) Outlets and percentages sold a) Outlet and percentages sold

Outlet name % Sold Outlet name Percent sold



b) Price/sq. ft (Kshs/sq. ft) b) Price/sq. ft (Kshs/sq. ft)

h2: What are the sales outlets for crust leather

Crust Leather (Hide) Crust (Skins)






h3: What are the sales outlets for finished leather?

Finished Leather (Hide) Finished Leather (Skins)






I : EXPORT TRADE IN LEATHER I1: Do you export leather? YES NO I2) If YES, what type of leather and to what countries? Type of Leather Export Countries % of each type

(i) Wet-‐blue -‐ Hide -‐ Sheep -‐ Goat

(ii) Crust Leather – Hide -‐ Sheep -‐ Goats

(iii) Finished Leather – Hide -‐ Sheep -‐ Goat

I3: Transport costs to Mombasa a) What type of transport do you use? -‐ Road -‐ Railway b) What is the transport costs from your tannery to: -‐ Mombasa by Road for (i) 20ft container Kshs.-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐/container (ii) 40ft container Kshs.-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐/container -‐ Mombasa by Railway (i) 20 ft container Kshs.-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐/container (ii) 40ft container Kshs.-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐/container I4: What charges do you incur in exports? (i) Customs and exercise (give cost or % charged) -‐ -‐ (ii) Veterinary Department Levies -‐



-‐ -‐ (iii) Export Licence – Kshs.-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐-‐/year (iv) Port charges/container -‐ -‐ -‐ I5: What is the FOB/price at Mombasa? Type of Leather Kshs/MT

(i) Wet-‐blue – Hides -‐ Skins

(ii) Crust – Hides -‐ Skins

(iii) Finished – Hides -‐ Skins

J . CONSTRAINTS IN TANNING SUB-‐SECTOR J1. Please specify the constraints that you encounter in the following areas and also indicate the consequences they can have in the grid below: Area of Operation Constraint Consequence Suggested

Solutions

Market Access 1.

2.

3.

Input Supply 1.

2.

3.



Technology/Product Development

1.

2.

3.

4.

5.

Access to Finance 1.

2.

3.

Infrastructure 1.

2.

Policy/Regulation 1.

2.

Others 1.

2.

3.

4.

5.



K. SWOT ANALYSIS OF THE TANNING SECTOR K1. Please mention specific strengths, weaknesses, opportunities and threats of this sector? Strengths Weaknesses

Opportunities Threats



Appendix 7.1: Land use Plan for Kinanie



THE NATIONAL DEPARTMENT OF PHYSICAL PLANNING

LAND USE PLAN FOR THE LEATHER INDUSTRIAL PARK AT KINANIE IN ATHI RIVER



Table of Contents

EXECUTIVE SUMMARY .............................................................................................................. 3

List of Acronyms .................................................................................................................... 7

1.0: INTRODUCTION ............................................................................................................... 1

1.1: Background ...................................................................................................................... 1

1.2: Sectoral background ....................................................................................................... 1

1.3: Feasibility Study for the Kenya Leather Park (Machakos) .......................................... 2

1.3.1: Objectives of the Study .............................................................................................................. 2

1.3.2: Tasks in the Study ...................................................................................................................... 3

1.3.3: Study Procedure ....................................................................................................................... 4

1.3.4: Output ....................................................................................................................................... 6

2: DISCLOSURE OF THE MASTER PLAN FOR THE LEATHER PARK (MACHAKOS) ...................... 7

2.1: The Vision and Mission ...................................................................................................... 7

2.2: Objectives of the Kenya Leather Park (Machakos) ................................................... 7

2.2.1: The nature of Export Processing Zones .................................................................................... 7



2.2.2: Objectives of the Kinanie Leather Park (Machakos) .................................................................. 8

2.3: Scope and Scale of the proposed Kenya Leather Park (Machakos) ....................... 9

2.3.1: Geographic Scope ..................................................................................................................... 9

2.3.2: Current land-‐use on LR 23961 ................................................................................................... 9

2.3.3: Components of the proposed Masterplan .............................................................................. 12

2.4: Justification of the Master Plan .................................................................................... 14

2.5: Institutional Context ........................................................................................................ 14

3.1: Policy Framework for Development Planning in Kenya ............................................ 16

3.2: The Legal Framework .................................................................................................... 22

3.2.1: Legal foundation to development planning in Kenya .............................................................. 22

3.2.2: Tariff Structure in the leather sub sector ................................................................................ 26

CHAPTER 4: THE PRE-‐PROJECT BASELINE ............................................................................. 28

4.1: The Biophysical Baseline ................................................................................................ 28

4.1.1: Administrative jurisdiction for the Masterplan ....................................................................... 28

4.1.2: Physiography, geologic and site soil conditions ...................................................................... 28

4.1.3: Climate and agro-‐ecology ........................................................................................................ 29

4.1.4: Vegetation: ............................................................................................................................. 31

4.1.5: Hydrology and Drainage .......................................................................................................... 31

4.2: Socio-Economic Baseline ............................................................................................. 33

4.2.1: Administrative jurisdiction ...................................................................................................... 33

4.2.2: Population and settlement patterns ........................................................................................ 33

4.3: Baseline profile specific to Kinanie ............................................................................... 35

4.3.1: Population and settlement patterns ....................................................................................... 35

4.3.2: Physical Infrastructure ............................................................................................................ 36

4.3.3: Status of Socio-‐welfare ............................................................................................................ 37

5.0: LEATHER, HIDES AND SKINS SUB-‐SECTOR IN KENYA ...................................................... 38

5.1: Analysis of local and national economic trends ....................................................... 38

5.1.1: The Perspective ....................................................................................................................... 38

5.1.2: Review of economic performance ........................................................................................... 38

5.1.3: Potential of the Livestock sub sector ....................................................................................... 39

5.2: ............................................................................................ The Leather Industry in Kenya ................................................................................................................................................. 43

5.3: Production patterns ........................................................................................................ 44

5.3.1: The African Perspective ......................................................................................................... 44



Africa’s resources of 230.6 million cattle are estimated to have provide 26.9 million hides (and calf skins) At off-‐take rate of 8.4% for the cattle. The off-‐take rate in Africa is however, much less that the 16.6% observed among developing countries in general, and the 21.2% of the world as a whole. ........................................................................................................................................................... 44

The countries responsible for producing most of the hides in Africa are those already renown for their livestock resources; namely: -‐ Ethiopia, Kenya, Nigeria, South Africa, Sudan and Tanzania which, together with Egypt, account for 63% of all the hides produced in Africa. .......................... 44

Africa’s resources of 241.0 million sheep are estimated to provided 82.8 million skins at 34.4% offtake which is is however much less that the 50.8% observed among developing countries in general, and the 50.1% of the world as a whole. The countries responsible for producing most of Africa’s sheep skins are Algeria, Ethiopia, Morocco, Nigeria, Somalia, South Africa and Sudan, together with Egypt, Libya and Tunisia which account for 65% of all the sheep skins produced in Africa. ................................................................................................................................................ 44

Africa’s resources of 209.3 million goats produce 67.7 million at 32.3% offtake , much lower than the 46.8% observed among developing countries in general, and the 47.2% of the world as a whole. The countries responsible for producing most of Africa’s goat skins are Ethiopia, Morocco, Nigeria, Somalia, South Africa and Sudan, together with Niger, Tanzania, Burkina Faso, Kenya and Egypt accounting for 70% of all goat skins produced in Africa. ........................................................ 45

5.3.2: Kenyan prodcution patterns ................................................................................................... 45

5.3.2: The Tanning Industry .............................................................................................................. 46

5.4: Footwear manufacturing ............................................................................................................ 59

Many formal and informal producers are engaged in the production of school shoes, sandals, military/security boots, and men’s shoes for two reasons: First, there is a high demand. A signifcant share of the Kenyan population is in school and in the working age bracket. Also, rising security concerns due to terrorism and other factors has led to an increased demand of military/security boots over the last few years; Second, these items are considered more as “uniform” products that do not require advanced design capacity or sophistication. These Kenyan-‐made products seldom have high variety and the ones from the informal sector share a similar rudimentary design. This explains the reason behind the meager production of women’s shoes, which tend to be highly trendy and require sophisticated design. ......................................................................................... 62

5.4.3: The Kariakor Cluster ................................................................................................................ 62

5.4.4: Domestic Footwear Market ..................................................................................................... 62

5.4.5: Footwear Exports in Kenya ..................................................................................................... 63

5.4: Manufacture of other leather goods .......................................................................................... 64

5.5: Employment in the Leather Sector in Kenya ............................................................... 67

6.0: LEATHER DEMAND ANALYSIS ......................................................................................... 69

6.1: Overview .......................................................................................................................... 69

6.2: Demand for Leather Products ...................................................................................... 69

6.2.1: Shoes ....................................................................................................................................... 69

6.2.2: Bags .......................................................................................................................................... 75



6.2.3: Jackets ...................................................................................................................................... 76

6.2.4: Wallets ..................................................................................................................................... 78

6.2.5: Belts ......................................................................................................................................... 81

6.2.6: Other leather products ............................................................................................................ 83

6.3: The national demand for leather ................................................................................. 83

6.3.1: Consolidated demand for base year 2015 ............................................................................... 84

6.2.3: Demand/Supply model for base year 2015 ............................................................................. 84

7.0: THE MASTERPLAN FOR KENYA LEATHER PARK (MACHAKOS) ........................................ 86

7.1: Objectives of the LIP ....................................................................................................... 86

7.2: Potential Economic Impact from the LIP ..................................................................... 86

7.2.1: Basis for assessment of economic impact ............................................................................... 86

7.2.2: The potential Economic Impact ............................................................................................... 87

7.2.3: The Need for a holistic focus in the Kenya Leather Park (Machakos) .................. 88

7.3: Priority Intervention in the Kenya Leather Park (Machakos) ..................................... 94

7.3.1: Provision for Primary tanneries ............................................................................................... 94

7.3.2: Capacity building for secondary tanning ................................................................................. 94

7.3.3: Value Addition Parks ................................................................................................................ 94

7.3.4: Installation of Support Infrastructure ..................................................................................... 95

7.3.5: Support Services ...................................................................................................................... 95

7.4: The Investment Schedule .............................................................................................. 96

7.4.1: The Capital Infrastructure Programme .................................................................................... 96

7.4.2: Support Institutions ............................................................................................................... 100

7.4.3: Support Infrastructure ........................................................................................................... 100

7.4.4: Community Support Service .................................................................................................. 101

7.4: Land requirements in the LIP ..................................................................................... 101

7.4.1: Proposed Land Use Plan for the LIP ....................................................................................... 101

7.4.2: Categories of Kenya Leather Park (Machakos) tenants ........................................................ 102

7.4.3: Current provision in the Land use Plan: ................................................................................ 103

7.4.4: Rationalized Land requirement ............................................................................................. 105

7.5: Provisional budget for capital Investment ................................................................ 106

8.0: REQUISITE POLICY SHIFT AND INTERVENTIONS ............................................................ 108

8.1: Policy Challenges ........................................................................................................ 108

8.1.1: Land User Classification ......................................................................................................... 108

8.1.2: Need to curb dumping of cheap imports .............................................................................. 108



8.1.3: Policy Intervention to locally secure Kenyan Wetblue leather .............................................. 108

8.1.4: Legislative barriers to non-‐export manufacturers at Kinanie ................................................ 108

8.1.5: Duty levied on exports of raw hides and skins destined for EPZ tanneries. ......................... 109

8.1.6: Absence of Sector Specific Incentives for the leather and leather goods sector .................. 110

8.2: Proposed Policy Interventions .................................................................................... 110

8.2.1: Towards resolution of Land Use classification ...................................................................... 110

8.2.2: Clarification under Cap 517 ................................................................................................... 110

8.2.3: Export Duty levied on exports of raw hides and skins destined for EPZ tanneries. .............. 111

8.2.4: Lack of Sector Specific Incentives for the leather and leather goods sector ......................... 111

8.3: Proposed Incentive package ..................................................................................... 112

8.2.1: Incentives provided under the EPZ Act ................................................................................. 112

8.2.2: Other requisite cushioning ................................................................................................... 113

i) Provision of a Common Effluent Treatment Plant to cut down on investment costs ............... 113

ii) Provision of shared production equipment especially for clusters based in the Value Addition Parks. ......................................................................................................................................... 113

iii) A skills upgrading programme to support EPZ Investors .......................................................... 113

9.0: CONCLUSSION AND RECOMMENDATIONS ................................................................... 114

9.1: Overview ........................................................................................................................ 114

9.2: Other major findings .................................................................................................... 114

9.2.1: Trends in Leather Production ................................................................................................ 114

9.2.2: Trends in Leather allocation .................................................................................................. 114

9.2.3: Demand for leather ............................................................................................................... 114

9.2.3: Potential Impact of the LIP .................................................................................................... 115

9.4: The LIP Model ................................................................................................................ 115

9.4.1: Intervention to increase access to raw materials ................................................................. 115

9.4.2: Policy level intervention ........................................................................................................ 115

APPENDICES ......................................................................................................................... 117

List of Maps Map 1: Location Plan ................................................................................................................................................................ 3

Map 2: Land Suitability Analysis ...................................................................................................................................... 18

Map 3: Land Use Structure Plan ........................................................................................................................................ 22



List of Plates Plate 1: Existing Vegetation Cover ................................................................................................................................... 11

Plate 3: A section of Mutongoni (Joska-‐Kenanie) Road .......................................................................................... 13

Plate 4: A newly sank Borehole ......................................................................................................................................... 14

Plate 5: River Athi’s Dry Bed and Eroded banks ....................................................................................................... 17

List of Tables Table 1: Land Requirement ................................................................................................................................................ 19

Table 2:Land use budget ...................................................................................................................................................... 20

Table 3: The land requirement for the various categories of industries ........................................................ 25

Table 4: Industrial development standards ................................................................................................................ 27

Table 5: Land use requirement for a neighborhood ................................................................................................ 28

Table 6: Housing typologies and sizes ........................................................................................................................... 29

Table 7: Summary of Residential zone regulations .................................................................................................. 29

Table 8: Recommended power line way leave ........................................................................................................... 34

Table 9: Implementation matrix ....................................................................................................................................... 37

ABBREVIATIONS AND ACCRONYMS

EPZA: Export Processing Zone Authority

LIP: Leather Industrial Park

EIA: Environmental Impact Assessment

EMP: Environmental Management Plan

MTP II: Medium Term Plan II

SME: Small and Medium Enterprises

CETP Common Effluent Treatment Plant

R&D Research and Development



DAP Detailed Area Plan

ICT Information and Communication Technology



CHAPTER 1: INTRODUCTION

1.1. Overview This report is a written statement about the land use plan of the proposed Kenya Leather Park (Machakos) at Kinanie in Athi River, Machakos County. Accompanying the written statement are the maps and graphics to represent the policies and strategies of the land use plan.

The preparation of this plan is in response to a request by Export Processing Zones Authority to the National Department of Physical Planning to prepare a land use plan for parcel Land Reference No.23961 measuring approximately 301 hectares located at Kinanie in Athi River to facilitate establishment of a Kenya Leather Park (Machakos) and related activities.

The preparation of the land use plan will entail designation of various land uses, making provision for proper and efficient circulation, green spaces and commensurate utilities and services.

Presently in Kenya, there are seven EPZs located in the Nairobi, Athi River, Mombasa, Kilifi, Malindi, Voi, and Kimwarer in the Rift Valley region. These zones are managed and promoted by the Export Processing Zones Authority (EPZA) and offer a range of attractive incentives to ensure low cost operations, fast set up, smooth operations and high profitability. The EPZs have been established to promote, attract, and facilitate investment by reducing the cost of doing business.

The establishment of a Kenya Leather Park (Machakos) will be a unique milestone for the country as it will be the first of its kind focusing on leather and leather related products. It will contribute towards promoting the development of Small and Medium Industries, enhance value addition to livestock resources, attract local and foreign investment, create an enabling environment through improved infrastructure, facilitate transfer of technology, and promote productivity and competitiveness of enterprises.

1.2. Purpose Objectives and Scope of the plan

1.2.1 Purpose The land use plan will provide a framework for development of the land while ensuring efficiency, compatibility of uses and environmental sustainability. The main purpose of this plan is to:

• Provide a basis for determining various leather and leather related land uses and their land requirements



• Provide a basis for the provision of efficient transportation, infrastructure and services to create an enabling environment for establishment of leather and leather related industries

• To formulate development/zoning guidelines and regulations to facilitate optimal/sustainable use of the land

• Provide a basis for undertaking environmental conservation • Provide a basis for phasing of projects

1.2.2 Objectives of the Plan The overall objective is to prepare a land use plan to facilitate the development of an economically, socially and environmentally sustainable Kenya Leather Park (Machakos).

1.2.3 Scope the Plan The land use plan is a short to medium term plan covering a period of between 5 to 10 years. It will cover the whole parcel of land reference number 23961 measuring approximately 750 acres located at Kinanie in Athi River.

The parcel of land will have two distinct uses namely sewerage treatment plant and Kenya Leather Park (Machakos). The sewerage treatment plant will take up approximately 250 acres while the Kenya Leather Park (Machakos) will occupy approximately 500 acres.

The issues to be addressed include leather and leather related industries, transportation, public purposes, residential, commercial and public utilities.

1.3. Geographic Location The site of the proposed development is Kinanie area within Mavoko Sub-‐County, approximately 7km from Kinanie shopping Centre and 15km from Athi River Township along Mombasa road. The property is accessed from Mombasa road at Kenya Meat Commission via a 30m all-‐weather road (Motongoni road) linking Athi River to Kangundo road at Joska shopping Centre.



Map 1: Location Plan

Source: National Physical Planning Department, 2015

1.4 Methodology The preparation of the land use plan entailed undertaking the following activities:

1.4.1 Secondary data sourcing and Review This involved obtaining the relevant topographical sheets and survey maps. Further, the client furnished us with

1.4.2 Reconnaissance Survey Reconnaissance survey was undertaken to appreciate the site and the surrounding areas. This was instrumental in ascertaining the boundaries of the land, appreciating the topography and the land use activities within the land and in the surrounding areas. This also provided an opportunity to determine the data needs for planning.



1.4.3 Base map preparation The preparation of the base map was guided by information obtained from both primary and secondary sources. Picking of both natural and manmade features was undertaken by use of a GPS.

1.4.4 Benchmarking Desktop studies were undertaken to identify best practices in industrial park planning which informed the preparation of the land use plan. Some of the countries where industrial park planning has been undertaken with a degree of success include India, Turkey, Durban, and Mauritius. The best practices learnt include:

• Space requirements: amount of land required for various land uses; • Infrastructural requirements: the physical, technological and marketing

infrastructure requirements; • The typical land uses of an industrial leather park; • The development standards for various land uses within an industrial park.

1.4.5 Designing of the land use plan Based on the results of the site analysis and after isolating areas that are not available for developable, areas available for development were then designated for various land use. An efficient transport network was also proposed.

1.4.6 Expected outputs • A land use plan indicating the proposed land uses; • Indicative maps and graphics to demonstrate the plan proposals; • A written report to accompany the plan.



CHAPTER 2: PLANNING CONTEXT

2.1 Overview The preparation of the land use plan for the Kenya Leather Park (Machakos) is underpinned policy framework (Kenya Vision 2030, the second Medium Term Plan, and the National Industrial Policy), legal framework, the LIP project proposal, stakeholder concerns, and site and context analysis as well as best practices from other jurisdictions.

2.2 Policy framework

2.2.1 Kenya Vision 2030 The preparation of the land use plan is premised on the Kenya Vision 2030 which is the country’s development blueprint which aims to transform Kenya into a newly industrializing, “middle-‐income country providing a high quality life to all its citizens by the year 2030”. Manufacturing which is identified as one of the key drivers and aims at achieving a “Robust, Diversified and Competitive Manufacturing Sector.”

Kenya Vision 2030 overall goal for the sector is to increase its contribution to Gross Domestic Product (GDP) by at least 10% per annum and propel Kenya towards becoming Africa’s industrial hub. The sector has a high potential of employment creation; provide stimulus for growth of the agricultural sector and offer significant opportunities for export expansion.

The establishment of the Kenya Leather Park (Machakos) therefore is an important step towards supporting implementation of the Kenya Vision 2030 flagship project of establishing economic clusters. The concept of clustering is imperative as it will not only take advantage of economies of scale, it will also offer opportunity to optimize the use of installed infrastructure and services.

2.2.2 Second Medium Term Plan (MTPII) 2013-‐2017 The Second Medium term Plan (MTPII) of the Vision focuses on the establishment of Industrial parks in various places to act as magnets for foreign direct investment (FDI), to promote value addition, and to develop technical skills. All this is necessary in order to address the acute challenges of poverty, joblessness, and inequality and to facilitate faster realization of Kenya Vision 2030.



The MTPII advocates for the development of SMEs and Industrial Parks in each of the 47 counties to attract new companies expand employment opportunities to citizens and attract FDI. The parks will offer infrastructure and shared resources such as power supply, telecommunication hubs, management offices, and internal transportation.

The MTPII supports adoption of industrial Clusters approach as a development strategy to focus on market-‐oriented research, value addition, and marketing of region specific products through the support of academia, the private sector, and related actors. The Sector will pursue the development of three clusters, which include:

• Meat and leather cluster through establishment of meat processing plants;

• Tanneries and other related industries in Isiolo, Garissa and Kajiado; and

• Promotion of dairy products processing in Kiganjo (Nyeri)

The establishment of the Kenya Leather Park (Machakos) is therefore consistent with the requirements of the second Medium Term Plan that is under implementation.

2.2.3 Kenya National Industrialization Policy Framework, 2010 The National Industrialization Policy aims to spur economic growth in Kenya through industrialization in order to create employment and contribute to the growth of GDP. Under the policy, the industrial sector is projected to grow by at least 15% per annum by 2017, by creating an enabling environment for a robust, diversified, competitive, and innovative industrial sector.

The overall objective of the policy is to sustain the growth of the industrial sector and make it the most preferred location for industrial investment.

The Kenyan leather industry is a prime agro-‐based sector with a high potential for economic development and promotion for employment opportunities. The industry will have strong backward and forward linkages that will provide opportunities for value addition using locally sourced raw materials.

The leather industry in Kenya is made up of four main sub-‐sectors, Raw material base (hides and skins), Tanneries, Footwear, and Leather goods manufacturing. The challenges



facing the sector include; low recovery of hides and skins due to poor slaughtering and flaying practices; and poor animal husbandry among others. Other challenges include export of raw hides and skins; and importation of second hand leather products.

The proposed Kenya Leather Park (Machakos) is in line with the objectives of the national industrial policy framework of creating an enabling environment for industrial development, enhancing value addition, and promoting development of SMEs. It will also be an attempt at addressing the current challenges faced by the sector.

2.3 Legal Context

2.3.1 The Physical Planning Act, 1996 The Physical Planning Act provides for the planning of all land within both urban and rural areas. This is the primary statute that provides for administration, types, content, process, and approval of various types of Plans. The land use plan has been prepared within the provisions of the Physical Planning Act.

2.4 Historical Context Export Processing Zones may be defined as fenced-‐in industrial estates specializing in manufacturing for exports that offer firms free trade conditions and a liberal regulatory environment (World Bank, 1992:7).

In Kenya, the first Export Processing Zone (EPZ) program was established in 1990 to provide an attractive investment opportunity for export-‐oriented business ventures within designated areas or zones. This sought to help the economy through increased productive capital investment, jobs generated, technology transferred, backward linkages developed and diversified exports.

Kenya's export Processing Zone Authority (EPZA) has been in the forefront of initiating, promoting, and providing attractive investment opportunities for the export-‐oriented business ventures in the country.

The individual EPZs are located in the capital city of Nairobi, Athi River (only 25 km from Nairobi), the Indian Ocean port city of Mombasa, nearby Kilifi and Malindi along Kenya's North coastline, Voi and Kimwarer in the country's inland Rift Valley region. Together they are constituted under the umbrella of and managed and promoted by the Export Processing Zones Authority (EPZA)



As a catalyst for investment and economic growth, the EPZA has conceived programs and policies that are intended to foster a bright investment for investors and further encourage them to take advantage of the numerous opportunities the country offers. This is by virtue of its distinctive location as the 'gateway to East Africa', the investor-‐friendly fiscal and monetary policies, supportive political frame work, well established private sector, the entrepreneurial facilities, the social amenities and the quality of life in the country.

The primary goals of an Export Processing Zone are:

1. To provide foreign exchange earnings by promoting non-‐traditional exports;

2. To provide jobs to alleviate unemployment or under-‐employment problems in the country and assist in income creation;

3. To attract Foreign Direct Investment (FDI) and engender technological transfer, knowledge spillover and demonstration effects that would act as catalysts for domestic entrepreneurs to engage in production of non-‐traditional products.

Although Kenya has experienced improved clothing and textile export performance since the inception of the EPZ program in the 1990’s, the country has not managed to secure its share of the global clothing and textile trade market. This is attributed to the adverse impact brought about by unfavorable local business environment which is characterized by high cost of production especially power tariffs that remain a challenge towards realization of the EPZ program potential. This is exacerbated by competition from more efficient Asian apparel/garment exporting countries like China, India, Bangladesh, Cambodia, and Vietnam among others.

Another challenge to the program is the enlargement of the domestic market to include East Africa Community (EAC), which means that EPZ firms have to sell only 20% of their annual production into the domestic market. This has adversely affected enterprise targeting EAC market. These challenges among others have contributed to the poor performance of the EPZs in the country.

2.5 LIP Project Proposal The preparation of the land use plan was largely guided by the project proposal prepared by EPZA. EPZA intends to establish a Kenya Leather Park (Machakos) in Kinanie to process



leather and leather based products. It is expected to provide demand-‐driven services and facilities to the same.

It will be established as an eco-‐friendly, world-‐class production facility, incorporating best practice in economic and social facility design, cluster formation, export promotion, effluent treatment and pollution control.

From the proposal, it is evident that the LIP is designed to address constraints facing Kenya’s leather sector with particular emphasis on increasing the economic contribution of the sector and enhancing the long-‐term sustainable growth of the value chain. The LIP is intended to accelerate the attainment of the sector’s potential for contributing to Kenya’s industrial sector.

The EPZ proposes to development the LIP as follows:

a) Infrastructure

This includes: Paved roads covering an entire length of about 5Kms; 5Km Sewer line; 5Kms Street Lighting with 35M spacing between poles; a proposed power substation; Water boreholes in different areas within the zone; Storm Water drains, culverts; and Common Effluent Treatment Plant (CETP).

b) Tanneries(200,000 M2)

Establishment of tanneries will be done in 2 phases: 20 Tanneries in Phase 1 and 16 Tanneries in phase 2. Each tannery will be on 1 ha plot.

c) Value Addition Parks (60,000 M2)

The development of Value addition Park proposes 8 leather value addition centers each sitting on 1ha plot in Phase 1 and ten (10) leather value addition centers in Phase 2. The

The value addition park is aimed at using the finished leather to add value to finished products.

d) SME PARK ( 15,000M2)

The park will house value addition activities and will target the small micro enterprises dealing with Leather products. Most of the products here will be targeting the domestic market. Sheds within this development will range from 350M squared to a maximum of 750M squared

e) Trade Centre – (8500 M2)



This will house activities that promote trade and development of the leather industry business. It will consist of: Conference facilities (1000 Pax Capacity); Exhibition Floors for the (space of approximately 1500M2); Shopping complex for leather products-‐ shoes, belts, bags (1500 M2); Offices for institutions; Common facilities-‐ toilets, restaurants, etc.

f) Research and Development Centre ( 5,000 M2) The center will have several departments promoting development of leather industry mainly in quality control in processing and production of quality skins and hides together with leather industry information dissemination.

g) Administration Centre (2500M2) This will house the regional management offices for

• Regional Manager for the zone • Managers for Support services • Manager for Utilities

h) Logistics and Customs Offices (3000 M2)

This will house government regulatory authorities and other organizations facilitating the free outward of movement of goods and raw materials: KRA Offices, Clearing and forwarding Agencies, KEBS Offices and Weights and Measures Department.

i) Housing estate: (20,000 M2)

The park will partly cater for the accommodations needs for all level workers in Phase 1 and Phase 2. The proposed housing typologies include:

• 4 Bedroom executive Apartments-‐ 10 No. of Blocks each with 8 Units

• 3 bedroom Apartments – 10 No. of Blocks each with 8 Units

• 2 Bedroom Apartments – 10 No. of Blocks each with 16 no. of Units

• 1 Bedroom Apartments -‐ 10 no. of Blocks each with 32 No. of Units

• Bedsitters Apartments – 10 No. of Blocks each with 64 No. of Units

• Green open spaces for children’s play areas, a kindergarten school, and 3000 M 2 shopping and commercial Centre to cater for the residents.

j) Utilities and Services ( 600 M2)

This will house the power plant, the workshops, the water offices, Power offices, estates department among others.



k) Common Effluent Treatment Plant (CETP) and Landfill

Effluent treatment from the tanneries as well as recycling of such waste will take place in the CETP while the landfill will handle solid waste from both the tanneries and the rest of the land uses.

The LIP proposal outlined in detail policy challenges, which could hamper the success of the project and provides possible solutions for the same including recommending the preparation of a land use plan to cater for the dichotomous activities to be catered for within the cluster. Indications of land used to be provided are given in the proposal including the requisite support infrastructure and services.

2.6 Stakeholder Context The preparation of the land use plan was informed and took into consideration concerns of the various players identified by EPZA. The EPZA held discussions with the following actors who were considered key to the success of the LIP.

• Ministry of industry, Investments and Trade

• Kenya Leather Development Council

• Kenya Investment Authority

• Kenya Industrial Research and Development Institute (KIRDI)

• Kenya Revenue Authority

• County Government of Machakos

• Leather sector trade associations

• The National Physical Planning Department



CHAPTER 3: ANALYSIS

3.1 Site Analysis Using the base map an in-‐depth site analysis was conducted to delineate the physical characteristics, land properties, environmental characteristics, existing developments, and existing transportation networks. The development and expansion pressures require careful management in order to preserve natural systems and the functions they support, inside and outside the sites earmarked for development environment.

3.1.1 Topography The land slopes gently from the East general direction to the West towards Athi River. However, there are trough-‐like features within the site forming water retention channels and exhibit characteristics of a series of wetlands.

3.1.2 Vegetation cover Eucalyptus trees occupy the lower part of the parcel all the way to the riverbank while the rest of the land is made of short shrubs and grass. There are acacia trees in the wetland areas.

Plate 1: Existing Vegetation Cover

3.1.3 Geology and Soils Geologically, the area consists of Basement System, which is part of the Mozambique Belt: a complex of metamorphic, igneous, and sedimentary rocks. The soils in the area are mainly

Source: Field Survey, 2015



black cotton soils and show a strong coherence to the different rock types and landforms. The rock system forms a firm base for development and it requires minimal excavation hence ideal for the proposed application under consideration.

3.1.4 Rainfall and temperature The area receives annual average rainfall of 876-‐1306mm. The rainfall pattern is bi-‐modal with first rains starting at the end of March and second starting in September. The area is characterized by annual mean temperature ranging from 21.2 to 27.8 degrees centigrade.

3.1.5 Drainage system The River Athi borders the property to the west. There are two depressions (valleys) cutting through the property running from the treatment works to the river.

3.2 Population dynamics A high population is anticipated in the Kenya Leather Park (Machakos) upon its establishment. In the industrial zone, each hectare will host approximately 8,000 workers. Based on this, the project will introduce approximately 500,000 people upon its full establishment. This will includes employees and their families, suppliers, clients, service providers among others. Approximately, 1% of this population will be accommodated within the facility.

This population will exert pressure on the social amenities such as water, housing, health Centre among others. There is therefore need to provide adequate physical and social infrastructure such as parking, banking services, hotels, shopping Centre among others, putting future population growth into consideration.

3.3 Infrastructure Analysis

3.3.1 Transportation The proposed project site is strategically located in the outskirts of Nairobi City hence easily accessible through A109 (Nairobi-‐Mombasa road), railway line (Syokimau railway station) and JKIA which is in the vicinity. The site is directly accessed through Mutongoni Road (E434), which is about 15m wide and has a gravel surface. There are many trucks (exhauster) ferrying waste from EPZ and Athi river to the existing treatment plant. This leads to wearing of the road resulting to a very rough and dusty surface calling for regular grading to make the road smooth and passable throughout the year. Therefore, the road is in poor condition and needs urgent upgrading in order to attract the prospective investors in the proposed project.



Plate 2: A section of Mutongoni (Joska-‐Kinanie) Road

There are internal roads (tracks) serving the proposed site. Some of them have been adopted in the plan and will be upgraded to the required standards. Ideally, roads within an industry should be wide enough to accommodate the high capacity vehicles such as trucks and trailers hence the need for 30M wide thoroughfares and 15-‐18m access roads.

Currently there is ample space for parking since the existing developments occupy less than 20% of the plot area. In addition, most of the vehicles do not spent a lot of time on the site. However, the increase of people and activities will increase vehicular flow hence there is need to create ample parking spaces for the large capacity vehicles, private as well as public transport vehicles.

A multimodal public transport system must be provided to increase accessibility of the proposed industrial park as well as lower transportation cost of both finished and raw materials. Pedestrian zones and bicycle tracks should be provided for in the transport master plan so as to encourage green transportation which is environmental friendly and more affordable to all.




3.3.2 Energy Adequate and reliable energy supply is a critical input to the tanning process and the general running of the entire industry. There is electricity on the site from the national grid, which is expected to serve the entire park. A power station should be provided on the site to take care of the massive energy demand in the industry (the amount of energy to create a leather hide is 20 times greater than that to produce a synthetic material). In addition, standby generators will be required to ensure continuity of the processes even during a power blackout and surge.

Since the area is hot for the better part of the year, there is potential for solar and wind energy which can be harnessed to generate electricity. Biogas can also be tapped from the tannery waste and decomposing household waste.

3.3.3 Water and Sanitation

Currently, three (3) boreholes have already been sunk within the site and more are yet to be sunk to meet the water demand. In addition, the property borders Athi River, which can be a source of water. However, water has been over abstracted for irrigation in the nearby farm and the river is almost drying up. Rainwater can also be harvested to boost water supply. Plate 3: A newly sank Borehole




The leather industry is highly water-‐intensive. Each tonne of hide/skin tanned requires over 40,000 liters of water. Hence even a small tannery with a capacity to process 3 to 4 tonnes a day uses up well over 100,000 liters of water a day—the daily household requirement of at least 2,500 people.

Daily domestic water demand (for a resident population of 3,840) in the LIP will be approximately 153,000 L (about 40L per person) while Industrial water demand will be approximately14, 400,000L (14.4M3) (see the calculations below).

Each tannery will be processing 10 tonnes of hide/skin per day and since processing tonne of hide / skin requires 40,000L, it translates to one tannery requiring approximately 400,000L daily. Therefore, the first phase which will have 20 tanneries will require approximately 8,000,000 (20*10*40,000) and in Phase II, 16 Tanneries will require additional 6,416,000(16*10*40,000).

Thus, uninterrupted water supply with consistent water pressure must be provided. The provision of service reservoirs and where necessary, elevated storage tanks is recommended for all water supply utilities. In particular, hospitals, institutions, and industrial plants should be provided with separate elevated storage tanks.

The current sewage lagoons are within the property, however to ensure acceptable standards of cleanliness, the leather industries will develop their own treatment works (ETP) before discharging into the main ponds. However, municipal waste and storm water will be channeled to the existing treatment plant.

3.3.4 Solid Waste Management Solid wastes generated in leather industries contribute mainly skin trimmings, Keratin wastes, fleshing wastes, chrome shaving wastes and buffing wastes (only 20% of hide/skin is converted to leather). It constitutes protein as the main component. If these protein and other chemicals, which are present in the chemical treated protein, are not utilized properly it will pose hazardous pollution problem to the environment.

In addition, other light industries, household and commercial areas as well generate solid waste hence the need for a proper waste management system to manage the solid waste.



On the other hand, however, the solid waste can be recycled to produce biogas, which will supplement energy requirement in the industry.

3.3.4 Information Communication and Technology

Information and Communication Technology infrastructure is a key requirement for any industry. Effective and reliable communication is necessary for smooth operation of the industry. There is adequate telecommunication coverage by Telkom landline, wireless, and GSM mobile phone connections at the site. Safaricom, Orange, Airtel have strong signal links in the area. The adequacy of access by many motorable roads provides efficient access to various post offices and courier services.

Fiber optic cabling network (designed to support a wide range of telephone, video, and data applications) mobile phone networks, television signals among others are some of the communication infrastructure that should be provided.

For purposes of effectiveness and reduction of environmental pollution, appropriate technology must be adopted in the tanning process. The research and development institute, which will be also on the site, will from time to time advise on the most appropriate technology to be adopted.

3.3.5 Social infrastructure

The provision of adequate social infrastructure is fundamental to ensuring people are safe, healthy and productive in the community. Social infrastructure includes a wide range of services and facilities, including health, education, community, cultural, play, recreation and sports facilities, faith, emergency facilities and many other local services and facilities that contribute to quality of life.

Presently, there are no social infrastructure facilities in close proximity to the site as the nearest facilities are at Kinanie centre, which is about seven (7) km from the site. It is there imperative that social infrastructure be provided to serve not only the resident and non-‐resident population within the industrial park but also the neighboring community.. The facilities to be provided include:



• Health Centre

• Education: primary school and a training Centre

• Community Centre

• Recreational areas

3.4 Environmental analysis

3.4.1 Waste products and pollution The leather industry throughout the world has been identified closely with the generation of air, liquid and solid waste pollution. The primary environmental threat involves the dumping of solid and liquid waste that contains leftover chromium and other hazardous compounds.

Leather production entails the use of a variety of chemicals that are harmful if released into the environment. Water pollution is caused through discharging tannery effluent (contains large amounts of pollutants, such as salt, lime sludge, sulfides, and acids) into the rivers and water bodies. Groundwater near tanneries has been found to have highly elevated levels of a variety of toxic substances such arsenic, chromium, lead, and zinc.

The leather industry can affect air quality in the vicinity of tanneries by emitting contaminated air containing hydrogen sulfide (used for dehairing) and ammonia (used for deliming solvent vapors). When inhaled, chromium acts as a lung irritant and carcinogen, affecting the upper respiratory tract, obstructing airways, and increasing the chances of developing lung, nasal, or sinus cancer.

Finally, has indicated above, tanneries produce huge quantities of solid waste, which pollutes the land even if it is dumped in a landfill.

3.4.2 Fragile ecosystem The River Athi, which borders the property to the west, is seriously eroded and is experiencing over-‐extraction of water for irrigation in adjacent farms. In addition, during rainy seasons, the river breaks its banks sometimes affecting some sections of the proposed site. Flooding mitigation should therefore be come up with to prevent such menace in the within the Industrial park.

Plate 4: River Athi’s Dry Bed and Eroded banks




There are wetland areas within the proposed site which include 2 depressions (valleys) cutting through the property running from the treatment works to the river. They contain wastewater from the treatment plant. No development should take place on them and a green buffer should be provided to protect them and make them more attractive for recreational purposes.

3.2Land Availability Analysis Land Suitability analysis was carried out to mitigate the adverse effect on land resources in both the short term (soil erosion, unsuitable water table) and long term (groundwater pollution, septic system failure, increased runoff pollution). This was guided by the following principles in mind:

• Minimizing the costs for provision of public services • Enhancing optimum utilization of land, especially critical in terms of industrial

development, affordable housing, and regional service centers. • Dictating future land use patterns that are manageable both financially and

environmentally • Mitigating natural hazards like flooding that may result from encroachment on

flood plains and wetlands

After undertaking a land suitability analysis through sieving, three categories of land were identified namely; developable land, developable with constraints and non-‐developable as depicted in the figure below.

Map 2: Land Suitability Analysis



Developable land with constrains requires mitigation measures to prevent occurrence of impeding potential threats A detailed SEA should be carried out to determine appropriate mitigation measures for these areas. Undevelopable land on the other hand will be used for environmentally friendly land uses such as recreation and conservation.

3.5 Land Requirement Analysis The intention of this assessment is to establish the types of land uses (Primary and secondary) and the land required (size) for each land use within LIP. The table below summarizes the land requirement for the LIP.

Table 1: Land Requirement

Category Land use Subzone Size in Ha Remarks




Primary Industrial Heavy 33 Proposed

Light 17

Secondary Residential -‐ 22.2

Education Primary 3.9

Training and Research 6.9

Recreation Green buffer zones …..

Central green …..

Public purpose Administration 8.1

Health Centre 2

Customs and Logistics 8.5

Community centre 1

Commercial SME 11.4

Trade and Display 6.3

Shops and hotels 2.1

Public Utilities Boreholes 0.15

Power Station 0.4

Fire station 1

Land Fill 9.4

Effluent Treatment Plant

9.5

Waste water Treatment Plant

81 Existing

Transportation Roads … Proposed

Parking …




CHAPTER 4: PROPOSALS

4.1 STRUCTURE PLAN

4.1.1 Overview A structure plan is a long term (10-‐15 years) statutory framework used to guide the development or redevelopment of land. It is used to define; future development and land use patterns; the layout of trunk (primary distribution networks) infrastructure and main transportation routes, including terminals; conservation and protected areas; and other key features for managing the direction of development.

The purpose of this structure plan is to apportion various land uses allocating as much land as required for each category. Other main functions of a structure plan are to:

1. Identify areas suitable for development to ensure that land in moribund land uses is utilized more effectively in the changing economic reality;

2. Ensure patterns and intensities of development are coordinated and compatible between existing and proposed areas of development to ensure that new developments make efficient use of areas resources/facilities and services.

3. Identify sensitive areas where special controls are needed especially for protection of natural resources to make most efficient use of an area’s resources/facilities/resources and safeguard for future generations;

4. Coordinate the staging of development over time, particularly where large areas are to be developed

5. To provide a coordinated approach to infrastructural provision and other land uses across the parcel.

4.1.2 Land Use Budget The table below shows the proposed land use budget in the LIP.

Table 2:Land use budget

Land use category

Specific land use Size (Ha) Percentage

Industrial Heavy industries (tanneries) 33



Light Industries (Value addition Parks)

17

Residential Residential: low, medium and high density

22.2

Educational Primary School and ECDE 3.9

Training and Research & Development Centre

10.0

Recreational Recreation and conservation areas (Parks/green spaces)

….

Public purpose Health center 2

Administration 8.1

Customs/logistics Centre 8.5

Community Centre/Social Hall 1

Commercial SME Park 11.4

Trade and Display Centre 6.3

Shops and hotels 2.1

Public Utilities Boreholes 0.15

Landfill 9.4

Common Effluent Treatment Plant 9.5

Fire Station 1

Power Substation 0.4

Transportation Road ….



Parking ….


Map 3: Land Use



Structure Plan




4.1.3 General zoning regulations

i. Environmental conservation A comprehensive Environmental Impact Assessment must be undertake to determine the potential negative impacts of the industry operations and its related land uses to the environment (air, water and soil) and propose a mitigation measures through an Environmental Management Plan(EMP) which MUST be adhered to. Annual environmental audits shall be carried out to establish the implementation of the measures provided in the EMP.

ii. Transportation infrastructure The plan proposes that approximately 15% of the planning area will be used for transportation. Road network: A hierarchy of roads ranging from 12m to 30m and service lanes of 9m has been proposed. Drainage, associated way leaves, pedestrian walkways, cycle lanes, and other non-‐motorized transport infrastructure shall form part of the road network. Trucks parking will be provided in the Customs and Logistics zone. Each zone/cluster will have its own parking for the employees and clients as well as loading areas for trucks.

Transport development standards

a) Roads A proper road network for easier accessibility of all the land uses must be pro vide in view of the provisions of this land use plan with the following road carriage sizes:

i. Primary – 30-‐36m ii. Secondary – 18-‐25m iii. Local distributor – 12-‐15m iv. Access-‐

• Cul-‐dec-‐Sac or short connecting road not exceeding 60m -‐ 9m • Service lanes -‐ 6m. • Cyclist lanes -‐ 3m • Footpaths -‐ 2m.

All roads must be designed to include drainage channels (way leave will range between 3m-‐4.5m), pedestrian walkways (footpath), cycle lanes, as well as crossing points. Proper road markings and signage are important for safety of the entire population and direction to the visitors. Street lighting should be provided to all the major roads for security purposes.

b) Parking



The maximum distance between a dwelling and its associated parking area should be 50m. A standard of 15-‐35 square meters parking space per car is recommended. The dimensions recommended are: (a) Flush Parking 5.0-‐5m by 2.5m for cars 10.0m by 3.3m for buses 30.0m by 4.om for trailers and trucks. (b) Angle Parking

5.0-‐6.5m by 2.5m for cars 10.0m by 3.3m for buses 40.0m by 2.5m for trailers and trucks at an angle of 30 degrees

Allow 10-‐2 (for every 5persons 1 parking space is required) parking spaces for 3500-‐5000-‐catchment population. Thus, for a population of about 4,000 who will reside in the neighborhood, 800 parking spaces will be required (PPH, 2007)

c) Street l ighting Streetlights will be provided covering the entire length within the development approximately 5Kms with 35 M spacing between poles within the project site.

iv. Disaster preparedness Emergency lanes should be provided within the industrial park for evacuating casualties as well as provision of way for service vehicle such as fire extinguishers.

A fire station will also be set up near the industrial areas to handle any emergency. Hydrants will also be provided in certain strategic points. All buildings should be fitted with working fire extinguishers as well as fire exists and alarms. A fire assembly point should also be provided.

First aid kits should also be available in every cluster place and in vehicles. In addition, the health centre in the industrial park will also handle any emergencies and accidents.

To mitigate the flooding issue, a detailed SEA should be carried out to come up with a mitigation plan and prevent future flooding.



4.2 Detailed Area Plans (DAP)

1.1.1. Overview A detailed area plan gives typical layout of the various land uses/zones for easier implementation. It shows the interrelation between land use, built form, and traffic movements. Each DAP will be guided by provided zoning regulations.

4.2.2 Industrial Heavy Industrial Area (tanneries)

An area of approximately 33 Ha has been proposed for heavy industries in the form of tanneries representing 17% of the planning area. This will be implemented in two phases: 20 Tanneries in Phase 1 and 16 Tanneries in phase 2. Each tannery will sit on 1ha plots.

The zone has further been categorized into three types: a) Type I -‐ 5 plots of 5 acres each (10ha) b) Type II -‐ 15 plots of 2.5 acres each (15ha)

c) Type III -‐ 17 plots of 1.3 acres each (9ha)

Light Industrial Areas Approximately 17 Ha representing 8% of the planning area has been proposed for light industry, which has been earmarked for value addition sites. 18 value addition centers are proposed each on a 1ha plot. The value addition site is aimed at using the finished leather to add value to produce finished products, which will be more competitive in the market. The activities expected in this area are non-‐offensive and can easily coexist harmoniously with other uses. The subzone further has three types:

a) Type I -‐ 8plots of 3.4 acres each (11ha)

b) Type II -‐ 4 plots of 2acres each 3.2)

c) Type III -‐ 6 plots of acres each (2.4ha)

The goods to be produced from the value addition parks include leather garments, shoes uppers, shoes linings, leather gloves, leather upholstery for furniture and chairs, leather belts, car seats covers, leather straps, leather bags, leather key holders, leather pulses and wallets, leather cardholders and pen holders and leather documents folders among others.

Industrial Development Standards



The total site area for a major industrial area should probably lie between 500-‐1200 acres for a town with a population of 200,000 and 5000,000. It will provide between 20,000 and 50,000 jobs, based on an average industrial density of 40 workers per acre. Table 3: The land requirement for the various categories of industries

Type of industry

Land requirement in Ha

Catchment population Minimum land size in Ha

Light 4 30,000 0.05

Medium 10 100,000-‐500,000 2

Heavy none Over 1 million 20

Source: Physical Planning handbook, Kenya The permitted uses within heavy industrial areas include:

i. Preparatory areas/rooms (beam house) ii. Tanning spaces (beam house)

iii. Dyeing spaces

iv. Rolling spaces

v. Finishing

vi. Associated civil works, mechanical works and electrical works

vii. Parking/ loading and offloading zones

viii. Green buffers

The permitted land uses in the light industrial area (value addition parks are as follows: i. Value addition space ii. Display areas iii. Workers changing rooms iv. Offices and boardroom v. Kitchenette space vi. Staff Toilets vii. Stores for raw materials and finished products viii. loading and off-‐loading bays and access ramps, ix. Drive-‐ways, parking areas, other associated Civil, Electrical and Mechanical

Works. x. Green buffers





Table 4: Industrial development standards

Classification

Permitted uses

Min. required parking

Max. f loor area ratio

Max. lot coverage

Max. height l imit

Max. length to width ratio

Setbacks

Landscaping

Minimum yard(building l ine)

Waste management

Heavy industrial

-‐Tanneries and -‐Processing units -‐Loading area -‐Fire station -‐Other associated Civil, Electrical, and Mechanical Works.

-‐1 space for each company vehicle and -‐1 space for each 500 sq. ft. of floor area, whichever is greater.

2.0 35%

13 times buildable area

3:1 3.0 m -‐ where any lot line of a Site abuts a public roadway, other than a Lane.

Each lot shall be graded, landscaped, and planted with trees, shrubs, ground cover, and appropriate natural landscaping materials.

Front yard-‐ 20 Rear yard-‐20 Side yard-‐ 10

-‐All effluent from the tanneries shall be treated in the ETP before being discharged or recycled -‐Solid waste from the tanneries shall be recycled and the non-‐recyclable waste to be disposed off in the landfill.



Light industries

-‐Offices -‐Value addition spaces -‐Storage areas -‐Display areas -‐Other associated Civil, Electrical, and Mechanical Works.

-‐1 space for each company vehicle and 1 space for each company vehicle or -‐1 space for each 500 sq. ft. of floor area.

0.4 45%

13 times buildable area

3:1 3.0 m -‐ where any lot line of a Site abuts a public roadway, other than a Lane.

Minimum landscaped open space on any individual lot shall not be less than 0.10 times the buildable area of the lot

Front yard-‐ 20 Rear yard-‐20 Side yard-‐ 10




1.1.3. Residential The proposed residential land use covers approximately 22.2Ha representing approximately 11% of the entire planning area. The residential detailed plan will comprise of mixed-‐use development, which will be developed in a neighborhood context to include roads with pedestrian walkways, children’s playground, open spaces, commercial shops, and community facilities, among others.

The estate will primarily house workers from all the levels in the park. Once the park is up and running, there will be demand for housing the staff and workers in the neighborhood. The park will partly cater for the accommodations needs for all level workers in Phase 1 and Phase 2.

Residential Development standards

Permitted land uses include limited commercial activities such as shops, cafeteria; community facilities such as social hall; green/opens and a primary school and other public utilities.

Table 5: Land use requirement for a neighborhood

Land Use % of Developed Area

High Density Medium Density Low Density

Dwelling plots 40-‐60 64-‐74 80-‐90

Recreation 21-‐29 7-‐16

Community Facil it ies

5-‐20 9-‐10 0.1-‐1

Roads Streets

4-‐15 1-‐7

6-‐7 3-‐4

8-‐8.8

Source: Physical Planning handbook, Kenya



Table 6: Housing typologies and sizes

Housing typology

No. of blocks

No. of units per block

Size of each block in m2

4-‐Bedroom Apartment

10 8 500 (25 by 20)


10 8 500 (25 by 20)


10 16 300 (15 by 10)


10 32 300 (15 by 10)

Bed-‐sitter 10 64 300 (15 by 10)

Table 7: Summary of Residential zone regulations

Issue Remarks

Street Network and parking At least 30%

Public Open Spaces 15-‐20%

Minimum Floors Four

Ground Coverage 40-‐60%

Plot ratio Ranges from 0.4 to 3.0

Setbacks in meters Front – 3 to 4.5 Rear – 4.5 to 6 Side -‐ 1.5 to 3



Density High density is encouraged A minimum of 150 persons per ha

Housing development Social Mix is promoted -‐ low, middle and high income housing provision

Distance between two buildings

a) The distance between any two dwellings, front to front, across a street, walk or common area shall be not less than 2 times the total height of the taller buildings.

b) Street Width -‐ It is recommended that the width of streets or access lane in a residential area be determined by the number of dwelling units or plots to be served. It is further recommended that the street network be hierarchical so that in the future urban areas will have a high rise urban morphology even in residential areas


4.2.4. Education A Research and Development Centre has been proposed measuring approximately 10 Ha. This site will also house a Training Centre. Apart from undertaking research, the centre will offer training support services to various cadres within the industrial park. A fully pledged primary school measuring 3.9Ha (with an ECDE centre) has been proposed to cater for the projected population of approximately 4,000 people expected to be housed within the residential zone.

Educational Development standards The catchment population of a fully pledged primary school is 4,000 with a walking distance of between 500m to 2 Km. Assuming that there will be 40 pupils per class and the classes will be from standard 1-‐8 and that the school may want to expand facilities in future, an area of 3.9 ha. may be provided as a minimum. However, schools are encouraged to build storied buildings for economy. Some of the facilities that must be provided in the primary school include but not limited



to classrooms, administration block, playground and sports facilities, sanitation block, and laboratory among others

R&D and training centre will include; leather technology division, chemical research division, research utilization & extension division, staff offices, lecture halls/training rooms, students centre and mess, and self-‐contained hostels.

4.2.5 Recreation A total of…..Ha of land has been proposed for recreation and conservation purpose. There are mainly areas found to be unavailable for development but which shall be utilized for conservation and recreation. They include the Athi River riparian reserve, and the riparian reserves along the two streams. A buffer of 60m for Athi River and 30m on either side of each stream is proposed. A green space measuring … Ha will be provided within the site for recreational purposes. In addition, green buffer zones will be provided along the roads for aesthetics as well as between different land uses. It is proposed that the area zoned 3-‐ be developed into a recreational park. Recreational Development standards The buffer zones along the streams and the river will be used as recreational parks. A detailed plan of the Park must be prepared to ensure its sustainability allowing only permitted uses. Some of the uses in the park will include a nature trail (pedestrian walkway and cycle lanes) of 9m, pergolas, among others. Certain vegetation, which are environmentally friendly, will be planted in the park accompanied by landscaping.

Some of the land uses that will have green buffer zones include landfill, fire station, power substation, main arterial roads, and industrial among others. A green/open space will also be provided within the residential zone

4.2.6 Public Purpose

An administrative Centre The administrative subzone covers 8.1 Ha. It is specifically for administration/management of the entire leather city.

The administrative centre will house the regional management offices for Regional Manager for the zone, Managers for Support services and Manager for Utilities. Other supporting facilities such as parking, washrooms, kitchenettes among other will also be provided.



Customs and logistics Centre The customs and logistics subzone covers about 8.5 Ha. It is set to offer services of clearing and forwarding to ease the process of marketing the products from the leather city.

This will house government regulatory authorities and other organizations facilitating the free outward of movement of goods and raw materials.

i. KRA Offices

ii. Clearing and forwarding Agencies

iii. KEBS Offices

iv. Weights and Measures Department

This subzone also caters for parking of all heavy goods vehicles such as trucks and lorries.

Health Centre The subzone covers about 2 Ha. It is set to offer health services to both the Leather City workers as well as the neighboring population.

Health Centre Development standards The preferred location for health services should be easily accessible by an ambulance and be provided with basic infrastructural services. Dependent on the level of health service, it is necessary to reserve adequate land for future expansion and for public cemeteries. The minimum land requirement for a Sub-‐Health Centre is two Hectares.

Community Centre This subzone will be set on a 1 Ha parcel for the purposes of social functions. A community center will enhance social interaction, networks, and offers relaxation from normal day-‐to-‐day activities. This enables the total development of the human being and is therefore pertinent for overall national development. Every neighborhood should have a community center, which will provide the following facilities: Library/Resource center, social hall and a VCT center. Land needs approximately 0.25 hectares to be located in positions along main pedestrian routes not isolated and away from main lines of pedestrian movement.

4.2.7 Commercial Approximately 19.8 Ha has been proposed for commercial purposes. The activities envisaged in this zone include an SME park (11.4 Ha), trade and exhibition centre (6.3 Ha), shops and hotels (2.1 Ha). The SME Park targets small micro enterprises dealing with



leather products targeting the domestic market. The trade and display centre will house exhibition centers for different products as well as conference facilities and shopping malls.

Commercial Development standards The minimum lot size in a commercial area should be 0.05 ha. This size of plot will cater for the architectural design, street landscape, natural lighting, and limited parking. Plot length versus the width should not be more than 1:3. Building lines should be 6m where roads range between 6-‐18 meters wide.

Permitted uses in the SME Park comprise of : • Working sheds

• Display Centers

• Loading and offloading bays

• Trolleys and forklifts

• Driveways and parking’s

• Stores for leather and finished goods

• Boardrooms

• Offices • Kitchen

• Changing Rooms for workers and staff Permitted uses in the Trade and Display Centre comprise of:

• Conference facilities

• Exhibition Floors for the

• Shopping complex for leather products-‐ shoes, belts, bags

• Offices

• Common facilities-‐ toilets, restaurants, etc

• Driveways and parking’s

• Loading and offloading bays

Corner shops should be equally distributed within an estate in such a way that they do not compete with the planned/existing shopping centre. A radius of a 100m from one corner



shop to another serving approximately 50 houses is recommended. They should not be located along the major roads and/or at the junction of major/distributor roads. They should only be located on secondary and minor roads. Appropriate occasional parking should be provided.

4.2.8 Public Utilities

Fire station The fire station will occupy about 1 Ha of land and will be located next to the heavy industrial area (tanneries) because of the high fire risks involved. In addition, the fire station will be in proximity to the other zones such as light industrial, residential among others. Fire station development standards Important infrastructure/facilities that will ensure the operation of the fire station include:

• Hydrants • Fire breakers (space between buildings to avoid spread of fire) • Fire engines • Parking area • Staff accommodation • Drilling areas • Good road network for easy accessibility of the built-‐up area • Any other relevant infrastructure

Land required is 0.4 hectares minimum to include station, staff accommodation, and drilling area. A small fire station would require 1 fire engine and at least 30 staff members to cover a population ranging from 50,000 to100, 000 depending on degree of fire risk.

Sanitary landfills It will cover 9.4Ha inclusive of future expansion. The industrial park produces huge quantities of solid waste from various operations hence the need for a landfill to handle such wastes.

Landfill Development standards A landfill must be designed with an aim to: ensure groundwater and surface water protection; minimize impacts to the environment from site operations; and to facilitate site closure and post-‐closure care. A buffer zone of minimum of 10m will be provided between the landfill and other abutting land uses. Other infrastructures that must be provided within the landfill include waste collection centers across all land uses, waste sorting facilities and any other necessary infrastructure.



Power substation A power station will be provided on 0.4 Ha (1 acre) piece of land to take care of the massive energy demand in the industry. In addition, standby generators will be required to ensure continuity of the processes even during a power blackout and surge.

Power substation Development standards

The main receiving sub-‐stations require 1.6Ha of land and require a buffer zone(about 50m) to separate it from other land uses In all cases, the distance between the power line and the ground below must not be less than six (6) meters. Furthermore, high-‐tension lines must not be passed over buildings constructed in the path of such lines. Main receiving sub-‐stations 275KV are not suitable to be close to residential areas, open spaces, and public facilities. The table below specifies recommended power line way leave trace.

Table 8: Recommended power l ine way leave

Capacity of power line Way leave in metres

11 KV 10

33 KV 20

40 KV 20

66 KV 30

132 KV single circuit towers 50

132 KV double circuit towers 60

Source: Physical Planning Handbook, 2007

Water Supply There are 3 boreholes within the project site. Each borehole and its reservoirs (storage tanks) will occupy 0.05Ha parcel of land, which will also act as a buffer. Water supply schemes including reservoirs need to be factored in for efficient provision of portable water. Rainwater harvesting will be encouraged for domestic use.

Water supply Development standards



Water supply in a region context depends on the sources and existing reticulation systems and infrastructure. Provision of these facilities should consider catchments population to be served and the per capita consumption in the relation to the available water.

Each borehole, and its reservoirs (storage tanks) will occupy 0.05Ha parcel of land, which will also act as a buffer. Tree planting is therefore encouraged in these areas. The distance between these plants and the residential areas should not be less than 100m in order to avoid the noise resulting from the pumps.

The reticulation systems in form of pipeline should be designed in a hierarchical manner, from the main pipeline distributor to the minor in order to achieve equity in distribution. The main water pipeline requires a way leave of 10 meters.

Common Effluent Treatment Plant (CETP) A common effluent treatment plant measuring 9.5 Ha will be provided to handle effluent from the tanneries. Effluents from other land uses will be channeled to the existing sewer treatment plant.

CETP Development Standards

It is recommended that sewage collection and sewage treatment plants be considered for all settlements with a population of 3,000 or more having an urban layout. Care must be taken to ensure that sewage effluent does not infiltrate ground water aquifers in a manner causing pollution of water sources. The treatment plant should be sited as far as is practicable from the boundaries of the master plan area, downwind of the prevailing wind direction. A surrounding tree belt(buffer) is desirable both as protection against pollution and for environmental purpose.

The permitted land uses include loading and off-‐loading bays, treatment ponds, related civil, mechanic and electrical works and any other relevant facilities.

Treated water shall be recycled for use in the treatment plant while treated non-‐recyclable water will be discharged off.



CHAPTER 5: IMPLEMENTATION PLAN

5.1 Overview: purpose and organization This implementation plan is integral to the land use plan. It provides a mechanism for the implementation of the activities, projects, and programs within the proposed land use framework. The implementation plan divided into prerequisite and phased activities. The prerequisites are the activities, projects, and programs that should be undertaken first in order to kick start the LIP project.

The rest of the activities are divided into phase 1 and 2 for purposes of orderly and progressive development of the site, prioritization of projects given limited resources, helps to overcome resistance to change, and allows for lessons learnt in early phases to be incorporated in systems installed in later phases.

5.2 Implementation matrix


43

Table 9: Implementation matrix

Activities Justification Actors Time-‐Frame

Prerequisites Cadastral Survey A cadastral survey will be carried out to translate the plan provisions on the ground in terms of the designated land uses and subdivision

Surveyors, EPZA

Within 1.5 years

• Re-‐routing the E434 Kinanie-‐Joska road

• Opening up and

paving of the internal roads

✓ Since it E434 road is a classified road that is open to the public, its current location will interfere with the safety and operations of LIP as a customs controlled area hence the need for re-‐routing it to the periphery of the LIP.

✓ For accessibility of the entire LIP

EPZA Within 1.5 years

• Drilling of boreholes

• Reservoir construction

• Laying of water pipes and hydrants

Water provision for construction purpose and ultimate use in the LIP

EPZA Within 1.5 years


44

Phase One Construction of heavy and light industrial parks

(20 tanneries and 8 Value addition marks)

Setting up leather-‐tanning and processing industrial plants and related value-‐added products

EPZA Within 5 years

• Constructing Effluent treatment plant

• Putting up a Power station

• Setting up Landfill

• Construction of Fire station

✓ Treatment of waste from industries

✓ Power provision for use in the LIP

✓ Garbage disposal and

associated activities ✓ Mitigation measures

against fire disasters

EPZA Within 5 years Within 5 years

Construction of Houses

For accommodation of some workers

EPZA Within 5 years

Construction of

• Administration block

• Customs and logistics

• Health Centre

• Community Centre

✓ Management of the LIP

✓ Health services for

resident and workers ✓ Enhance Social

interaction

EPZA Within 5 years

Contrition of

• SME Park • Trade and

Display Centre

For operation of small and medium enterprises and exhibition areas of leather-‐related products

EPZA Within 5 years


45

Construction of

• Primary School

• Training,

Research and Development Centre

✓ Provision of Basic education for resident and neighboring population

✓ Research and training in leather and leather-‐related products

Machakos County

EPZA

Within 5 years

Tree planting and landscaping the recreational areas

Providing of green spaces/conservation areas; leisure for resident and workers; environmental conservation and aesthetics.

EPZA Within 5 years

Phase Two Construction of heavy and light industrial parks

(16 tanneries and 10 Value addition marks)

Addition of leather-‐tanning and processing industrial plants and related value-‐added products

EPZA Within 10 years

Construction of additional Houses

For accommodation of some workers

EPZA Within 10 years


46


47

Documents

Final Feasibility Study Report (Public Version) - · PDF filepage!2" consultancy services in the feasibility study for the kenya leather park proposed for (kinanie) machakos county