Since November last year, Rwanda temporarily suspended an 80 percent development levy it had imposed on raw hides and skins exported beyond the East African Community (EAC) in 2015.
The removal of the levy will be in effect until November 2026, according to the Ministry of Trade and Industry.
Why the decision:
Speaking to The New Times, Prudence Sebahizi, said the move was taken due to a lack of market within the region, which had led to stockpiling. Thus, officials removed the levy to ease the trade of such products as the country works to establish its own leather industry that will boost value addition.
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"The 80 percent levy on the export of raw hides and skins outside the EAC regional market was originally introduced to encourage local value addition. The government has temporarily lifted this levy due to the lack of sufficient market within the EAC, which had led to an accumulation of unsold stock," he said.
"The government resolved to temporarily suspend collection of the development levy on the export of hides and skins to the rest of the world while we work on establishing a leather tannery industry," he added, noting that a study has already been carried out on the feasibility and profitability of the leather industry in Rwanda.
"An area of about 20 hectares has been identified in Bugesera District for the establishment of a tannery park. At the moment, we are mobilising the required budget, beginning with setting up an effluent treatment plant and other essential infrastructure, which are prerequisites for attracting potential investment in the industry," he said.
Efforts to engage local investors with vast experience in the field are underway to find those who can partner with the government in the work.
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Sebahizi also revealed that the government has secured support from the African Development Bank (AfDB) to strengthen the leather industry.
"This support includes enhancing the production capacities of leather processing small and medium enterprises (SMEs) along the leather manufacturing value chain and capacity building for key actors such as vocational training institutions, skin and hide collectors, and collection centres," he highlighted.
Suspension of levy will not affect the country's revenue collection
Straton Habyarimana, an economic analyst, told The New Times that the decision will not affect the country's revenue collection.
Rwanda currently produces 6,000 tonnes of raw hides and skins annually, generating approximately Rwf4 billion per year.
"Although suspending the levy means a loss of tax revenue, I think the levy itself was not generating significant income. This is because high taxation tends to discourage businesses or pushes traders towards smuggling," he explained.
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Jean D'Amour Kamayirese, Chairperson of the Kigali Leather Cluster, told The New Times that the price of raw cow hides was around Rwf1,500 per kilogram in before 2015, while full skins of smaller animals like sheep and goats were priced at approximately Rwf3,000.
However, he noted that after the introduction of the levy, the prices fell significantly to Rwf 100 per kilogram of cow hides, while full skins of smaller animals would be sold at about Rwf400, because of limited availability of the international market.
He urged that all hides and skins pass through the Leather Cluster before being exported, pointing out that this would create job opportunities.
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"We can provide jobs by employing collectors and ensuring better prices for the hides. Additionally, we could send them to factories--even those outside Rwanda--where they can be processed under our terms. We would pay for the service, then bring the finished leather back into the country," he explained.
Aline Niyigena, owner of Goodskin Ltd, a company specialising in hides and animal skins business, said the suspension of the levy has already brought positive changes by opening up markets beyond the region.
"The market limitation meant that regional buyers had full control over pricing, knowing that all hides and skins had to be sold to them. As a result, they dictated the prices," she said.
"A kilogram of cow-hides, which was at Rwf100 in June last year, has now risen to Rwf350. By June this year, it could reach Rwf500. Small animal skins that were priced at Rwf500 have now increased to Rwf1,300," she added.
