Kenya to commission Kariokor Leather Factory in July

The government of Kenya has announced plans to commission the Kariokor Common Leather facility in July this year. Confirming the reports, Nairobi County Governor Mike Sonko said he will unveil the market in July to pave way for the production of leather products such as shoes, belts and handbags.

“Nairobi residents will now access locally made leather products in the city in the next two months after the opening of the Kariokor Common Leather factory,” said the Governor.

Kariokor Leather Factory

The leather factory is part of Kenya’s stride towards towards realizing its Vision 2030, the country’s economic development blueprint which aims to transform Kenya into a middle-income country.

The facility is being g constructed in collaboration with the Kenya Leather Development Council. It will be equipped with modern machinery and equipment that will mechanize production of shoes which according to Sonko, will go a long way in the production of good quality shoes that meet international standards.

Nairobi County has the highest number of slaughterhouses in the country with an average annual production of hides and skin at 525 tonnes, goatskin 1.6 tonnes, calf hides 31.5 tonnes, and camel hides 199.

The old Kariokor market currently produces over 2 million pairs of shoes annually and the production is expected to increase significantly once the new market is operational. Upon completion, the new facility is expected to have an average annual production growth from the current 2 million shoes to 10 million shoes. This will increase traders’ annual income to more than  US $10m annually by the year 2022.

Job opportunity

Moreover the new facility will increase job opportunities to up to 10,000 in three years both directly and indirectly through subsidiary jobs. Currently the old Kariokor market employs about 1,000 people. The county will also introduce training sessions for employees on how to operate the machines.

A management board will be created between the leather council, the county and national government. Other stakeholders will be incorporated to ensure the facility is managed effectively.

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This was mainly fuelled by two large deals in the sector in that period – Exxon Mobil’s acquisition of a 25 percent stake in ENI East Africa for $2.8billion, and Assala Energy’s acquisition of Shell Gabon for close to $1billion. The Mining and Metals sector, which had accounted for some of the largest share of deal activity in previous years, was the second largest target sector in 2017, accounting for about 20 percent of total M&A values. Volume and value of M&A in SSA (Source : EY) Three key factors behind the slowdown in M&A in SSA in 2017: 1. Macroeconomic and political uncertainty According to EY’s Africa Attractiveness Program (May 2017), 2016 was the worst year for the continent in nearly 20 years. The continent experienced low economic growth, on the back of falling commodity prices, currency volatility and high inflation. As a result, the “Africa Rising” narrative tapered off and investors held back. This trend seems to have carried on in 2017, with investors continuing a cautious stance on dealmaking in the continent. In addition, political uncertainty in some of the major African economies – Nigeria, South Africa and Kenya – has also contributed to investor apathy, resulting in them adopting a “wait-and-see” attitude to dealmaking in the continent as a whole. 2. Slowdown in inbound M&A from international investors International investors in particular have seemingly taken their feet off the deal pedal in SSA as they focus on more inward looking developments and uncertainties in their home markets. For example, the UK’s focus on Brexit and the ongoing political uncertainty in Europe has meant most investors in those regions are focusing more on domestic issues rather than on pursuing international M&A opportunities in Africa. Similarly, slower economic growth in China, and the more inward looking policies in the USA have also meant that investors in those regions have held back on international expansion endeavours, not least in SSA. Higher exchange rate risks were also a deterrent for inbound investors in Africa in 2017. 3. Challenges in deal origination and opportunity identification This is particularly the case for international private equity investors in Africa. 2017 saw muted appetite for deals in SSA from the large private equity investors, with some significantly reducing their focus on the continent. For example KKR recently reported that it was dissolving its Africa investment team because it could not identify “sizeable” opportunities in the continent. Most private equity investors cited a lack of visibility of deal opportunities in Africa as one of the key challenges in doing deals in the continent. 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