Ethiopian Leather Sector Still Untapped

Abyssinia Business Network /ABN/

By Samuel Tekleyesus /ABN/

Leather manufacturing is one of the oldest industries globally and particularly in Ethiopia which has remained and sprung forward as an economically important sector in terms of engaging citizens intensively and in export business. The Ethiopian leather industry is relatively an older industry with more than 90 years of involvement in processing leather and producing leather products. Ethiopia’s leather and footwear industry has significant international comparative advantages owing to its abundant and available raw materials, highly disciplined workforce and cheap prices.

 Well-known that the country boasts the largest livestock production in Africa, and the 10th largest in the world. Ethiopian leather and leather products industry encompasses tanning and dressing of leather, manufacture of luggage and hand bags, and manufacture of footwear’s. According to the Ethiopian Investment Commission /EIC/, The firms in the industry produce products such as leather shoes and boots, canvas and rubber shoes, plastic footwear’s, leather upper and lining, leather sole, semi processed skins, leather garment, plastic sole and crust hides, and wet blue hides.

Ethiopia annually produces 2.7 million hides, 8.1 million sheepskins and 7.5 million goatskins. This comparative advantage is further underlined by the fact that the costs of raw hides and skins constitute on average 55-60% of the production of semi processed leather. Ethiopia’s leather and leather product sector produce a range of products from semi-processed leather in various forms to processed leathers including shoe uppers, leather garments, stitched upholstery, backpacks, purses, industrial gloves and finished leather.

Despite the huge and diversified livestock population available for the leather sector; the industry has not developed as it is expected. Yet, it is showing a great progress on the phase of producing highly value-added products. At the end of the GTP-II,the leather industry sub-sector expected to earn 800 million USD, considering that the leather manufacturing industries could enhance their productivity and compete to sell their products in the global market by exerting their full capacity.

According to the Ethiopian Leather Industries Institute, there are about 1500 registered private traders dealing in raw hides and skins an important force in the industry through the operation of  rural operation network supplying raw hides and skins  through long chain (small collectors, small traders, middle and heavy suppliers) to the tanneries in the country. Almost 100% of sheep skin is supplied in wet salted. About 75% of goats’ skin supplied in wet salted and the rest 25% air dried. With regard to the preservation method of cattle hide 10% fresh, 60% are in wet salted and 30% air dried. Around 8.5 million pieces sheep skin, 7 million pieces goat skin and 1.2 million pieces hides are supplied to the tanneries per annum. It has been estimated to recover 96%, 93% and 36% of sheep skin, goat skin and cattle hides respectively and the rest being uncollected or consumed by rural tanners.

There are 32 tanneries nationwide converting hides and skin to different types of finished leather. This sector is relatively at its mature stage and has successfully moved to the production and export of higher value-added and fully processed finished leather. There is a possibility of producing up to 500 million square feet of finished leather per year.

Footwear Industry is at an infant stage of development in the country only with two factories before 1991 but at present it has reached 24 medium and large scale footwear manufacturers. The production capacity of shoe factories including production of Small and Micro enterprises rose to 15 million pairs per year. Therefore, the shoe industry is an emerging and promising industry in the country.

Besides, there are 23 garments and goods factories and three glove factories producing leather gloves, garments, bags and different kinds of leather products. This industry, particularly glove production is an emerging segment and appears to be more promising.

Ethiopian footwear factories produce men’s casual shoes and children’s shoe-uppers made from pure leather. Additionally, the factories:

  • Sell directly to overseas importers/wholesalers, or to direct buying offices
  • Facilitate the production and export of footwear under the private labels of department stores, boutiques, shoe retail chains and mail-order houses;
  • Source out from Ethiopia and other nations in East Africa and re-export
  • Facilitate the production and export of internationally well-known brands under contract

The Ethiopian footwear industry produces shoes that are globally competitive in terms of both quality and price. Due focus is given to maintaining the quality of the hides and skins, leather and leather products for export. Ethiopia has sustained to be the leader in its livestock resources in Africa which proves the availability of a huge potential for the country’s leather industry.

Sheep and goat skin represent the bulk of Ethiopian leather production. The country is known in the international leather market for its superior qualities of sheep skin, acknowledged as being the best in the world. The Ethiopian sheep skins are sought for high class and high value glove leather and the goat skin are equally acknowledged to be the finest for suede making for garments and footwear.

The international leather market has coined special names for these two varieties of skin after two local places – Selallie and Bati. The sheep skins are referred to as Selallie Genuine and the goat skin Bati Genuine which are offered at premium prices over all others. The sheepskin in particular has a reputation for its fiber strength and other qualities attractive to the international market which is best suitable for dress gloving and shoe upper. Bati Genuine are mainly used for shoe upper and leather goods. Cow hides are mainly used for shoe uppers.

Ethiopian leather products have been exported to markets in Europe (especially Italy and the UK), America, Canada, China, Japan, India and other Far Eastern countries and the Middle East. Leather is also exported to other African countries including Nigeria and Uganda. The government of Ethiopia also considered the leather industry a priority sector for growth. Like in other priority sector all form of investment and export incentives are applicable to the leather and leather product industry.

The export performance till now is found to be low due to limited managerial capacity in the sub-sector to compete in the global market, lack of application of better technology, absence of product diversification, confined market destination. Despite its long pedigree, the leather products industry in Ethiopia has been struggling with limited processing capacity that explains not just the inability of local leather goods producers to penetrate the export market, but also their failure to withstand competition from imports.

Currently, the government is processing all the preliminary activities to construct Leather City at Modjo. Ethiopia has a potentiality to invest more and expand in leather industry which substantially is because of raw hide and skin exports. The trade of manufacture and export of leather footwear, leather goods and leather garments is one of the promising sectors for the economic and social growth of Ethiopia through foreign direct investment (FDI) or through Joint venture.

(Samuel Tekleyesus has earned MBA in Finance, he’s a

lecturer, researcher and business consultant)

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