Ethiopian Review

By Muluken Yewondwossen | Capital Ethiopia

Government has long term plans to boost sector

One of the major export sectors for Ethiopia, the leather industry, is expected to fall 20 per cent short of its 130 million dollar earnings target this year.
However, the country is projected to improve the leather export by 30 per cent over the next five years.
Leather products account for about 10 per cent of Ethiopia’s export earnings. This makes it the third largest export behind coffee and oil seeds, but in terms of manufactured products, it is number one.
Abdissa Adugna, secretary general of the Ethiopian Leather Industries Association (ELIA), told Capital following the financial crisis that occurred from September last year, there has been a drop in demand for leather products all over the world.
“Currently there is an over supply of leather raw material on the international market that has led to the plunge in the price of leather products,” he said.
Exports from most leather producers have decline by 20 to 30 per cent since the economic problems started biting.
“This is the so-called ‘third wave of global financial crunch’ that is expected to attack the third world countries’ economies.
“We are expecting it will affect other country’s export sectors the same,” an official at the Ministry of Trade and Industry said.
In the last budget year (2007-08), Ethiopia registered record revenues from the sector, passing 100 million dollars for the first time with total earnings of around 101.3 million dollar, a growth of around 13 per cent from the previous year.
Export taxes on raw and semi-processed hides and skins items are to be tripled in December 2008.
When the new tax regime is in place, it will create opportunities to improve the activity of the leather industry and to increase foreign exchange earnings from the sector. Footwear exports grew by 9.6 million dollars last budget year from 5.5 million dollars the year before.
The House of People’s Representatives approved the proclamation to raise export taxes to 150 per cent on raw and semi-processed hides and skins in February 2008 after extensive consultation on the issue with the sector.
The proclamation states that raw hide and skins shall be levied at 150 per cent of its value and wet-blue cow hide is levied at 20 per cent. Taxes on pickled sheep skins are set at 10 per cent, with wet-blue sheep and wet-blue goat skins at five per cent.
ELIA is working to improve export levels – taking as a base year 2007/08′s export performance of 101.3 million dollar – to increase revenue by 30 per cent every year. This amounts to earnings of 130 million dollars, 170 million dollars, 220 million dollars, 290 million dollars, and 380 million dollars over the planned period, according to ELIA’s five year strategic plan.
Ethiopian shoe factories produce 25,000 pairs daily and the country supplies 1.3 million raw hides and 16 million raw skins (goat and sheep) per annum.
Ethiopia has the 10th largest population of livestock in the world, and one of the largest in Africa with some 78 million cattle, sheep and goats. Following the Government’s interest in improving the sector, giant leather industries are coming to invest here.
In a related development, ELIA is preparing to construct leather warehouses. Currently, the association is tendering to select a consulting company for the construction of the project. According to Abdissa, the association will propose for the Government to secure a plot for the project after the consulting company has advised.
“We have a plan to construct five stories headquarter and warehouse that will be able to store imported accessories for the industry and leather raw material (pickle and wet-blue),” Abdissa said.