Ethiopia: Ambitions to become a global force in leather production

Ethiopia is home to the largest population of cattle in Africa. In recent years the country’s leather industry has attracted several foreign companies that have set up factories here. For instance in 2012, Chinese footwear manufacturer Huajian Group opened a factory at the industrial zone outside Addis Ababa where it manufactures 6,000 pairs of shoes and boots per day.

“The industry has a big future,” says Yigzaw Assefa, chairman of the Ethiopian Leather Industries Association (ELIA) and CEO of Bahirdar Tannery.

As one of the government’s priority sectors, investors in leather enjoy incentives including duty exemptions on capital goods and construction materials, and five-plus years of an income tax holiday. Other positives of operating in Ethiopia are free access to US and EU markets as well as cheap labour and electricity.

Transfer of knowledge, expertise

With more foreign investment comes competition for local players, but Assefa says it will also lead to the transfer of knowledge and technical expertise.

For decades Ethiopia has exported its leather to Europe and Asia where it is transformed into fashionable items. But Assefa believes investment in Ethiopia-based factories by foreign companies will help change this. Local tanneries too are tapping into opportunities to produce shoes, bags and belts for export. One example is Assefa’s own tannery which he established in the 1980s.

Today it mostly processes animal skin for export as leather, but the company is expanding its production with the construction of a new plant that will undertake processing of leather into bags, wallets, belts, binders and gloves for sale abroad.

“We are constructing the building and training of workers. In the meantime we are testing the market with a small quantity of fashion gloves and industrial gloves which have already gotten acceptance in Italy, Russia and the US,” says Assefa.

“We have to change the image we have today, that we only produce raw materials.”

Potential for manufacturers

The local market is also opening up for other manufacturers. In the early 2000s plastic shoes from China entered the market and were quite popular, raising concerns among local shoe manufacturers. But this is shifting, with more shoe companies now selling locally and proudly displaying their ‘Made in Ethiopia’ tags. There are also multiple SMEs that manufacture leather bags for sale in the country.

Although exports dominate, Assefa believes local consumption of Ethiopian leather products will increase as people’s income levels rise.

Supply of raw materials a challenge

However, the increasing investments and activity in the industry has caused a shortage in the supply of hides. Most factories source animal skins from suppliers who in turn source from small-scale suppliers who collect hides from different homesteads.

Although most families in rural Ethiopia are farmers and keep cattle, Assefa says commercial farming needs to be developed. Inefficient farming methods by small-scale farmers, such as not properly treating animals and grazing them on the same fields year-in year-out, leads to poor quality skins, meat and milk. Careless handling and poor sanitation post-slaughter also leads to damage of the hides.

“In order to have healthy and productive sheep, goats and cattle, more modern farms should be developed,” Assefa says.

“Backyard killing should not be practised because people damage the skin at home when peeling it off the animal. We need modern abattoirs so the collection process will be easier, centralised and the skin will be well preserved.”

Encourage local talent

In coming years Assefa expects to see more investors pump money into expanding existing facilities and establishing more factories.

“The number of shoe and leather goods factories will increase,” he predicts. “There is a conducive and enabling atmosphere in terms of both the political and economic situations.”

To compete with industries in other parts of the world, Assefa says investors in Ethiopia should prioritise local talent development.

“A cheap and trainable labour force is available. Our people are honest, polite, friendly and co-operative. But they need training, and this should be done by the government and private sector,” he says.

“These factories will only create value if they have qualified human power.”