Back to Market Survey

MARKET NOTE ON ETHIOPIAN LEATHER AND LEATHER PRODUCTS

GENERAL

Ethiopia offers a wide range of finished leather and leather products to the world market because of its untapped livestock resource. Some of the products, such as Ethiopian highland sheepskin (which has gained an international reputation for making gloves), are known for their quality and natural characteristics. Ethiopian hide and skin exports include pickled, crust and finished sheep skin and wet blue goat skin, crust and finished goat skin, crust cow hides, finished garment leather, finished glove leather, lining/upper leather, suede leather, full grain leather, embossed leather and patent leather. The export of leather products (such as leather garments, footwear, gloves, bags and other leather articles) is highly promising. With an abundance of livestock resources, Ethiopia has a comparative advantage in producing leather and leather products.  The largest number of livestock in Africa and the tenth largest in the world are found in Ethiopia.  The country has about 49.6 million cattle, 25 million sheep, 23 million goats, 38 million poultry and over 600,000 camels.  In addition to its large supply of livestock, Ethiopia has a large labor pool.  Labor is readily available and inexpensive.

 The Government of Ethiopia has given due attention to the leather sector in a bid to improving the productivity of the sector and competitiveness of the Ethiopian leather products in the international market.

PRODUCTION

The leather industry in Ethiopia produce hides, pickled sheep skins, wet-blue goat skins, crust and finished leather, and leather products (Footwear, garments, gloves, bags, wallets, travel good, etc.).  It is estimated that Ethiopia’s off-take/kill rates are low for cattle but high for sheep and goats, with 6% for cattle, 33% for sheep, and 37% for goats.  Estimates place the off-take rate for hide and skin production at approximately 2.7 million cattle hides, 8 million sheep skins and 7.5 million goat skins per annum.  Sheep and goat skins represent the bulk of Ethiopian leather production.  Ethiopian highland sheepskins and hides provide a strong base for semi-processed leather, finished leather and leather products.  The Bati kidskin and the Selallie sheepskin in particular have a reputation for strength and other qualities attractive to the international market, which recognizes them as Bati Genuine and Selallie Genuine and offers them premium prices.  

MANUFACTURING UNITS

Currently 160 tanning, footwear and other leather goods producers have obtained licenses from the Ethiopian Investment Agency of which most of them are privately owned and exports semi finished leather.  Over 80 per cent of the tannery output is exported directly as pickled sheepskins or wet blue into the international market, while the remainder is sold locally to leather goods manufacturers. In addition to these, 6 tanners, 7 footwear and 9 leather goods factories are under construction.  Sino-Overseas Leather products PLC, a Chinese company signed an agreement with the Ethiopian Investment Agency enabling it take 50,000 Sq.m of land from Oromia Region and plant four leather products factories.  One of the factories to be built by the company would be a tannery with the capacity of producing 3 million pieces finished leather annually whereas the second one will be a glove factory with a capacity of one million pairs of leather gloves annually.  The third one will be a shoe factory with the capacity of producing 2 million pairs of leather shoes per year and the last one is a leather garment factory.

EXPORTS

The Ethiopian Leather Industry was able to achieve a record performance in export, crossing US$101.3 million dollars in the past fiscal year (2008/09) which was US$30 million before 1999.  For this improvement, the diminishing of semi finished export proportion and the growing of value added products on the fiscal year and export tax on raw and semi processed hides and skins on the fiscal year are the main reasons to improve the performance of the leather industry and to increase foreign exchange earnings from the sector.  The country used to export raw hides and skins to European and Asian markets but the government is now supporting enterprises on maximizing exports of leather products. Major importers of Ethiopian leather products are Germany, Italy, China, India and the United States. 

Ethiopian tanneries have traditionally exported leather at various stages of processing (from pickled to crust) to international markets.  Ethiopian hides and skin exports include: Pickled sheep skin, wet blue sheep skin, crust sheep skin, wet blue goat skin, crust goat skin, crust cow hides, finished garment leather, finished glove leather, lining/upper leather, suede leather, full grain leather, corrected grain leather, embossed leather and patent leather.  The export of leather products such as leather garments, foot wear, gloves, bags and other leather articles is also highly promising.  The main markets include China, India, Italy, Japan, the Netherlands, the United Kingdom, Germany and the United States.  As a beneficiary of the Africa Growth and Opportunity Act (AGOA) since, 2000, most categories of Ethiopian leather exports to the United States face no duties.  The European Unions Everything-But-Arms (EBA) initiative also provides access to Ethiopia as a “least developed country” (LDC). 

Ethiopian Exports of Leather and leather products  

INDIA’S IMPORT

                                                                                                Value in lakh Rupees

Council of Leather Exports (CLE) delegation visited Addis Ababa from 28-30 October, 2007.  The delegation comprised of five companies manufacturing leather goods and was led by Dr. K. Elangovan, Executive Director (CLE).  CLE also provided free air-fares and hospitality to Ten Ethiopian Companies in leather sector to visit the India International Leather Fair (IILF) in the year 2008 and 2009.  Liberty Shoe India Limited participated in the Addis Ababa Leather Trade Fair held in January 2008. 

During the CII-EXIM Bank Conclave March 2008, a Memorandum of Understanding was signed between the Ministry of Trade and Industry, Government of Ethiopia and the Department of Commerce, Ministry of Commerce and Industry, Republic of India to enhance the cooperation in leather industry through technology and market collaborations.  A 17-member delegation from the CII, All India Skin & Hide Tanners and Merchants Association and Finished Leather Manufacturers and Exporters Association also visited Ethiopia from 18-20 August, 2008, in connection with exploring the possibility of sourcing semi-processed leather and joint ventures in Ethiopia.  Recently, a delegation from Tata International visited Ethiopia and opened an office to explore the possibilities in leather sector

The Ethiopian Government imposes 150% tax on hide and skin exports

The Ethiopian Government has passed a proclamation to toll export taxes up to 150% on raw and semi-processed hides and skins on Thursday, February 7, 2008.  The proclamation rates and basis of computation states that raw hide and skin shall be levied 150% of its value and wet blue cow hides is levied at 20%.  Pickled sheep skins are levied 10%, with wet blue sheep and wet blue goat skins are levied 5%.  The bill reverses the ban on export of raw hides and skins by allowing export at 150% export tax.  The new tax system would be effective as of February 9, 2008.

Government lifts tax on shoe accessories: The Ministry of Revenue of the Government of Ethiopia has lifted the tax imposed on import of accessories and components used by shoe industries effective as of July 8, 2008 with a view to encourage the sector.  The Government plans to produce 60 to 70 million pairs of shoes per year, increasing current production of 24 million per year by 2010.

CONSTRAINTS

According to an industry survey conducted by the Ethiopian Export Promotion Agency, leather-producing firms report that they are operating from 30 to 90 per cent below capacity.  The industry faces constraints due to outmoded equipment and machinery; lack of market information; shortage of qualified slaughter houses and problems with the law regarding livestock; low quality standards; and lack of proper handling of raw materials. Lack of market awareness and quality standards were seen as impediments to increasing exports.  Producers of finished leather apparel and goods report a shortage of hides and skins as a constraint to increasing production volumes.  Tanneries have established export markets and thus prefer to export rather than sell in the domestic market.  The Ethiopian Government and the leather industry are working on ways to increase the supply of hides and skins to local leather goods producers.  Traditional methods of animal husbandry render the current output per unit of domestic breed of livestock too low.  Improving livestock husbandry is an important element to increase the supply of raw materials for the industry.  Ethiopian leather industries should overcome their challenges and work with global tanning industries. 

The Ethiopian government established the Leather and Leather Products Technology Institute in order to support the formation of skilled labor force and the dissemination of advanced technologies

Opportunities

Ethiopia has great potential for the rapid development of its leather sector and has focused its short-term strategy on moving all leather production from the wet-blue stage to the crust and eventually finished stage.  The strategy for the long term is to gradually convert all available hides and skins to finished leather products.  The leather is considered as one of the top priority areas to drive the economy.  The Ethiopian government has shown an increased interest in boosting the leather industry recently, and has now injected close to US$60 million into the industry.  The funds will allow the leather industry to earn about US$300 million per year from exports.  The export of leather shoes is expected to become one of the leading export items in five years, though levels at present do not hold much promise

COMMENTS AND MARKET SITUATION

1. For the leather footwear firms, the main factors affecting competitiveness are the poor quality of domestic leather, and the high cost of imported inputs. Opportunities exist for Indian companies, particularly suppliers of equipment and machinery and inputs in the sector.

2. The Ethiopian market also needs manpower training, quality control and market research services

3. The Ethiopian government offers substantial incentives to investors in leather and leather products, including tax holidays of up to eight years.  It also facilitates the acquisition of land for investors in this field at very reasonable lease rates. 

ADDIS ABABA (Ethiopia): November 2009

Back to Market Survey