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Re-visiting
Ethiopian Leather Industry
Wondirad Seifu , 20 Feb. 2015
Ethonlines: www.geocities.ws/ethonlines
Ethiopian leather industry is regarded as a strategic sector;
however, its performance is very poor, laced with high-profile corruption. Rather,
it becomes a hemorrhage for the Ethiopian economy.
The leather industry had been ranked next to coffee in export
earning until 1980s, fetching about 60 million dollar while operating with
only a dozen of tanneries. In deed, since then the tanneries number is
expanded to about 34; but for nothing, except sharing the existing profit.
Taking the advantage of the world commodity price rise ,
the industry’s export proceed is mounting to 100 million dollar in 2015,
but at a constant supply of 18 million skins and 2 million hide over the
past three decades owning to the poor per capita consumption of meat in
Ethiopia ; though Ethiopians are known as meat lovers . This, therefore,
implies no real growth is realized in the industry.
The attempt made by the Ethiopian People Democratic Front
( EPDRF) led government to maximize benefit from
value addition seems to be aborted. In this regard the government had put a
ban on export of unfinished leather, contrary to the principles of World
Trade Organization (WTO) in which the country is supposed t be a member
sate in near future.
Although, the tanneries are said to reach a full fledge
processing capacity and kick-started export of only finished leather , its value
is not commensurate with the expected value added. World wide experience
proves that finished leather has a potential to yield, at least, five times
on top of its corresponding raw skins. But in Ethiopian case the value
added is confined to ten million dollar, mainly from export of leather shoe
and garment.
On the hand, it is odd enough to note a decline in
import of finishing chemicals in the country’s trade statistics. Or the
country is managed to produce finishing chemicals?
The ban seems uncomfortable for some tanneries. And so,
a certain Chinese company was caught red- handed while exporting unfinished
leather under cover (Reporter). It was also said that some party affiliated
tanneries are managed to introduce an odd practice of exporting leather
without touching the country’s notorious National Bank.
In fact, the
government officially confessed that the industry is severely suffering
from under and over invoicing, next to the lice, a parasite that down grade
Ethiopia
leather. We are also told that some tanneries are establishing a price
transfer scheme with their parent companies residing abroad. And yet the EPRDF government monopolized
media have echoed value added gain in the industry time and again.
In another development, the government in collaboration
with Italy
had established a leather institute at a cost of 130 million birr with an
aim to re-innovate the industry. Though the institute is sucking up to 40
million birr annual budget, its activity is still not visible. But it is
brave enough to present a fictitious annual report at the quasi – parliament’s
show-up session in front of idle men.
However, the institute should be praised for its
proposal to dislocate all tanneries with an aim to provide them with a common
waste treatment plant out side Addis
Ababa at a cost of 800 million birr. Thanks to UNIDOS’s fancy waste treatment plants.
The industry has come to enjoy an international
gathering and now it is poising to celebrate the 8th All African
Leather Fair under the auspicious of tanners association. Though the role of
the association is only limited to as a travel agent, while its counter
parts in other part of the world are playing a leading role in their
respective country’s leather industry development. In fact, some times it
serves as a cartel to control the supply market.
But in recent time, the association comes up with a
noble idea that focused on the import of hide and skins in order to curtail
skins shortage in the country. Currently all tanneries are working bellow
30 per cent of their installed capacity due to hide and skins shortage,
while the country is losing over two million hide and skins due to poor
collection system ,absence of regulatory bodies and contraband or illegal
trade.
The idea seems good, but it imposed a double penalty as the
country is inflicted by high-profile corruption. Sadly, the leather that will
be made from the imported skins is supposed to be sold below the cost of
the later like a second hand commodity to quench the greedy motive of
bloody corrupters. While the Revolutionary democratic government is
envisaged to generate about 500 million dollar from the leather industry in
near future, but managed only 10 percent of it.
At this juncture, it would be wise to look for other
viable alternatives with the premise that the leather industry is no more promising
for Ethiopian economy. The list of alternatives is many: lifting the ban,
for example, would foster competitiveness in the industry via equilibrium
price.
Or a simple cost- benefit analysis goes like this: in
the local market a single raw skin is sold for 3 dollar, while its
international price is 6 dollar. Therefore, export of the 20 million skins
could definitely yield 120 million dollars without impregnating with
imported chemicals. If that would
happen, the benefit will be multifaceted. The country will be free from
tannery waste estimated at several thousand tons of toxic chemicals like
sulfide, chromium, volatile compounds etc, spreading all over the country.
And there by, it helps the development of the country’s fledgling tourism
industry.
Perhaps, a modest investment in synthetic leather
industry would do much better than the natural leather. This sounds good, because
there is a looming fear that Ethiopian leather would be out of market,
sooner or later, as its quality is deteriorating at a disastrous rate.
For example, 1-3 grade sheep skins share is dropped from
70 percent to bellow 20 percent. Almost there are no 1-3 grades in hide
crust leather.
All in all, the leather industry is no more worthy as a
strategic sector, rather it become a hemorrhage for the Ethiopian economy.
In spite of a huge amount of investment received by the leather industry,
in addition to export subsidy, its return is highly regressive. If that huge
amount of had been put in other sectors,
say, oil seed or khat, a narcotic leaf and EPRDF’s favorite cash crop, the result would be many
folds.
To conclude,
unless our country’s projects are evaluated against their opportunity costs,
instead of political motive, their viability would be doubtful like that of
the discord dam, whose construction is now undergoing at the out skirt of
the Blue Nile
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