In the past two consecutive public holidays, the price of raw hides and skin has seen an unprecedented decline. The Ethiopian Raw Hides and Skin Suppliers’ Association (ERHSSA) lays blame on tanneries manipulating the market price to disrupt the normal course of supply.
Berhanu Abate, chairman of ERHSSA, told The Reporter that both the Ethiopian New Year celebration, which is held in the second week of September, and Ethiopian Christmas (celebrated January 7) had seen an artificial price decline that had never been observed before. According to Berhanu, a fine sheep’s skin used to fetch 100 birr the past two years, but the going rate ranged from 15 to 30 birr during the two holidays. Hence, on average, legally-registered traders have lost some 20,000 to 30,000 pieces of raw hides and skin due to price manipulations, Berhanu said.
Berhanu calls on the government to pay closer attention to the raw hides and skin business and devise a formal channel of trading platforms. The hides and skin business is open for anyone without legal requirements. Traders collect and supply to factories across the country, Berhanu said. However, the market has recently been disrupted by operators who manipulated prices in order to secure an uncontested supply. The way the market operates in the country solely depends on primitive mechanisms, negatively affecting some 40 members of the association. That, in turn, put Berhanu and his fellow traders and suppliers in difficult situations without proper grading and standardization while trading raw hides and skin with tanneries. It is to be noted that the Ethiopian Standardization Agency puts hides and skin under the compulsory standardization category. Yet that is not reflected in the markets, Berhanu argues.
Despite the grievance the association aired against the tanneries, poor quality, treatment and preservation technologies are affecting 60 percent of the raw material most tanneries depend on. Recently, prices have seen some improvements which, Wondu Legesse, director general of the Leather Industry Development Institute (LIDI), said was a reflection of the international market.
Lately the price of hides and skin has seen some improvements and locally the prices have been picking up to reach 50 to 60 birr per piece, as opposed to the 15 to 30 birr range three months ago.
Though repeated attempts to include comments of the Ethiopian Leather Industries Association (ELIA) had borne no fruit, the association has been in constant negotiation with suppliers to improve quality and to desist from price manipulation. Ethiopia produces high-quality sheeps’ skin, but the country has not benefitted much from the leather sector.
That said, the leather industry struggles to meet targets set by the government. The sector is expected to fetch some USD 800 million from export by the end of the Second Growth and Transformation Plan (GTPII). The concluded GTPI fell far short of the USD 500 million export target.
Following the 150 percent export tax on unfinished and unprocessed leather in an effort to promote value additions, a gradual markup has been witnessed in the leather sector. The footwear export performance seems closing in the gap with the finished leather export. Yet, export figures in the first half of the current fiscal year were way below targets. Accordingly, finished leather has fetched USD 31.7 million, footwear USD 19.2 million, gloves 2.4 million and leather apparels and accessories earned USD 1.6 million. The target for the half year was set at USD 113 million but it failed short at USD 54.8 million, indicating a performance of 47 percent of the target.
Under such poor outcomes, Wondu sounds unthreatened. He is buoyant that in two years’ time, the hurdles in the leather and footwear subsector would be surmounted. Currently, there are projects that have the capacity of producing some 20,000 to 30,000 pairs of shoes per year. Both local and global markets are jogging for huge supplies. One of the major challenges, however, is the lack of capacity, shoe makers and tannery operators agree. Local demand for footwear and leather products is estimated to be some 15 million pairs per year but supply falls far short of that.