Leather industries are worried
Growing demand for Ethiopia’s raw hides unlocks new business opportunities for local suppliers, opening up a new stream of export revenue for the country’s foreign currency-strapped economy.
Consumers in West Africa, mainly Ghana, Togo, and Nigeria, buy the hides that are raw from Ethiopia for food consumption. It’s a key meal component, known as Ponmo or Wele in West Africa.
It has now become a lucrative business opportunity for suppliers who have shifted their focus to the export market. The upward trend is occurring despite the fact that an export tax equal to 150 percent of the item’s value has been imposed on it.
Raw hide suppliers have long been obliged to dispose of the lion’s share of the hides and skin they collect after the leather industries rejected majority of their products due to quality issues. Industries have also been unable to increase quantity of the hides they source from the market due to a critical shortage of forex to import the chemical inputs required for processing.
Increased shipments of rawhide to West Africa, however, left leather industry in an uncertain situation about its long-term prospects.
Industries are not currently experiencing a shortage, but the growing trend has prompted broad concern and been labeled a threat to the industry’s sustainability in the future.
Management of the Ethiopian Leather Industries Association claims that suppliers are doubling down on their efforts to profit from exports, while officials give them a pass due to the potential for foreign currency inflows.
Local industries are experiencing severe shortage of foreign currency to purchase chemical inputs, according to the Association’s secretary, Solomon Getu. He says this is the primary cause of the sluggish performance and low leather production.
“Leather industries are established depending on the hide inputs from cows and oxen. If the tanneries have enough chemical inputs, they could automatically absorb the entire hide made available in the country,” Solomon said, calling for support to enable the industries.
“Why are hides exported as opposed to looking for solutions in chemical inputs to achieve better results?” Solomon asks.
Suppliers of hides have been negatively impacted by the low productivity of domestic businesses, which is mostly driven by a shortage of forex to import input. The tanneries and factories have also become unwilling to take all of what the suppliers have gathered. However, the government expects the export to close this gap.
“It has created space for the improper disposal or removal of hides, resulting in hides being strewn about and filling the air with a foul odor,” an official said.
Solomon described the lobbying efforts of his Association, which included sending two letters to the Ministry of Industries requesting an end to rawhide exports and allocation of enough forex for importation of inputs for the industries.
This development poses a threat to the viability of the industries, which are wholly reliant on local supplies to source the hide. The move would undermine the progress achieved in substitution of some imports, including military shoes, as Solomon claimed.
“The economic advantage in the value-added sector as well as the local demand for leather products, including military shoes, will be challenged now,” he added.
The Reporter made multiple attempts to get comments and export data from the Ministries of Industry, Trade & Regional Integration and the Leather and Leather Products Industry Research and Development Center, but without success.
