This info was revealed by the CEO of ARA Shoe, Tobias Zimmerer, after reaching some agreements with the Ethiopian Ministry of Trade and Industry (MoTI).
The company has an agreement with the Minister of Trade and Industry and some local shoe manufacturers to establish a big shoe factory.
ARA Shoe produces and sells shoes around the world.
Zimmerer came to see Ethiopia to investigate the possibility for investment in the shoe producing sector on invitation by ECBP (Engineering Capacity Building Programme).
Presently there is an agreement to work with two shoe factories in Ethiopia, namely Ras Dashen and Kangaroo Shoes.
Zimmerer indicated that he did not know the cost estimation as to how much to invest as initial capital yet.
Ethiopian Leather Sector Assessment and Benchmarking
UK consultant, John Avery, submitted his more than 100 page report to the Ethiopian Minister of Trade and Industry. The following are some extracts of his executive summary.
Revolution or Evolution in the Ethiopian Leather Sector?
The Ethiopian leather industry is at the start of a period of great change and metamorphosis, to try to become producers of finished leather and finished goods. The objective is to take the best possible foreign earnings benefit from having added value to the product, before it is exported.
The magnitude of this change appears to be little understood as to the impact at factory level and the timescale unrealistically short.
Typically, the finished leather can be 10 times the value of the commonly produced intermediate processed ‘commodity product’, widely available today. In comparative terms, the finished article can be in the order of 100 times as valuable. There are, however, many constraints evident in raw material quality regarding practical potential for products to be made.
The initiatives of MoTI are realistic and sound to guide the sub-sector into making a highly significant contribution to foreign currency earnings for the Ethiopian economy.
The impression gained through the tanners is that the timescale for the changes to become effective would indicate an element of ‘revolution’ rather than ‘evolution’, in short, too much, too soon.
As an industrial sector, they need to develop a co-ordinated strategy as to what products are to be made, what the market is and how they will be sold.
The various owners and controllers of the tanneries are among the first to admit that their industry has been static and stagnant, failing to develop and realise their potential on its own.
With Ethiopia, the Government is attempting to energise and speed up the rate of change, for the good of the nation as a whole.
Ethiopian tanners in the hands of hide merchants (or “Hide merchants hindering progress”)
There is evidence to suggest that the national raw material is on a downward trend, with husbandry and preservation issues being the underlying causes. There is, however, no incentive for the traders to improve methods along the supply chain, because the national appetite for the material is greater than the supply network can provide.
In a scenario such as this, prices will remain firm and quality will continue to fall.
Farming, production of food, meat in particular, currently holds back the population and industry. Whereas the Ethiopian population has doubled over the past 20 years, the national herds of sheep, bovine and goat remained the same fundamental size. If more modern techniques could be adopted, more animals would live healthy, happy lives and produce good quality meat and good quality skins.
Dipping of sheep against ecto-parasites has been shown not only to have beneficial impact on skin quality but also on meat yields, but there is as yet, no move to adopt this activity in Ethiopia.
The tanners know that they could also maximise the proportion of top grades of skin, therefore leather, that goes for sale at premium prices. They also know that the current level of quality in raw material prevents them from attempting to make some premium products that would prove among the most profitable for the company and the country.
Not dipping sheep is costing the Ethiopian leather sector millions of dollars each year in loss of potential earnings.
Raw material prices are demonstrably too high, effectively twice the price that they should be. Bovine material has doubled in price within the last 12 months, the material does not compare well with hides elsewhere in the world. An Ethiopian hide produces an average of 22 ft2 of leather.
Of particular concern are husbandry and preservation methods, the suitability of the material for leather making, limits it to low-value products in most cases.
The traders can sell every piece of raw material generated; there is no incentive to improve. Complicit with this, is the attitude and function of the tanners, continuing to insist that they work exclusively Ethiopian hides and skins, regardless of the quality issue.
The hide and skin traders take the advantage of this virtual monopoly and, naturally, push up the prices until they maximise their earnings.
The only way to break the monopoly of the traders is for the industry to refuse to pay the current prices, throw the prices back at the traders and buy in from outside. But it appears that the tanners are not brave enough for this move yet.