Capital Ethiopia Newspaper

Chinese firms to spend $2 bln in leather sector

Two Chinese firms have teamed up to spend two billion USD in the Ethiopian leather sector

in a venture that could transform the sector and create 100,000 jobs.
A latecomer but hugely significant entrant to the Ethiopian leather sector is the Chinese Huajian International Shoe PLC which announced earlier this week that it signed a 10 year deal with the largest Chinese equity firm in Africa China Africa Development Fund (CADFUND).
The deal sealed back in January is worth two billion USD and will establish a light manufacturing zone in Ethiopia employing up to 100,000 and production turnover of four billion USD annually.
The announcement was made by Helen Hai a representative of the company during the inauguration ceremony of the fifth African Leather Fair (AALF).
The company’s senior officials came to Ethiopia in October 2011 and met Prime Minister Meles Zenawi who courted them to start production as soon as possible, Capital learnt.
“We took the PM’s challenge and within three months we started shoe production from January 5, 2012 onwards and today we have about 600 employees and two production lines in Ethiopia,” Helen said.
Huajian was established 20 years ago with 18 employees to currently become the largest ladies’ shoe manufacturer in Ethiopia. In 2008 it invested 250 million USD in a raw hide footwear plant in Guangdong, China. The company presently has 20,000 employees spanning 47 production lines and an annual export volume of 300 USD million.
High end local products dominated the bustling fifth AALF at the Millennium Hall, Addis Ababa from March 1-3, 2012.
The leather fair which brought about 185 exhibitors from Ethiopia and 37 other countries featured a wide array of leather products including leather goods, foot wares, chemicals and garments. Some of the foreign firms present at the fair came from diverse countries ranging from Brazil, India, Italy, Turkey and the US.
Another foreign entrant to the Ethiopian leather industry present at the fifth AALF was Pittards from UK which was represented in the inauguration ceremony by Reg Hankey CEO of Ethiopian Tannery.
“I hope that the AALF can become as big as those fairs from Bologna, Italy and Shanghai, China and the increasing investment in this sector makes me hopeful that this will happen” Reg said.
He added that the Ethiopian government has set a challenge for the Ethiopian sector to achieve 500 million USD in export targets as per the end of the GTP and for this purpose has made adjustments with regards to tariff barriers.
He continued by saying that the government had made tariff adjustments such as a tariff increase on crust leather imposed in December which has made Ethiopia become a full member at the international trade forum but with a desire to rise up to the challenge of its new status.
Improvements in banking, service delivery, quality, logistics and product quality were some of the areas mentioned as issues of concern that the leather industry want to improve on to continue in its now found status and prominence.
One of the local products that demonstrated the steady transformation of the leather sector was Dire Industries Company which encompasses Modjo Tannery, Dire Tannery, Peacock shoe factory and Dire Electronics and Transportation among its many subsidiary companies.
The finished leather products of Dire Tannery and the shoes of Peacock made from sheep and ox leather were a draw to the pensive crowd trickling into its spacious and elegant stand.
Biniam Bedada Manager of Dire Industries Private Limited Company said the leather shoes and finished leather products were to be sold to local and export markets. The shoes are mainly exported to countries like Italy, the US, and Japan while the finished leather products are sold to countries like the US, China and India.
The leather shoes that are sold on the local market range from 250-500 birr per pair and 12 USD for exports. The finished leather products which are overwhelmingly destined for exporting range from 2-2.5 USD per square feet.
Biniam nevertheless said the company faces shortages in leather raw materials, delays in imports of leather components and electrical outages, although he stressed it’s getting better nowadays.
A similarly attractive and spacious stand f the Italian firm Despa- Pidgi which not only sells shoes for both genders and all ages but designs them as well.
Gianluca Pollastrelli, an exhibitioner for the company said they are working jointly with Anbessa Shoe Company to help them design new shoes soles and prototypes in order for Anbessa to produce the shoes and sell them to the the local and international market. It also provides training about producing quality high end shoes.
The Italian firm also sells its own at around 2,500 Euros per pair.
Gianluca also said the collaboration is expected to help boost Anbessa shoes production and sales amount by 100,000 pairs of shoes annually.
Ambassador Bruck Debebe From the Ethio-Leather Industries attributed the prevalence of high quality high end local products government encouragement and the maturing of the private sector as well as a bonded warehouse arrangement as contributing to the rise of the leather industry.
“We hope that this is a win-win solution as the world market is huge but Ethiopia’s share so far is minuscule,” said Amb. Bruck, referring to the sloth like growth of leather exports.
However the Ethiopian Leather Industry Association (ELIA) stated more pressing challenges were the supply of 16 million hides and skins annually compared to what it says are 40 million hides and skins that it needs annually.
Informal backyard killing, and lack of knowledge of skinners and handling sensitive skins improperly are reasons for the short supply.
ELIA estimates that hides and skins could have revenue value four times greater than meat products because they can be used in so many more ways than meat.
It proposes the establishment of a slaughter house strategy across the country where backyard killing of livestock is put to an end, in the process saving hides and skins from damages.
They hope to see the establishment of Small and Medium Enterprises (SMEs) that can reach out more effectively to every region of the country.