The Ministry of Industry (MOI) is drafting a new regulation that aims at controlling the market for raw hide and skins.
The new regulation that tries to harmonize the market chain and circulation of raw hide and skins is expected to solve the price speculation and hike that is constantly occurring between tanneries and suppliers.
The regulation drafted by MoI in tandem with other affiliated organs such as the Leather Industry Development Institute (LIDI) and other major stake holders in the supply chain is expected to be submitted to House of Peoples’ Representatives before the end of the current budget year.
Wondu Legesse, Director General of LIDI, told Capital that before the ratification of the new draft regulation, regional trade and industry offices, regional agriculture offices, federal ministries of Industry, Agriculture, Trade and other stake holders will hold a panel discussion on June 14.
Over the past years, despite several works undertaken to modernize the raw material collection system, the sector market system was not clear on a direct plan of action. For instance a year ago the government attempted to control price hikes by imposing a maximum price upon the raw materials but the impact was not effective.
Although the government expected significant growth from the sector in the past decade, the sector has been adversely affected due to lack of a modern marketing system. The demand and supply gap has also created unhealthy market competition between tanneries.
According to the new draft law, tanneries cannot buy raw hide and skins from any supplier that is not legally registeredand have to sign a contract with suppliers.
“The new regulation will clear the market system from the grass root level and it will identify the standard and source of the raw materials, which make clear the product quality and standard based on the location of the product source,” LIDI head explained about the draft law.
It may take few months for the implementation of the new regulation due to the fact that it has to be introduced for all stake holders and that have a role in relation with the market system, he added.
“Based on the new regulation the suppliers will be identified and the initial collecting route or line will also be known,” experts who contributed on the drafting told Capital.
Currently the price of sheep skin is over 90 birr while the price of other raw hide and skins is growing. Previously some tanneries were collecting the raw hide and skins from the market, which is not allowed for tanneries, rather than buying from suppliers.
Recently the government has issued a duty free scheme to import raw hide and skins or semi processed leather products due to the supply shortage occurring in Ethiopia.
According to experts in the sector, some foreign based companies, mainly Sudanese have come with their sample product to create market link with Ethiopian Tanneries, but there has not been any official transaction held between tanneries and foreign suppliers. “Currently companies are being negotiating with local tanneries about the price to supply the product,” experts said.
The government has projected a gross of half a billion dollars from leather and leather products exports by 2015; the end of the five year plan. During the current -budget year the government had imposed a heavy tax on crust export to encourage an increase in finished leather and leather products for export.