A draft regulation by Ministry of Trade on hide and skin will create market centers to stop illegal trading that will eventually aims to ban slaughtering animals at home.
As a result of talks between stakeholders on June 14 at the Ministry of Trade hall, a new regulation will become effective in the coming fiscal year to control the raw hide and skin market from the Wereda to tannery levels.
The draft says that Weredas or city administrations will undertake the business in a legitimate manner. The first step will be to eliminate middlemen and make the process of selling skins more transparent.
A marketplace with quality standards, regulated by the government, will be the first stage of the new program, for those wishing to invest in hides and skins. The draft regulation indicated that the number of the first raw hide and skin market actors will be limited by each Wereda or city administration based on their size.
Secondary market actors; suppliers, slaughter houses and associations that the Ministry of Trade have been permitted to buy and sell skins received from the first market actors (the people who collect skins from homes for example); these associations and suppliers will then sell them to the tanneries. All trading will be held under contracts signed between the suppliers and tanneries.
All secondary market actors will need warehouses and reserve centres approved by the relevant governmental office, to be involved in the business. In the future raw hide and skin trading will be undertaken by the Ethiopian Commodity Exchange (ECX) along with other agricultural products. All the trading will then be done based on quality standards set by the Ethiopian Standards Agency.
The new regulation also addresses the issue of hoarding. Hides and skins must be delivered within six hours for suppliers or tanneries, the dried hides have to be delivered in two months and the preserved ones must be delivered in three months.
“This specific time schedule will allow us to control the trading while maintaining the quality,” one expert explained.
The government also plans to form the third market in which tanneries will trade with each other.
“Tanneries will be divided in two sections depending on their capacity, the first section will allow them to produce the raw hide and skin up to semi finished stage and other tanneries will buy the semi finished products and will convert it to finished materials,” the new plan states.
This system will allow tanneries to specialize in limited product items. The third trading will be applied after detailed legal frameworks are issued by the government. According to the draft law, tanneries cannot buy raw hide and skins from any supplier that is not legally registered and will have to sign a contract with suppliers.
Small slaughter houses (slabs) will be established in every corner of the town and Wereda administrations to increase the collection of products.
“In the future any slaughtering will not be allowed without these selected slabs,” the government’s plan stated.
Quality standards will be set based on the sources of the raw materials. The new plan also aims to include farmer’s unions as it plans for them to be involved in the rawhide and skin market.
“It may take a few months to implement the new regulation because it has to be introduced to all the stakeholders,” an expert explained.
The new system and regulation is designed to harmonize the market chain and circulation of raw hide and skins and stop the price speculation that is constantly occurring between tanneries and suppliers.
The regulation, drafted by MoI in tandem with other affiliated organizations, such as the Leather Industry Development Institute (LIDI) and other major stake holders, is expected to be submitted to House of Peoples’ Representatives before the end of the current budget year.
Recently a lot of work has been done to modernize the way raw material for leather is procured. However, until now there was not a concrete plan of action. One year ago the government attempted to control price hikes by imposing price caps on raw materials, which saw only minimal impact.
Ethiopia hopes for a high degree of revenue from leather but lack of a modern marketing system and the gap between supply and demand has hindered growth and created unhealthy market completion between tanneries.
The government has projected a gross of half a billion dollars from leather and leather product export 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.
Tadesse Haile, State Minister of Industry and Yakob Yala, State Minster of Trade chaired the one day closed discussion session held at the Ministry of Trade hall.