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New regulation on the make to ban slaughtering of animals at home
The Ethiopian New Year holiday raw hide and skin market has shown a 30 percent decrease in prices compared to a year ago, Capital has learnt. While any decrease in prices encourage exports, the instability of the market presents a challenge for tanneries and leather producers, as the price of their primary raw material fluctuates wildly. The government plans to remedy this by introducing new regulations to control the skin and hide market to encourage transparency and increase stability.This will benefit the leather industry, as it will encourage investment and increase production.
In the near future, the Ethiopian government hopes that the leather industry will thrive and become a critical and profitable sector within the economy. However, this requires the market for the raw materials (skins and hides) to be stable and transparent, if profits are to be made and maintained.
According to a survey Capital conducted at different market locations in the city on Thursday September 12, a day after the holiday, the maximum price for a piece of raw sheep hide was 60 birr. Last year at the same period raw sheep hide fetched 90 birr. Meanwhile, the price of goat hide was up to 35 birr this year.
These prices are rates at the primary market. The prices may increase when the skins are transferred to wholesalers.
Raw hide and skin resellers said that the current holiday price is much lower compared with past holidays. For instance, this past Easter, one of the public holiday that is celebrated by slaughtering a sheep, goat or ox, the price of hides and skins was higher compared to this New Year holiday. “The price of hide was about 80 birr per piece four months ago just after Easter holiday,” raw hide and skin buyers said.
“We fix the price based on the information that we get from wholesalers,” the buyers told Capital.
Tanneries and other sector actors have complained that the price of raw hide and skin is artificially created and that it does not take into account the actual market.
“The lower level leather market has experienced different problems over the past year, but now it seems to have stabilized somewhat,” experts said.
Abdissa Adugna, secretary general of the Ethiopian Leather Industries Association, said that even though the raw hide and skin market is more stable compared with the past, it still needs to decrease some to be in line with a healthy market.
“The price of sheep hide has to be at least 50 birr per piece,” he told Capital.
But he appreciated the current market and said that the price decrease will encourage the sector to export more.
Several experts have said that due to the artificial price hike, tanneries have been forced to spend more capital for the purchase of hides and skins.
The raw hide and skin market has not been stable in the last few years in relation to the growth of tanneries. Currently, there are 23 tanneries, but some huge foreign-based tanneries that opened in the past few years have required large amounts of input which is said has contributed to the rise in the prices.
Currently, the government seems not that interested in the establishment of new tanneries, but instead focusing on expanding the finished leather market.
Meanwhile, in the beginning of the budget year, new regulations that help to stabilize the hide and skin market are expected to be introduced by the parliament.
Based on the draft regulation on hides and skins the government will create market centres to stop illegal trading, with the eventual aim of banning the slaughtering of animals at home. It will control the market from the Wereda to the tannery level.
The draft says that Weredas or city administrations will be responsible for the business in a legitimate manner. The goal 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 number of primary 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 has given permit to buy and sell skins) will receive skins from the primary market actors (for example, the people who collect skins from homes). These associations and suppliers will then sell the skins to tanneries. All trading will be conducted according to contracts between the suppliers and tanneries.
In the future, raw hide and skin trading will be carried out by the Ethiopian Commodity Exchange (ECX), along with other agricultural products. All trading will then be done based on quality standards set by the Ethiopian Standards Agency. A lot of work has recently been done to modernize the way raw materials for leather production are procured. However, until now there was not a concrete plan of action. Two year ago the government attempted to control price hikes by imposing price caps on raw materials, which had a minimal impact.
Ethiopia hopes to earn a lot of revenue from leather, but the lack of a modern marketing system and the gap between supply and demand has hindered growth and created unhealthy market competition between tanneries.
The government has projected a gross of half a billion dollars from leather and leather product exports by 2015, the end of the five year plan.