External challenges like the latest perk of US and China trade war, revised FDI policies besides slow interest of the international market is continuing bleeding local and foreign trade of the Ethiopian leather industry.
The leather sector is one of the major historical sources of hard currency like coffee, while this day it has been substituted by other commodities like horticulture and khat.
The Leather Industry Development Institute (LIDI) stated that the latest trade war between the two world’s biggest economies has affected the export of leather and leather goods.
Berhanu Sirjabo, public relations head of LIDI said that the country’s export has been affected by the trade war between the US and China, who imposed tariffs on each other’s imports.
The public relations head claimed that the trade war affects the country’s revenue directly and indirectly. Both sides would buy our products and export to each other’s country, but this has now slowed due to the tariff that both countries imposed on each other in the past few months.
Experts at the Ethiopian Leather Industries Association (ELIA) said that the sector is going through a serious problem locally even though the international trend like the US China trade war is also pressuring the sector externally.
The leather sector actors are strongly arguing that the leather sector has declined in the past five years, despite the government’s statement that it has shown a slight improvement in investment and export revenue.
Local tannery owners who requested anonymity claimed that the government has been deliberately or ignorantly affecting the sector through its policy which was amended in the past years.
“The sector has been built for nearly seventy years and was expected to brew better achievements in these days, but the reality is different,” they complained.
Yared Alemayehu, owner of Wallia Leather and Leather Products and former president of ELIA, said that the problem in the leather sector is very wide and directly pointed to the government’s policy.
“In the sector we the local actors have over a half century of experience, but all of a sudden in the past five years it has collapsed. It has to be asked why the collapse occurred,” Yared said. “If the problem is seen in one or two factories it would likely be due to mismanagement by the companies but the problem is seen in all actors. Therefore, the government body considers that it is a problem of mismanagement by local companies and lack of competition with FDIs’ that invested in the sector around a decade ago,” he added.
That has caused stakeholders to develop incorrect policy in the sector and replace the former policy that only favor FDIs, according to the sector actors.
“Since the policy change is in favor of FDIs there is another question, does the country benefit in export revenue, value addition, technology and even employment? But the answer is that the sector does not show any change regarding the stated questions,” Yared told Capital.
Ethiopia’s rank in livestock population is 8th in the world while India is not far from Ethiopia in terms of the population number of livestock but the export of India excluding local business has reached USD 17 billion. “When it comes to the Ethiopian leather sector it did not show any change meanwhile the number of the size of FDIs increased,” experts said when pondering the role of FDI and its contribution.
“When FDIs expanded in the country why did the export revenue become stuck at the level where Ethiopian actors performed about a decade ago,” they asked.
They argued that the current export revenue is not comparable from the performance a decade ago.
“Ten years ago we exported natural leather, but now export items for instance footwear produced by synthetic materials is registered as the export of leather goods.”
“If excluding the non leather goods like the synthetic footwear and then comparing the leather export from exports ten years ago the current hard currency generation is lower than what we achieved years back,” they claimed.
“At the past we have earned the same export revenue by only the export of semi finished and finished leather not by exporting footwear. If they said that export of leather goods expanded why did the sector earn the same amount that we have contributed,” they asked.
In 2008 the government has imposed a high levy on the export of raw hide and skins and wet blue, pickle and crust, which are semi processed products to encourage the local production of finished leather and boost the country’s hard currency revenue.
Against the investment proclamation of 2003 the government has allowed foreign investors to invest in the leather sector from scratch which was claimed as illegal and affects the local investors.
The 2003 investment proclamation stated that FDI shall invest from the semi processed; while the local investor is protected to produce from raw to crust on the concept the country has adequate capacity to process by local investors. “But without a law the government has allowed FDI’s to invest from the raw level that we argued it is a displacement of local investors,” experts claimed, “they even amended the investment proclamation that highly favors the FDI without evaluating the outcome of the allowed foreign investors in the sector.”
They argued that the government policy has affected one of the oldest businesses that Ethiopian developed for close to 70 years.
“We have argued that the foreign investors do not have a long term vision and that they are now engaged on environmental challenges, lack of working safety,” they claimed.
Currently about 16 local tanneries have suspended their production, however the government claimed that there are 8, according to sources. The sector has been one of the major areas to manage a huge amount of employees, but it declined.
Experts also claimed that the other reason the sector did not show improvement in revenue is that the FDI’s export their products for their chained companies or affiliates by offering a lower price or under invoice.
“If the sector was protected on some level for local investors the customs shall cross check the cost of production of the finished and goods products, but when we challenged the idea allowing foreign investors to engage on all sectors the officials ridiculed us and blamed us saying that we are backward,” experts claimed.
According to Berhanu, the limited capacity of Ethiopian leather goods manufacturers regarding the management and weak technological capability also negatively affects the sector. “Technological transfer on the sector is the major issue that the sector needs is tackling the inner challenge, while the external challenge is difficult to be solved,” Berhanu said.
“When the technology advanced at the leather industries the sector shall keep the standard and improve the export value and volume,” he argued.
“The Prime Minister shall interfere and solve the problem by changing the policy,” local actors expressed hopefully.
Experts at the association have also stated that the international trends in the past couple of years have changed in the leather sector.
Currently the synthetic industry is booming and major manufacturers are also engaged in the sector that affects the Ethiopian export.
“The sector is very dynamic which also is a significant factor in the slowdown of the Ethiopian leather sector in the past couple of years,” sources at the association said.
According to Berhanu the country has now a capacity to produce 20 million pairs of footwear per annum for the export market, while the revenue expected from the sector has not grown as per the expectation. “Currently the country has a single factory that shall produce 50,000 pairs of footwear per day,” Berhanu indicated. The country’s revenue from leather and leather goods exports stood at USD 134 million based on the past budget year’s performance.
At the end of the first Growth and Transformation Plan (GTP I) the government has targeted to generate half a billion USD, while the actual performance did not show change for the past decade.
In the past few years the sector investment has grown significantly. For instance the number of tanneries has reached 32 from 20 about a decade ago, but some local tanning facilities became bankrupted, according to the sector actors.
“Previously they have killed the local investors by buying the product with high price and now they are saying they do not want to use the local raw material that is the reason for price reduction and wastage of the national resource,” a tannery owner, who declined to be named, told Capital. “Currently we are very few struggling to service, while most of them are out of the market,” he said. “The companies that currently existing are also in trouble of heavy debt and even consumed significant amount of running cost in the past ten year,” he added, “if the government want the existence for the industry has to right off the debt of the companies what Egypt made in the past.”
However even the number of tanneries increased more, in the past couple of years the raw material price has significantly dropped and that forced to waste the resource. To keep the resource from wastage the government itself is engaged on buying the raw hide and skin from suppliers on major holiday seasons and processed the raw to semi stage via private tanneries.
On the latest holiday, Christmas, the raw hide and skin has been rated a price of up to 25 birr and 35 birr for goat and sheep skin respectively, while the demand of hide is very low that it has been sold by 4 birr per kilogram. The institute official said that lack of industrial salt has been slowed the hide trading on the holiday morning but it has been revived in the afternoon after the collectors encouraged to use edible salt as optional.
There are 24 footwear factories and from those 16 are engaged in the export market. The international trend indicated that the price of footwear is from USD 9 to 23, but the locally produced footwear is not worth more than USD 13.
Leather’s difficult times
EUROPEAN SPRING
The ‘European Spring’, if one may call it that, is a bit different from that of the ‘Arab spring’. For a start, the European insurrection has been methodical and dawdling. Nonetheless, they both utilized the operational tactic of flooding the streets. After the 2008 financial crisis, the European sheeple (human mass) was severely impacted by the austerity measures enacted by the various nation states in collaboration with the EU, IMF, EC, etc. In many of the European countries the disillusioned mass of humanity ultimately decided to form new alliances that could challenge the status quo. Popular sovereignty became the overriding objective amongst the seemingly opposed groups within the whole political spectrum. In addition, the desire to open up the sphere of political and economic governance unified the diverse collective. Most importantly and unlike the Arab Spring, the ‘European Spring’ is happening in the very womb of the beast itself, so to speak! See the articles next column, on page 44.
These new movements, parties and coalition are espousing fresh ideas, like ‘direct democracy.’ The Swiss are known for such a system (frequent referendum) and now the French also want to have the same!
It is in Greece where it all started. As the TROIKA (EC, ECB, IMF) was flexing its muscle over the Greece economy during the global financial crisis, its sheeple decided to abandon the old political parties and tried setting up new ones, away from the center. Syriza, a left leaning party came to power by traditional democratic means, i.e., elections. Nevertheless, Syriza’s grand plan to challenge the policies imposed by the TROIKA didn’t see the light of day. Soon thereafter, the youth of Greece joined their brethren from Eastern Europe in the mass exodus that characterized post USSR Europe. Unbeknownst to many a sheeple, this mass exodus still continues today! According to the conditionality imposed by the TROIKA, Greece’s national assets were sold off to transnational capital, whose primary objective is of course to make money, not the welfare of the Greece sheeple! Then came PODEMOS and INDIGNADOS in Spain. Again, PODEMOS is a left leaning political party formed to counter the austerity policies of the TROIKA. Election got PODEMOS to power or rather to power sharing, but its policies had to be diluted to accommodate its coalition partners. At the end of the day, it is still the TROIKA that has the upper hand in deciding the economic policy of Spain, Portugal, etc.!
Probably the most significant departure from the current globalization project of transnational capital was the decision by the British sheeple to withdraw from the EU, altogether! The gamble the then prime minster took resulted in what is now called Brexit. Not long after this significant referendum, the US sheeple also decided to go for the jugular and elected Mr. Trump, but Mr. Trump is no radical. Even though many consider him as an outsider. Mr. Trump had to rely on the old Republican Party machinery to win the election. Unlike Europe, setting up a new political party of significance is not really possible in the ‘land of the free’! Be that as it may, the ‘deep state’ was/is not happy about the outcome, hence the political brouhaha in D.C. The change momentum that started in Greece has now overtaken the imagination of the European sheeple. For example, the Italian sheeple came up with its unique arrangement, at least by the standard of ordinary party narrative to secure power. Five Star Movement (left) and Lega Nord (right) joined forces to oust old parties whose ideologies have always hovered close to the center. It is becoming increasingly clear that parties of the far ends are coming closer on many issues of practical relevance. It is common sense, more than anything else that is at work here. Ideologically centered parties that have been operating under the forceful thumb of transnational capital continue to lose political ground across Europe!
Enter the French ‘yellow vests’! Here there is a whole lot more than what meets the eye. The French are demanding not only a new government, but also a new way of popular political participation. They no longer consider ‘electoral democracy’ as adequate to the challenges of modern life. Who should blame them? Every time a politician wins a public office, it is not the interest of the sheeple he/she advocates, rather it is the greed infested agenda of transnational capital, under the auspices of the ‘deep state’. To rectify this structural democratic deficit the French sheeple is now demanding ‘direct democracy’. Today, Citizen Initiated Referendum (RIC) is the main demand of the French sheeple and it envisions a radical change in political governance. ‘The Citizen Initiated Referendum (RIC) would allow French citizens to propose their own laws that would then be voted on by the general public in a referendum that could effectively bypass the French parliament. According to the Yellow Vest movement, the RIC would not be limited to just proposing new laws but would have several other functions including repealing existing laws and referendums on amendments to the French constitution. The movement also backs the idea of a RIC to, dismiss any politician, the president, a minister, a deputy or any other elected official.’ It seems ‘electoral democracy’ is now on the ropes, while ‘participatory democracy’ is in the ascendance. Civil disobedience is going to be another of the weapons to be employed by the angry sheeple of the French republic. For instance, French citizens are threatening to instigate ‘bank run’ unless the government accepts and implements their demand.
Do not underestimate the French! In the French Revolution of 1789, they executed their king, Louis XVI and abolished the monarchy (1792). They also came up with new societal arrangements infused with highly liberating ideals. (Declaration of the Rights of Man and of the Citizen.) In 1848 they also had another revolution, the February Revolution, which abolished slavery and initiated male universal suffrage. Today, the French citizens are demanding not only the overthrow of their current government but much more! In other words, they are willing to question the very foundation of the currently polarizing globalization, which of course was anointed by entrenched interests as sacrosanct. It seems we are cursed to live in interesting times, as the Chinese blessing foretells. How will the European Spring end? This is an important question, not only to the European sheeple, but also to the global populous at large. “When the government violates the people’s rights, insurrection is, for the people and for each portion of the people, the most sacred of the rights and the most indispensable of duties.” Marquis de Lafayette, 1790 (French & American General). Good Day!
CCD real-estate founder summoned to court
Messele Haile (PhD), founder of the Country Club Developers (CCD), has been summoned to court after people asked for his arrest.
The complainants appeared in court on January 1.
The plaintiffs had paid for six houses each resting on 1,000sqm of land and had been waiting for them over a ten year period. They then sued the real estate company and eventually the Federal High Court ruled in their favor. The court ordered the real estate company to deliver the houses in 16 months.
They were given four more months to complete the import process but still no house materialized. Then, 5 months later the creditors went to the court to force the company to deliver the homes.
Lawyers for CCD told the judge that they couldn’t deliver the houses on time because of the foreign currency shortage and the quality of products the company use for finishing materials.
The applicants wanted over one million birr in damages calculated at 30,000 birr every month of delay in getting the homes.
The applicants also reported to the court that they sent CCD three different letters notifying the company that it had failed to live up to its end of the bargain.
Tamagn Beyene, the lawyer for CCD said that it is illegal to arrest the general manager because he acted in good faith and forces beyond his control caused the company to be unable to finish the house.
Bekalu Zeleke takes reigns of BoA
The former chief economist and vice governor of the National Bank of Ethiopia (NBE), Bekalu Zeleke, began working as president of the Bank of Abyssinia (BoA) a day after the Ethiopian Christmas holyday. In addition three new vice presidents (VPs) were also assigned by the board of directors which is being chaired by Meseret Taye.
A few months ago, the former president, Mulugeta Asmare resigned from his position. When he did so,
Sources said that as per the time frame that Mulugeta gave, the new president officially started his work as of January 8.
The board approved the position of two new VPs about two weeks ago and another one became acting VP during a special meeting of the board of directors held on Thursday.
The three VPs that assigned by the board are Meseret Assfaw, chief enterprise officer, and Daniel Hailu, chief information officer, Asaminew Deribew, who was assigned last Thursday will manage the chief customer service, according to sources.
Currently the bank has five VPs and two executives under its structure.
Under his leadership in the past five years Mulugeta has registered magnificent performance at the bank. Previously they experienced trouble with non-performing loans. Bekalu, who also registered several achievements under his leadership at Commercial Bank of Ethiopia (CBE), the state financial giant, has been assigned as chief economist and vice governor of the central bank by Prime Minister Abiy Ahmed (PhD), but he left after a couple of months service.
When he was president of CBE he registered massive deposit mobilization and expanded the bank’s branches by close to four fold. The total number of CBE’s branches has now reached about 1,300 from 220 as of June 30, 2010.
Bekalu has been president of CBE for close to a decade by replacing Abe Sano, who is now president of Oromia International Bank.
BoA is one of the two oldest private banks and in the past decade it has made several remarkable achievements.
In the past fiscal year the bank that has 2.56 billion birr paid up capital has registered assets of 31.9 billion birr for the year, which was 25.8 billion birr a year ago, while their capital has reached 4.3 billion birr which is a 27 percent increase. The paid up capital, assets and others statements put the bank one of the top three on the private banking industry.
The number of depositors at the bank has dramatically increased. In the 2016 /2017 fiscal year the number of depositors stood at 750,000, while it has now increased by 35 percent and reached more than one million.
Besides the growth in the number of customers the bank’s deposit mobilization went up by five billion birr within a single year.
The report indicated that the total deposit mobilization at the end of June 30, 2018 reached 26 billion birr, which was about 21 billion birr a year ago. The growth of deposit mobilization has placed the bank as one of the most competitive banks and a key player in the sector.
In terms of advances and loans BoA has facilitated close to 4 billion birr during the fiscal year amounting to a total of 18 billion birr.
Loans and advances grew by 28 percent compared with the preceding year. Term loans and over drafts grew by 35 percent. According to BoA’s financial report, the proportion of loans indicated that term loans took the lion’s share by 66 percent and over drafts and advances stood at 21.3 and 12 percent respectively. From the total loans domestic trade took the highest portion followed by exports, construction and industry.
