The following research report contains market research, analysis, statistics and business intelligence relating to research on Leather Industry In Ethiopia.

Order the 2008 Edition of this report now by adding this item to your cart or for faster service call us at 212-398-5505 to speak to a customer service representative.

ABSTRACT
1. WITH AN ABUNDANCE OF LIVESTOCK RESOURCES, ETHIOPIA
HAS A COMPARATIVE ADVANTAGE IN PRODUCING LEATHER AND
LEATHER PRODUCTS. THE LARGEST NUMBER OF LIVESTOCK IN
AFRICA AND THE TENTH LARGEST IN THE WORLD ARE FOUND IN
ETHIOPIA. ACCORDING TO THE LIVESTOCK MARKETING
AUTHORITY FIGURES, ETHIOPIA HAD APPROXIMATELY 35
MILLION CATTLE, 25 MILLION SHEEP, AND 19 MILLION GOATS
IN 2000. THE ETHIOPIAN MINISTRY OF AGRICULTURE
ESTIMATES THAT THE CURRENT SKIN REMOVAL RATE TAKE IS 7
PERCENT FOR CATTLE, 33 PERCENT FOR SHEEP, AND 37
PERCENT FOR GOATS. THIS TRANSLATES INTO AN OUTPUT OF
2.4 MILLION COW HIDES, 8.3 MILLION SHEEPSKINS AND 7
MILLION GOATSKINS IN 2000. ON AVERAGE, ETHIOPIA HAS
THE CAPACITY TO SUPPLY 16 TO 18 MILLION PIECES OF HIDES
AND SKINS TO LOCAL TANNERIES.

2. IN ADDITION TO ITS LARGE SUPPLY OF LIVESTOCK,
ETHIOPIA HAS A LARGE LABOR POOL, ESTIMATED TO BE 36
MILLION. LABOR IS READILY AVAILABLE AND INEXPENSIVE.
THE UNEMPLOYMENT RATE IS ESTIMATED TO BE 40 PERCENT.
THE LEGAL MINIMUM WAGE RATE IS 120 BIRR ($14) PER
MONTH. THE AVERAGE WAGE IN THE LEATHER INDUSTRY IS 450
BIRR ($53) PER MONTH FOR CUTTERS AND SEWERS; 700 BIRR
($83) FOR FLOOR SUPERVISORS; AND 1700 BIRR ($200) PER
MONTH FOR MANAGERS.

STRUCTURE AND PRODUCTION

3. THE LEATHER INDUSTRY IN ETHIOPIA PRODUCES HIDES,
PICKLED SHEEP SKINS, WET-BLUE GOAT SKINS, CRUST AND
FINISHED LEATHER, AND LEATHER PRODUCTS (FOOTWEAR,
GARMENTS, GLOVES, BAGS, WALLETS, TRAVEL GOODS, ETC).
THE TOTAL ANNUAL PRODUCTION IN THE SECTOR HAS AVERAGED
AT JUST BELOW $100 MILLION FROM 1996 THROUGH 1998, THE
LATEST YEAR THAT INFORMATION IS AVAILABLE. PRODUCTION
DATA CAN BE FOUND IN APPENDIX A. ACCORDING TO THE
ETHIOPIAN INVESTMENT AUTHORITY, 170 PROJECTS VALUED AT
APPROXIMATELY $80 MILLION WERE APPROVED FROM 1992 TO
2000.

4. THE ETHIOPIAN MINISTRY OF TRADE AND INDUSTRY REPORTS
THAT THERE WERE 191 FIRMS (10 PUBLICLY AND 181
PRIVATELY-OWNED) IN THE LEATHER INDUSTRY IN 1998 (THE
LATEST YEAR AVAILABLE) IN THE FORMAL SECTOR. IT IS
DIFFICULT TO ESTIMATE THE NUMBER OF FIRMS OPERATING IN
THE INFORMAL SECTOR. THREE TANNERIES WERE LATER
PRIVATIZED. FOUR LARGE STATE-OWNED TANNERIES (ADDIS
ABABA LEATHER INDUSTRY, KOMBOLCHA TANNERY, ETHIOPIA
TANNERY AND MODJO TANNERY) AND ONE LEATHER SHOE FIRM
(ANBESSA SHOE FACTORY) ARE SCHEDULED TO BE PRIVATIZED
IN 2002.

--------------------
MARKET OPPORTUNITIES
--------------------

5. THE LEATHER INDUSTRY IS THE SECOND LARGEST FOREIGN
EXCHANGE EARNER AFTER COFFEE. IN 1998, THE SECTOR
EXPORTED $41 MILLION PRIMARILY TO EUROPE, ASIA, AND THE
MIDDLE EAST. HIDES AND SKINS MAKE UP THE MAJORITY OF
THESE EXPORTS, ACCOUNTING FOR OVER 99 PERCENT OF
LEATHER EXPORTS. FINISHED LEATHER PRODUCTS ARE
PRIMARILY SOLD ON THE DOMESTIC MARKET. (EXPORT AND
IMPORT DATA CAN BE FOUND IN APPENDIX A).

6. WITH A POPULATION OF 62 MILLION PEOPLE, ETHIOPIA HAS
A LARGE DOMESTIC MARKET. HOWEVER, PURCHASING POWER IS
LIMITED; PER CAPITA GROSS DOMESTIC PRODUCT IN 2000 WAS
$102. THE LEATHER INDUSTRY MUST INCREASE ITS EXPORTS
SIGNIFICANTLY IN ORDER TO GROW.

7. AS A BENEFICIARY OF THE AFRICA GROWTH AND
OPPORTUNITY ACT (AGOA) SINCE 2000, MOST CATEGORIES OF
ETHIOPIAN LEATHER EXPORTS TO THE UNITED STATES FACE NO
DUTIES. AGOA GIVES ETHIOPIA AND OTHER ELIGIBLE
COUNTRIES PREFERENTIAL TARIFF MARGINS RANGING FROM 2
PERCENT TO 38 PERCENT ON LEATHER GOODS.

8. ETHIOPIA IS A MEMBER OF THE COMMON MARKET FOR
EASTERN AND SOUTHERN AFRICA (COMESA), A REGIONAL
INTEGRATION BODY WITH 20 MEMBERS. COMESA CREATED A
FREE TRADE AREA (FTA) IN OCTOBER 2000. WHEN ETHIOPIA
JOINS THE COMESA FTA IN THE COMING YEARS, ITS PRODUCTS
CAN ENTER OTHER MEMBER COUNTRIES DUTY FREE. ETHIOPIA
ALSO HAS PREFERENTIAL ACCESS TO THE EUROPEAN UNION
MARKET UNDER THE EU ACP INITIATIVE.

-----------
CONSTRAINTS
-----------

9. ACCORDING TO AN INDUSTRY SURVEY CONDUCTED BY THE
ETHIOPIAN EXPORT PROMOTION AGENCY, LEATHER-PRODUCING
FIRMS REPORT THAT THEY ARE OPERATING FROM 30 TO 90
PERCENT BELOW CAPACITY. THE INDUSTRY FACES CONSTRAINTS
DUE TO OUTMODED EQUIPMENT AND MACHINERY; LACK OF MARKET
INFORMATION; LOW QUALITY STANDARDS; AND LIMITED SUPPLY
OF RAW MATERIALS. FIRMS IN THE LEATHER SECTOR CITE THE
NEED TO INVEST IN TECHNOLOGY UPGRADES AND HUMAN SKILLS
DEVELOPMENT AS CRUCIAL TO IMPROVING PRODUCTIVE
CAPACITY. LACK OF MARKET AWARENESS AND QUALITY
STANDARDS WERE SEEN AS IMPEDIMENTS TO INCREASING
EXPORTS.

10. PRODUCERS OF FINISHED LEATHER APPAREL AND GOODS
REPORT A SHORTAGE OF HIDES AND SKINS AS A CONSTRAINT TO
INCREASING PRODUCTION VOLUMES. TANNERIES HAVE
ESTABLISHED EXPORT MARKETS AND THUS PREFER TO EXPORT
RATHER THAN SELL ON THE DOMESTIC MARKET. THE ETHIOPIAN
GOVERNMENT AND THE LEATHER INDUSTRY ARE WORKING ON WAYS
TO INCREASE THE SUPPLY OF HIDES AND SKINS TO LOCAL
LEATHER GOODS PRODUCERS. IMPROVING LIVESTOCK HUSBANDRY
IS AN IMPORTANT ELEMENT TO INCREASE THE SUPPLY OF RAW
MATERIALS FOR THE INDUSTRY.

11. OTHER IMPEDIMENTS TO THE SECTOR'S DEVELOPMENT
INCLUDE WEAKNESSES IN THE TRANSPORTATION,
COMMUNICATIONS, FINANCIAL INFRASTRUCTURES AND THE LAND
TENURE SYSTEM.

12. TRANSPORTATION LINKS. ETHIOPIA USED TO ENJOY
ACCESS TO ERITREA'S ASSAB AND MASSAWA PORTS FOR ITS
TRADE TRAFFIC. WHEN THE 1998 ETHIO-ERITREAN WAR BEGAN,
ETHIOPIA WAS FORCED TO DIVERT ALL OF ITS TRADE FLOWS TO
THE PORT OF DJIBOUTI. IN THE SHORT-TERM, ETHIOPIA WILL
HAVE TO RELY EXCLUSIVELY ON THE DJIBOUTI PORT. THE
DJIBOUTIAN GOVERNMENT HAS HIRED A PORT MANAGER THAT IS
MODERNIZING THE PORT TO INCREASE ITS CAPACITY. IN THE
MEDIUM- TO LONG-TERM, PORTS IN SOMALIA, SUDAN AND KENYA
MAY BECOME OTHER ALTERNATIVES.

13. ALTHOUGH THE ETHIOPIAN GOVERNMENT HAS BEEN SPENDING
MONEY ON EXPANDING THE ROAD AND RAIL NETWORKS, THE
TRANSPORT INFRASTRUCTURE REMAINS IN A POOR STATE.
ETHIOPIA CONTINUES TO HAVE ONE OF THE LOWEST ROAD
DENSITIES IN THE WORLD.

14. COMMUNICATIONS SYSTEMS. ETHIOPIA HAS ONE OF THE
LOWEST TELE-DENSITY RATES IN THE WORLD. THE GOVERNMENT
IS WELL AWARE OF THE URGENCY IN ADDRESSING THE
SITUATION. THE GOVERNMENT HAS INVESTED IN UPGRADING
ITS LAND AND MOBILE COMMUNICATIONS SYSTEMS, AND HAS
RECENTLY UPGRADES ITS INTERNET BANDWIDTH. PLANS FOR
PARTIAL PRIVATIZATION OF THE FIXED LINE COMMUNICATION
SYSTEM ARE UNDERWAY.

15. FINANCIAL SECTOR. THE FINANCIAL SECTOR NEEDS TO BE
FURTHER LIBERALIZED AND FOREIGN PARTICIPATION SHOULD BE
ALLOWED TO IMPROVE COMPETITION AND THEREFORE SERVICES
PROVIDED TO THE PRIVATE SECTOR AND CONSUMERS. FOREIGN-
OWNED FIRMS CAN ACCESS LOCAL CAPITAL, ALTHOUGH LOCAL
FIRMS REPORT THAT ACCESS TO CAPITAL IS DIFFICULT.

16. LAND OWNERSHIP. ANOTHER SERIOUS DRAWBACK FOR
INVESTORS IS THAT THE GOVERNMENT DOES NOT ALLOW PRIVATE
LAND OWNERSHIP. INVESTORS CAN, HOWEVER, LEASE LAND FOR
UP TO 99 YEARS. THE ETHIOPIAN INVESTMENT AUTHORITY
FACILITATES THE LAND LEASE PROCESS.

--------------------------
PROSPECTS FOR U.S. EXPORTS
--------------------------

17. OPPORTUNITIES EXIST FOR U.S. FIRMS, PARTICULARLY
SUPPLIERS OF EQUIPMENT AND MACHINERY FOR SMALL-SCALE
INDUSTRIES. THE FOLLOWING LIST PROVIDES THE TYPES OF
EQUIPMENT AND MACHINERY NEEDED BY THE SECTOR:
CHEMICALS, DYES, BAND KNIVES, BUFFING, CARDING, CONTROL
SYSTEMS, CUTTING SYSTEMS, DEWATERING SCREENS,
DEWOOLING, DRUMS, DRYING EQUIPMENT AND PARTS, DUST
EXTRACTION, EFFLUENT TREATMENT SYSTEMS, EMBOSSING &
PRINTING, EXTRACTORS, FELTS, FLESHING, GLAZING,
GRINDING EQUIPMENT, IRONING, MILLING DRUMS, MIXING
SYSTEM, PERFORATING, PIGMENTATION LINES, POLISHING,
PRESSING, PROCESSING VESSELS, RESELLERS, ROLLER COATER,
ROLLERS RUBBER, SALTING, SEWING, SHAVING, SHEARING,
SPARE PARTS, SPLITTING, SPRAYING, STACKING, TURN-KEY
TANNERY PROCESSES, VACUUM DRYER, WATER TREATMENT
SYSTEMS. THE ETHIOPIAN MARKET NEEDS MANPOWER TRAINING,
QUALITY CONTROL, AND MARKET RESEARCH SERVICES.

18. REGARDING TRADE FINANCE, THE SERVICES OF THE EXPORT
IMPORT BANK OF THE UNITED STATES ARE ONLY AVAILABLE FOR
SPECIALLY FINANCED TRANSACTIONS. EX-IM PLANS TO
INTRODUCE A SHORT-TERM INSURANCE PILOT PROGRAM IN 2002.
THE LOCAL PRIVATE BANKS PROVIDE FINANCING BUT REQUIRE A
LARGE PERCENTAGE OF ANY LOAN IN COLLATERAL, USUALLY
CASH OR DURABLE CAPITAL.

19. PRICE IS THE MAIN FACTOR CONSIDERED BY MOST
POTENTIAL BUYERS OF EQUIPMENT AND MACHINERY. THE SECOND
FACTOR IS LOCAL AVAILABILITY OF SERVICE AND SPARE
PARTS. HIGH QUALITY IS USUALLY THE THIRD ELEMENT
CONSIDERED.

------------------------------------
INVESTMENT CLIMATE AND MARKET ACCESS

20. INVESTMENT FACILITATION. THE ETHIOPIAN GOVERNMENT
RECOGNIZES THE IMPORTANCE OF FOREIGN INVESTMENT TO SPUR
ITS PRIVATE SECTOR. THE INVESTMENT CODE WAS REFORMED
RECENTLY TO PROMOTE FOREIGN INVESTMENT. A ONE-STOP-
SHOP CENTER IN THE ETHIOPIAN INVESTMENT AUTHORITY HAS
BEEN CREATED TO ASSIST INVESTORS WITH OBTAINING
NECESSARY APPROVALS AND FINDING LAND TO LEASE. LOCAL
CONTENT REQUIREMENTS ARE NOT REQUIRED BUT ARE STRONGLY
ENCOURAGED.

21. TAX STRUCTURE. ETHIOPIA'S TAX STRUCTURE SHOWS THE
GOVERNMENT'S OPENNESS TO PRIVATE INVESTMENT. SALES
TAX RATES ARE 4 PERCENT AND 12 PERCENT DEPENDING ON THE
PRODUCT. A 15 PERCENT VAT WILL BE INTRODUCED IN
JANUARY 2003. THE EXCISE TAX RATE RANGES FROM 10
PERCENT TO 150 PERCENT ON SELECTED ITEMS. CUSTOMS
DUTIES RANGE FROM ZERO TO 40 PERCENT. FIRMS CAN SEEK
TRADE TAX EXEMPTION FOR IMPORTS OF INVESTMENT CAPITAL
GOODS, SUCH AS PLANT, MACHINERY, AND EQUIPMENT.
COMPUTERS AND VEHICLES ARE UNFORTUNATELY NOT TAX
EXEMPT. FIRMS CAN APPLY FOR DUTY DRAWBACK SCHEMES,
WHICH EXEMPT CUSTOMS DUTIES ON RAW MATERIALS PROCURED
FOR PRODUCTION OF EXPORT PRODUCTS.

22. INCOME TAX HOLIDAYS RANGING FROM ONE TO FIVE YEARS
ARE AVAILABLE DEPENDING ON THE PRIORITY AND LOCATION OF
THE NEW INVESTMENT. INCOME FROM PROJECT EXPANSION IS
ALSO EXEMPT FROM INCOME TAX FOR UP TO TWO YEARS
DEPENDING ON THE PRIORITY OF THE ACTIVITIES INVOLVED.
CAPITAL REMITTANCES BY FOREIGN INVESTORS ARE ALLOWED
AND ARE EXEMPT FROM TAXES. THE CORPORATE INCOME TAX
RATE IS 35 PERCENT.

--------------------
23. APPENDIX A: DATA

PRODUCTION VALUE ($ MILLIONS)
1996 1997 1998

LEATHER AND LEATHER PRODUCTS $77.7 $74.4 $69.5

FOOTWEAR $22.7 $25.4 $25.3

TOTAL $100.4 $99.7 $94.8
PRODUCTION VOLUME
1996 1997 1998

LEATHER SHOES AND 1,384,703 1,179,602 1,080,430
BOOTS (PAIRS)
LEATHER UPPERS AND 1,136 419 545
LINING (`000 SQ. MT.)
SEMI-PROCESSED SKINS 15,308 11,112 17,913
(`000 PIECES)
LEATHER GARMENTS 826 1,017 1,611
(`000 SQ. FT.)
CRUST HIDES AND WET BLUE 4,347 5,192 5,551
HIDES (`000 SQ. FT.)

IMPORT VALUES
1996 1997 1998

RAW HIDES AND SKINS $63,181 $96,528 $43,511
LEATHER GOODS $751,339 $966,826 $1,727,528

EXPORT VALUES ($ MILLIONS)
1996 1997 1998

RAW HIDES AND SKINS $71.1 $59.2 $40.8
LEATHER GOODS $ 0.034 $ 0.031 $ 0.005

--------------------------------------
24. APPENDIX B: BACKGROUND INFORMATION
COUNTRY COMMERCIAL GUIDE:
HTTP://WWW.USATRADE.GOV/WEBSITE/CCG.NSF

ECONOMIST INTELLIGENCE UNIT, COUNTRY PROFILE ON
ETHIOPIA: HTTP://WWW.EIU.COM/

ETHIOPIA INVESTMENT GUIDE:
HTTP://WWW.ETHIOINVESTMENT.ORG/

ETHIOPIAN INVESTMENT AUTHORITY WEBSITE:
HTTP://WWW.ETHIOINVESTMENT.ORG/

AFRICA GROWTH AND OPPORTUNITY ACT: HTTP://WWW.AGOA.GOV

25. THIS REPORT WAS PREPARED BY THE U.S. EMBASSY IN
ETHIOPIA AND THE U.S. DEPARTMENT OF COMMERCE.

DISCLAIMER
Information in this report relies on sources including Government Publications, Opinions of industry experts and other public sources. Infomat can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. All prices subject to change without notice.

$3500 USD
For the 2008 Edition

Published: 2006 August
Market: Mens Womens Childrens
Region: Ethiopia
Industry: Textiles
Pages: 45
Delivery: 7-12 Business Days
SKU: infre0000279