Shortage of import inputs renders 10 out of 28 leather factories /tanneries to halt production as the remaining 18 work under minimal capacities, the Ethiopian Leather Industries Associations (ELIA) reveals.
“The sector is challenging to operate since almost 99 percent of inputs like chemical, accessories and others are imported for factories,” said Solomon Getu, secretary of ELIA, adding, “The industry is mostly dependent on foreign currency to import inputs from the existing 28 leather producing industries, 10 of which have fully stopped their production. From the remaining 18, only 8 are working at 40-50 percent production capacity while the rest ten are working with less than 15 percent of their capacity.”
It is to be recalled that a few months back the association had requested the relevant government bodies, Ministry of Industry and National Bank of Ethiopia (NBE) to re-amend the forex retention for factories to access more foreign currencies they earned from their export earnings to import inputs.
The association expressed that the leather industry aught at least to access 40 percent of the foreign currency earned for the purpose of import inputs.
The retention and utilization of export earnings and inward remittances directives no. FXD/79/2022 that was amended and became effective on January 6 on its article 4.1 stated that banks are required to surrender 70 percent of the foreign currency earnings from export of goods and services, private-transfer and NGO’s transfer to the NBE.
However, as Solomon indicates, no response has been given by the relevant bodies.
With the leather tanneries and leather product manufacturing industries being related; the impact on leather tanneries is said to have a ripple effect on the producers.
In the 2021/22 budget year, the leather and leather goods export generated only 40 million dollars. As Solomon manifested for the current budget year it will be difficult even to generate 30 million dollars from exporting leather products if the situation continues with the way it is now.
In the past three years, the export earnings from the sector have declined in relation to internal and external factors like COVID 19.
In the 2017/18 and 2018/19 budget year the sector contributed USD 130 million and USD 120 million respectively that reduced to USD 75 million in the 2019/20 budget year.
Meanwhile, the export earnings have eroded compared with the preceding year. Nonetheless, the local market has been boosted in the budget year as per the explanation of Solomon.
As he indicates, the Ministry of Industry and the Development Bank of Ethiopia are working to facilitate forex access to SMEs including the leather industry which they expect could be an option to solve the problem.
The association in collaboration with the Ministry of Industry and the Ministry of Trade and Regional Integration and United Nations Industrial Development Organization /UNIDO/ has organized the 13th all African leather fair to be held from February 16-18, 2023 at the Millennium hall.
As indicated, more than 250 local and international tanners, footwear and leather goods manufacturers, leather garment producers, machinery and input suppliers and technology logistics and financial institutions and companies and more than 17,000 visitors are expected on the occasion.
“The upcoming event will play a great role to initiate the leather industry and reverse the downturn of the leather sector after math of the pandemic and international market failure,” remarked Remedan Bedada, president of the association, whilst expressing hope for a positive turn for the industry.