Leather has been an important industry sector of Ethiopia’s economy for decades, with the country being home to some of the world’s finest quality raw materials for leather production. However, despite this advantage, the industry was largely underdeveloped and lacked modern technology and infrastructure, resulting in a significant gap between the country’s potential and actual leather production. Recognizing the potential of the sector, the Ethiopian government initiated a number of initiatives to promote and develop the industry. One of the key initiatives was the creation of the Ethiopian Leather Industry Development Institute (ELIDI) in 2000. ELIDI is responsible for providing technical support and training for local tanneries and manufacturers, as well as promoting the industry both domestically and internationally.
In addition, the government has established leather industrial parks in various parts of the country, with the aim of providing modern infrastructure and technology to local tanneries and manufacturers. These industrial parks offer various incentives to investors, such as tax holidays and duty-free imports of machinery and raw materials, in order to attract foreign investment in the sector. The government has also implemented policies to promote the use of eco-friendly and sustainable practices in the industry, with a focus on reducing the environmental impact of leather production.
The Ethiopian leather industry is not only witnessing significant growth but also contributing to the country’s economic development. The government’s commitment to sustainability and modernization, coupled with positive growth projections, positions Ethiopia as a major player in the global market for leather and leather products.
Export Growth
The government’s efforts to promote the sector have resulted in significant growth in exports of leather and leather products. According to the Ethiopian Leather Industry Association (ELIA), the country exported more than $135 million worth of leather and leather products in the 2019/2020 fiscal year, a 27% increase from the previous year. The top export destinations for Ethiopian leather products include China, Italy, and Vietnam. This growth in exports has been driven by an increase in production capacity, as well as improvements in the quality of leather products produced in Ethiopia.
Domestic Market
In addition to exports, there has been significant growth in the domestic leather industry. The establishment of leather industrial parks has created a platform for local tanneries and manufacturers to access modern technology and infrastructure, which has improved the quality of leather products produced in Ethiopia. The industrial parks have also attracted foreign investment, with companies from China, India, and Turkey setting up operations in the country. This growth in the domestic industry has created employment opportunities and contributed to the overall economic growth of the country.
China Factor
China has become a significant player in Ethiopia’s leather industry as both an importer of raw materials and a key market for finished leather products. The country’s abundant supply of high-quality raw materials, with over 54 million cattle, has been one of the main reasons for China’s interest in investing in the development of Ethiopia’s leather industry. However, concerns have been raised about whether Chinese investment may be focused mainly on the extraction of raw materials, rather than on developing local manufacturing capacity, which could limit Ethiopia’s growth potential.
Sustainability
One of the key priorities for the Ethiopian leather industry is sustainability. ELIDI has been working with local tanneries to implement eco-friendly practices and reduce the environmental impact of the industry. This includes the implementation of wastewater treatment facilities, the use of renewable energy sources, and the promotion of sustainable farming practices for the cattle that provide the raw materials for the industry. The government has also established a Leather Sector Sustainability Council, which is responsible for promoting sustainable practices in the industry and ensuring compliance with international standards.
Recent Macroeconomic and Financial Developments:
While reviewing the GDP growth of the county for the past 10 years one can find that the country could achieve 10% growth, one of the highest growths rates. Real GDP remained above East Africa’s average (4.7% in 2021 and 4.4% in 2022). The leather industry contributes about 6% of the national GDP and the export of leather products contributes around 4%. source of foreign currency earnings for the country. Here is the summary.
GDP is projected to grow 5.8% in 2023 and 6.2% in 2024, driven by industry, private consumption, and investment, can benefit the Ethiopian leather industry in several ways. It can lead to increased consumer spending, investment opportunities, export potential, technological advancements, government support, competitive advantages, job creation, and a stronger economy. However, challenges like inflation, exchange rates, and market demand need to be managed for the industry to fully leverage these opportunities.
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