Ethiopia is the most interesting place in the world for investment in leather. Yigzaw Assefa, Managing Director of Bahirdar Tannery and Chairman of the Ethiopian Leather Industries Association (ELIA), explains why, as well as where the country’s light manufacturing sector is heading.
Ethiopia has the largest livestock population in Africa. The government has established in its GTP key priority industries: textile and garment industry, leather and leather products. As President of the Ethiopian Leather Industries Association, what are the opportunities and the advantages regarding investment in these sectors, and how would you assess the government’s efforts to make it more business friendly?
Ethiopia is home to the largest cattle population in Africa and the 10th in the world. The potential for the leather industry here is immense, that is why many Chinese, Indians and Turkish have already invested here.
Thanks to the commitment from the government we have been exporting semi-processed items for many years, and now we are moving towards exporting finished leather products. To that effect, many companies are joining us in our industrial parks to produce shoes or other finished goods. They are already exporting those goods to America, Europe and Asia.
We are also starting to develop our dairy and meat industry. Our cattle population, the price and quality of our raw materials and labor, the political stability, and our easily trainable manpower make Ethiopia the perfect choice for FDI. Our government is highly committed to offering incentives for foreigners to invest in manufacturing and take part in our industrialization.
In an interview last year you said, “Ethiopia has become a focal point for tanneries because its sheepskin, goatskin and cowhide are renowned for being high quality.” What are the competitive advantages Ethiopia’s tanneries offer regarding other regions?
Ethiopia is especially known for its highland sheepskin, which is very convenient for dressing, fashion and sports gloves. It was actually Pittards, a British company, who promoted Ethiopian sheepskin in the world as optimal for dressing gloves. That is why the UK company has based its production in Ejersa and is producing and supplying really high quality leather to the world. Our highland sheepskin is soft, durable, fine and strong, which makes it suitable for the production of gloves.
Regarding the goatskin, we have two types: Bati type and Bati-genuine, with a more compact production and suitable for bags or garments. It is one of the finest leathers in the world. In the leather industry, the quality of the raw materials is critical, and that we definitely have. When combining it with the right technology, Ethiopia becomes the most interesting place in the world for investment in leather.
You are constantly updating your products with the latest designs and technologies, have very competitive prices, and are engaged in increasing your productivity. How important is investment in technology?
At the moment we are using world-class technology because we are working with prominent companies from Europe and Asia. We have been working for the last 50 years with England and Europe, especially with Italians, Germans and Spanish. We have developed our technology according to their requirements. We have benefited from technology transfer. We have to work hard and be flexible to the constant changes in technology and world standard requirements to satisfy the international markets. We are on the right track but we keep on improving our machinery and production techniques. We have to work hard and we will continue to work hard.
Bahirdar Tannery was initially established in 1998 to process crust and semi-finished leather, and is currently engaged in the production and export of high-quality and premium leather products to the international market. Which are your core markets and what others are you thinking of entering?
Now we are working especially with Europe, namely with Germany, Italy, Hungary, Sweden, and Romania, and with Asian countries such Indonesia, Japan, Malaysia and Thailand. Our company is a middle-sized tannery; so far we are able to respond to the demand of leather for those markets. Although we have been only focused on leather exports, we are now starting to create finished products to be introduced to the market by the second half of 2016. This move will let us conquer new markets.
We also know you want to develop your own international quality leather brand and are expanding your production with the construction of a new plant that will undertake processing of leather into bags, wallets, belts, binders and gloves for sale abroad. How are these projects advancing?
To expand our leather market, branding is highly important. Ethiopian highland sheepskin in one of the most famous materials for dressing and sport gloves. In order to promote its quality in international markets, we have developed the Ethiopian Highland Leather brand. We have started the promotion in Japan and we will continue to do so in the rest of the world by attending to international trade fairs in Hong Kong, Shanghai, Las Vegas and Germany.
We are building a production plant to expand our business into finished products such as accessories and garments. Our existing customers have already tested our products and they gave us a very positive feedback. As soon as the production plant is finished we will purchase the machinery and start production. Our production facilities are being built according to world-class standards and audits, environmentally friendly policies, and offer nice working conditions for our workers.
In line with the government’s Climate Resilient Green Strategy, how are you ensuring an environmental friendly leather industry?
We,at Bahirdar Tannery are trying to follow environmentally friendly procedures according to our government’s commitment and the expectations of our international customers. We are upgrading our plants to make sure there will be no waste discharge; everything will be treated and reused. We are ISO 9000 and ISO 14000 certified, and we follow European standards in terms of the use and regulation of hazardous chemicals in leather processing. We ensure that all our products have been produced according to environmentally friendly processes. We have excelled in all our inspections and audits and have been awarded with all the required certifications. Nowadays it is not a question of willingness or economic interest, it is mandatory to be environmentally friendly and advocate for the health and safety of our community.
What would you highlight as the biggest milestones achieved by Bahirdar Tannery?
When I started this business, my ambition was not to continue with the traditional way of exporting semi-processed items. I have traveled a lot in Europe and Asia and visited numerous factories; I have participated in international leather trade fairs and saw the great potential we have not tapped yet. So far we have only been exporting raw materials to other tanneries, and I knew we had the opportunity to produce finished products ourselves. By doing so, the final customers will benefit from high quality and cheaper goods, and Ethiopia will also highly benefit from being involved in the entire value chain.
When we export semi-processed raw material to Europe, the European tanneries process the leather and afterwards they outsource the manufacturing to Asian countries to be later distributed in Europe and America. The production of the finished good goes through more than three countries and plenty of intermediaries and logistic costs.
Ethiopia has the resources to integrate the entire value chain, from the sourcing of raw materials to the production of finished goods and the export to international markets.
Our ambition will be materialized soon. This is a mandatory approach for Ethiopia to become an industry-led economy. Unless we create jobs by developing industries, the agriculture sector cannot absorb the demand of a growing workforce.
Industrialization is a key factor for Ethiopia’s economic sustainability. Light manufacturing only requires the right equipment, the right training and the right investment atmosphere to make Ethiopia be able to export finished goods, benefit from higher margins and create a higher number of jobs all across the value chain. Raw materials and agriculture products should be converted into finished goods, otherwise we will keep on supplying raw materials at a cheap price and remain poor.
For example, the production of leather goods started in Europe. Due to the increasing labor costs, tanneries were relocated in Asia. Now the costs are also rising in Asian countries and sourcing and importing the raw materials became expensive. The world is now staring at Africa due to its resources availability, cheap labor force and proximity to global markets. It is our time to take this opportunity, especially for Ethiopians.
Africa is a growing investment destination for both advanced and emerging economies. What is attracting so much attention to the continent?
Africa is rich in its people, its resources and its culture. Africa is today striving to industrialization, peacemaking and democracy. Our continent is growing towards economic development and shifting from aid to investment. It has an immense potential due to its immense natural resources, big population and availability of land. For those who would like to work in Africa, now it is the time to invest and grow together. Africa offers a large labor force, access to raw materials and plenty of untapped resources. Now it is the right time for Africa as well as for Ethiopia.
Regional integration and industrialization are one of Africa’s key priorities, and Ethiopia is no stranger to it. As Ethiopia is currently heading COMESA, please discuss Ethiopia’s regional integration efforts.
Ethiopia is working in collaboration with its neighbors and other African countries to improve interconnectivity and infrastructure. We are connecting Ethiopia with Djibouti, Sudan, Kenya and other countries, and we are also sharing our resources. We are providing electricity to Djibouti and Sudan; soon we will export energy to Kenya and other eastern African countries, as well as the north of Africa in the future.
We are progressing in health, infrastructure, and agriculture, the backbone of our economy. One of the reasons behind our growth is that we are focused on making the best of what we have; that has helped us a lot to progress vastly and we will continue to do so.
Ethiopia has the vision to become the light manufacturing industry center in Africa by 2025. How feasible do you see this goal?
For the last decade we have seen over 10% GDP growth. We have completed the first phase of the Growth and Transformation Plan and we just started the second phase, which is focused on industrialization. We aim to become the light manufacturing hub of Africa by 2025. We are confident about our targets after witnessing the impressive growth resulting from our hard work in the last 10 years.
Our strong historical relationship with America and Europe, mainly based on aid, is now shifting to investment. Now you can find British companies in Ethiopia involved in different sectors. The first name that comes to my mind when I think of the leather industry is Pittards. There are American, British, Chinese, Indian, Italian, German and Turkish investors already involved in the leather industry. I am sure many more will follow. By working hand in hand with investors from prominent economies, there is no reason why Ethiopia would not achieve its targets.
Ethiopia and the UK have had long and fruitful relations. What is your assessment on the current diplomatic and commercial relations of both countries?
We have a very strong and historical relation with the UK. They are known for its generous aid to Ethiopia, but that assistance should be supported by investment too. We would like to have more participation from UK investors who would like to share with us their technology and their know-how. Although aid is necessary, it needs also investment to ensure sustainable and self-sufficient development. Aid can be finished after some years, and what happens next? On the contrary, investment will generate value and make us self-sufficient. Trading is beneficial for both sides. We would like to have more UK investment in different sectors, as well as increased trading and know how transfer.
British companies are active in creating local employment; transferring know-how and management skills. What opportunities would you like to highlight to UK investors?
Any Ethiopian tannery and leather manufacturer would like to work with UK investors, because they have the technology, we have the material and the skills. It could be a very good combination if we worked together. Not only me but also other Ethiopian manufacturers would like to work with UK investors.
Ethiopia’s leather sector is a priority for our government because it is a resource-based industry. There are already successful stories from British companies investing in Ethiopia like Pittards, who are not only sourcing from our country but also producing and exporting finished goods.
It is not only time for us but also for the UK to come and invest; other countries like China and Turkey have already benefitted from investing at the right time in Ethiopia. It is in their hands to be part of this growth; it is already a reality.