Leading the transformation

5 March 2001

Scattered throughout the chaotic fume-filled streets of Addis Ababa are hundreds of small enterprises fighting against difficult trading conditions and strict government regulation. One such company is the Ethiopian Sung Bin Leather Garment Factory which is situated near the centre of the capital. The role of the private sector in the Ethiopian leather industry is crucial and the largest investment group in the country, Midroc Ethiopia, moved into the sector by acquiring the Ethiopian Pickling and Tanning Factory, Awash Tannery and the Universal Leather Articles Factory. The companies were auctioned off by the Ethiopian Privatisation Agency and bought by Midroc Ethiopia who then set up the Ethio Leather Industries (Elico) plc to manage their investment. Elico now process approximately 33% of all Ethiopian hair sheep and goatskins and 20% of bovine hides, making them by far the largest leather producer in the country. Currently they have two tanneries in operation and one leather products factory. The Awash Tannery processes sheep and goatskins and cattle hides from raw to finished leather. The Ethiopian Pickle and Tanning Factory manufactures pickled sheepskins and wet-blue goat for export. A third tannery, Akaki, is currently under construction and should be open within the next twelve months. Following privatisation Elico came up with a comprehensive development plan, which took into account the immense livestock resource, the favourable economic conditions and improving investment climate in Ethiopia. The development programme envisages considerable upgrading of the industry, in which the capability is being developed for the production of semi finished and finished leather, as well as finished shoe uppers, gloves and garments. Elico are already well underway to implementing the plan which will boost the country's foreign currency earning. This was agreed when Midroc acquired the three company units and consultation with other tanners and the government is ongoing but progress has been slow. 'Around 10% of our current production is finished leather. We have a contract with the government that states that we produce 100% finished leather within five years of signing the purchase agreement', says Asnake Sahlu, general manager, Elico Group. 'Our first step is to supply the local market and produce lining leathers for export as crust and finished leather. Recently, we have made a breakthrough and have started producing higher quality finished gloving and garment leather.' Elico were officially founded in June 1997, according to Ethiopian Commercial Law of 1967, with a capital of 52 million birr (US$6.3 million). The figure refers to the sum paid for the takeover of the Ethiopian Pickling and Tanning Factory and the Universal Leather Articles Factory. With the consequent take over of the Awash Tannery and other additional investments in the sector, Elico's capital investment has reached 237 million birr (US$29 million). Elico were given a series of commitments by the government in order for them to buy the businesses. The following objectives were agreed: * Produce finished leather for the local and export market * Procure from the local and international market machinery, spare parts, related articles and chemicals, proven to be essential for promoting the production capacity and efficiency * Setting up new tanneries and leather-based industries and taking part in state privatisation auctions of enterprises * Enhance the technological efficiency of existing plants through links and close association with foreign partners who have experience of the international markets and a solid technical background * Promote Elico products through participation in local and foreign trade fairs Markets 'The sheepskin market is very good at the moment but we are facing strong competition from China for our high quality goatskins which are used for suede', Asnake Sahlu, told Leather. Elico export most of their small skin production as pickle or wet-blue to major markets such as Italy, UK, Middle East and the US. The majority of bovine leather and some ovine/caprine leather is transferred to Universal to be made up into leathergoods and garments for the domestic market. Elico attend a number of exhibitions on a regular basis in order to attract new business and discuss business with existing clients. They regularly attend the Asia Pacific Leather Fair, both Lineapelle shows, Meet in Africa, IILF, the Sharjah Leather Show and the All China Leather Exhibition. Elico lead development of the sector Soon after the initial takeover, Elico formulated a long-term programme designed to improve and modernise the leather industry as a whole and some headway has already been made to modernise both the infrastructure and the mentality of the Ethiopian leather sector. The company have had several meetings with other tanners and the government to establish a combined strategy to improve raw material quality and collection, and assistance to produce more finished leather. Elico are also leading the way in formulating a workers' salary scale and the issue of new ID cards for workers and distribution of new uniforms. They also want to set-up and supervise a centralised procurement of hides and skins for the benefit of all companies since much of the country's hides and skins never reach a tannery. 'All tanners will be the beneficiaries of this project. We have urged the government to organise a responsible campaign with outside financial help from Unido or the FAO if necessary. The ministry of agriculture are interested in the project but we haven't seen any action so far', says Asnake Sahlu. He had seen a decrease in raw material quality during the past ten years. Previously, many sheep and goat had been dipped in an organised programme but it was scrapped a decade ago. Elico have estimated the decrease in raw material quality and a lack of education has led to lost foreign currency earnings of between US$12 - 15 million a year on only pickled hair sheep. The loss is even higher when finished leather is considered. Ultimately, the long term objective of the plan laid out by Elico is to expand Ethiopia's leather industry by utilising the size of its livestock population and thereby turn Ethiopia into the African continent's leather industry hub. Training To become successful on the international market Elico have realised that this can only be achieved with a qualified workforce who are constantly updated with ongoing developments in the sector. Training has been given priority at Elico. The training programme is to be carried out in close cooperation with the South African Leather Research Institute and BLC - Leather Technology Centre. Elico are also looking at possible training cooperation with the Indian Institute of Leather Technology. The training programme envisages the sending of selected personnel for regular training courses in the above mentioned foreign centres. Local courses have also been implemented to train workers. These include a three month course on hide/skin and leather selection quality in collaboration with the National Productivity Centre in Ethiopia. Preparation is also underway to provide a skill development course for Elico-Universal workers in leather garment design, cutting and tailoring at the Brussels-based Centre for Industrial Development. In-house training is to be conducted by senior Elico experts. Ethiopian Pickling and Tanning Factory (EPTF) Established in 1971, the Ethiopian Pickling and Tanning Factory was Elico's first acquisition in 1997. The factory, located in Addis Ababa, has a workforce of 350 workers and a capacity of processing 12,000 wet-blue goatskins and pickled lambskins a day. Since September 2000 the tannery has become more specialised in the production of goatskins. A small amount of pickled hair sheep is still produced at ETPF until all production is switched to Awash. 'The shift of production to concentrate on goatskins at EPTF is part of Elico's wider strategy. We want to keep sheep and goat production separately to ensure better quality', says Kidanu Chekol, production & technical operations manager, Elico Group. The factory site covers an area of 20,143m2 and includes seven pickling and tanning drums and seven paddles for rehydrating skins. After tanning each skin is area measured and graded on a series of tables that have grids marked on the surface to give a quick indication of area. At least three selections are made on each skin by a junior selector and a senior selector followed by the quality control selector before shipment. Awash Tannery The Awash Tannery was officially opened by the last Emperor of Ethiopia, Haile Selassie I, in 1957 although the tannery had been operating during the previous 20 years. The tannery is the second largest in Ethiopia and is situated in Addis Ababa close to EPTF. Awash is made up of two plants, one for hide and another for lamb and goatskin processing. Together they employ 762 workers. Elico have spent over US$1 million in upgrading their raw hide and skin, and pickled pelt storage and effluent treatment facilities. The new effluent plant, Italequipment built, was commissioned earlier this year and is the most modern in Ethiopia. The plant is able to recover and recycle spent chrome and has the capacity to meet all the international discharge regulations. Operative training is now taking place. All lime fleshings are collected in a series of bins and recycled. Technicians at Awash have managed to turn the fleshing waste into a crude glue, which is then sold on the local market. Unwanted hair is also recycled. 'We don't make any money from the glue or hair but it helps us recycle our waste', says Kidanu Chekol. Dried hides are bought to the tannery from all over the country and the group process 20% of all hides available in the country. Awash also receive salted hides from the Elfora abattoir, a sister company of Elico. The tannery has the capacity to process 3,600,00 sheep and goatskins and 396,000 hides per annum. In the future Awash is to concentrate on producing sheep and cow leather and some production will be switched to the Akaki Tannery when it is up and running. The factory is located on a 123,000m² site, of which 1,566m² and 2,778m² provide the tannery buildings and the raw material and chemical storage facilities, respectively. An expansion of the finishing plant is the next phase of development for Awash. During the first six months of 2001 the company are heavily investing in new embossing and buffing machinery in their quest to manufacture more finished leather. 'At Awash we have now developed fully finished gloving leather for dress and casual gloving. The leather is of an international standard. We will be showing the samples to some of our customers for their opinion', Kidanu Chekol, production and technical operation manager, Elico, told Leather. Universal Leather Articles Factory Established in July 1973 and incorporated into Elico in July 1997, the Universal Leather Articles Factory manufactures leathergoods and garments for the local market. Universal use leather supplied by tanneries in the group and have a total of 300 workers working a single eight hour shift. 'We specialise in producing ovine nappa, bovine nappa or buffed nubuck leathers. We have four shops located throughout Addis Ababa as well as our private customers', says Tamrat Wajitu, manager, Universal Leather Articles Factory. 'At the moment we only produce items for the local market but we intend to start exporting again once we have found new partners in foreign markets.' Universal have an annual capacity of 30,000 small leather articles, 36,000 leather garments, 9,000 ladies' handbags, 3,000 brief cases, 4,575 portfolios and 2,925 school bags. Akaki Modern Tannery Akaki, equipped with the latest technology, is due to be operational during 2002. It is located at the Akaki industrial area of Addis Ababa (see January Leather news). The tannery is at an advanced stage of construction with a declared capital of 16 million birr (US$2.0 million). The factory will be unique in that it is vertically organised to rely entirely on its own hide/skin processing plant for the entire spectrum of finished leather articles, which it will manufacture for the export market. The tannery will produce finished leather for high quality garments, leather footwear and other products. The total area of the factory premises is 104,000m², 49,203m² of which will be utilised for leather production and 8,800m² for administration purposes. Machinery installation is 60% complete and expected to be finalised in the coming months. In the first phase production is due to begin with hide/skin processing into the pickled, wet-blue and crust stages. In the second phase of development Elico will begin the production of finished consumer articles. The different sections of the factory are equipped with sophisticated machinery, including the entire range of tannery machines, and the plant will include quality control, inspection and research and development facilities. A significant element in the factory complex is the installation of a modern waste disposal system, designed and built to avert an unnecessary environmental pollution. A labour force of 450 workers has been involved in the construction stage of the factory and it is anticipated that the factory will create 650 jobs when fully operational. Experienced workers with training and experience in Britain and Germany have already been recruited. A further group of workers are due to be dispatched to Italy and Germany for training. The Akaki programme also envisages the training of workers at COMESA (Eastern and Southern African Common Market) Leather Institute, which is located on the same industrial estate in Addis as the tannery. When up and running Akaki will have the following annual processing capacity: hides 2,625,000ft², lambskins 9,000,000ft², goatskins 2,400,000ft². Different leather product types including shoe uppers and linings, garments, gloving and other leather articles are expected to be produced in the purpose-built factory. The products of Akaki Modern Tannery are exclusively aimed at the export market. Prospective export markets are expected to be the European Union, the United States and the Middle East.

Privacy Policy
We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.