Tanners target the easy money

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. Sung Bin is Ethiopia's second largest leather garment manufacturer after the much larger Elico Group. The company produce around 1,500 garments and an unspecified number of leathergoods each month. This accounts for approximately 10,000ft² of finished leather each month. They are a small company by international standards but are a significant player in the domestic sector. However, when the large purchasers of semi processed skins - mainly European - enter the market life becomes more complicated for even the larger local manufacturers. Sung Bin buy all of their leather from the local market. 'We buy Ethiopian hides and skins for several reasons. Firstly, we have an abundant local supply of good quality locally finished leather and secondly it is very difficult for us to buy raw materials from abroad because it is very difficult to get hold of the hard currency to pay for it', says Hailu Bezuneh, managing director. This is the real dilemma facing Sung Bin as their leather suppliers often don't deliver as expected because of the higher prices offered from abroad, the availability of hard currency or simply a passport out of the country (to attend foreign exhibitions). This makes it more attractive for local tanners to supply foreign clients, even though many foreign buyers have no history of loyalty to any supplier tannery. The price of finished garment leather increased by 1 birr (20 cents) per ft² in the final two months of last year as international demand for Ethiopian skins increased. 'When the tanners are busy we have no choice but to accept the price', says Bezuneh. Sheep nappa is particularly popular at the moment sending prices upwards and many tanners are clearing between 200 - 300% profit margins on pickled hair sheep and wet-blue goatskins. The margins are often much lower for finished leather sold on the domestic market so the local footwear and garment producers have to wait. 'The only pressure that we can apply is when the market is not so strong and then we buy higher volumes. But when the market has strong demand we have less power. This is Africa and we have to wait', Bezuneh remarked. This is the problem facing virtually all local finished product suppliers in Ethiopia and it stifles any growth and the opportunity for local businesses to develop and grow and in turn help the economy expand in one of the world's poorest countries. It's a vicious circle and ultimately is counter productive to the development of a value added leather sector in Ethiopia. The national government have decreed that it would support more finished leather being produced within the country but as of yet have not backed their words with any actions. Many companies, including Sung Bin, are attempting to circumvent these problems by forming partnerships or joint ventures with overseas companies. Despite exhibiting at Mipel in Italy and Meet In Africa in Morocco they have yet to find an international company willing to market their products. 'If we can find someone to market and promote our products in foreign markets then it will help our business. The combination of top quality Ethiopian skins and production with overseas expertise could be of benefit to both parties', says Bezuneh. Bezuneh and his chief designer visit the tanners to choose the specific shade and grade of each batch. They choose extensively 1/2 grades for the international market and lower 2/3 grades for the domestic market and for leathergoods. 'We have five or six supplier tanneries located around Addis Ababa and we have to trust them when it comes to quality ', he says. Buying from a variety of suppliers does allow Sung Bin to shop around but if the demand is strong then he just has to wait until the foreign appetite is satisfied. Most garments are made in the traditional black, brown or beige colours with a small selective range of colours such as bottle green, navy blue and red. Most production is exported to markets including US, Canada, South Korea, Switzerland, Greece and Zambia and the remainder is sold on the local market. Sung Bin have established a healthy business with the diplomatic community in Ethiopia. The factory was formally founded by a group of South Koreans in 1992 who saw the vast potential in good quality raw material from Ethiopia and invested US$724,638. Their objective was to use Korean manufacturing know-how with Ethiopian leather and imported components from Korea to produce medium quality garments for the export market. However, the increases in the costs of finished leathers eventually forced the Koreans away from the business and the current owners took over in 1996. The current major shareholder and managing director, Hailu Bezuneh, and the other company stockholders took control of the company's assets and have subsequently invested US$1,400,000 on the 1,735m² factory and now they produce articles from Ethiopian hair sheep, goat and cow in full grain, nubuck and suede. They still import a large number of their component parts, such as zips, linings and buttons etc from South Korea. Email: esbleatherg.f@telecom.net.et