The government has selected three international firms, which are committed to set up factories in Ethiopia, to supply chemicals for local leather factories.
The Federal Investment Board selected the three suppliers, two Italian and one US company, two weeks ago. The selection of the suppliers is hoped to resolve the long-awaited complains of local leather factories that suffer due to the absence of major leather chemicals.
The Engineering Capacity Building Programme (ecbp), a Programme under the Ministry of Civil Service (MoCS) which focuses on leather, textiles, and education sectors, collected information about international chemical firms. It then recommended the three companies to the Leather Industries Development Institute (LIDI).
The LIDI, a government agency which gives technical support to local tanneries, made a technical evaluation and passed their names to the Ministry of Industry (MoI). The Ministry submitted the companies' profiles to the Federal Investment Board, composed of seven officials including ministers, for approval.
The Board approved the two Italian companies, Tancuir Chemicals and Repico Chemicals, and a US firm, C & E Chemicals, to become the main suppliers for local tanneries. The three companies are committed to build factories in Ethiopia within the year they are ready.
Repico, an Italian producer of dyestuffs and chemicals for tanneries and textile factories, established in the late 1940s, is headquartered in Milan, Italy. Repico also has subsidiary companies in a number of countries. The company is producing various ranges of dyestuffs in its plants located in Switzerland and Italy.
The three factories were selected after an assessment was made of their chemical products, supply capacity, whether they had a European quality certification and commitment to respect the customs bonded warehouse rules of the Ethiopian Revenues & Customs Authority (ERCA), according to Tesfaye Legesse, representative of marketing support at the LIDI.
The companies enjoyed the decision of the Council of Ministers that privileged international chemical producers and distributors to bring chemicals through the bonded warehouse system.
The system helps the companies import chemicals without paying tax.
However, the tanneries that will buy the chemicals from them are expected to cover the appropriate taxes.
"The companies have the privilege to stock their desired amount of chemicals," Tesfaye told Fortune. "They will also supply the desired amounts of chemicals to the tanneries."
The three firms will supply basic and finished goods to 26 tanneries, of which four of them will join the industry after four months. Out of the 100 types of leather chemicals that the tanneries require, only five types of chemicals are available locally: lime, caustic soda, sulphuric acid, aluminium sulphate, and salt.
Tanneries used to import the demanded chemicals on their own or through the Ethiopian Leather Industries Association (ELIA). Modjo Tannery, located near Modjo, 73km southeast of Addis Abeba, is among the leather factories that fall in the former category.
The tannery spends close to 20 million Br a year on the purchase of chemicals, according to a senior manager at the factory. Established in 1964, the company currently has the capacity of producing 8,000 finished sheep and goat skins and 500 hides every day.
The ELIA, which comprises 40 members drawn from tanneries, shoe factories, and leather garments, also imported chemicals on behalf of its members. The Association claimed to spend around 300 million Br, annually, on the import of chemicals from China, India, and Italy. The approval of chemical suppliers is hoped to ease the burden on the ELIA.
"Importing chemicals in bulk has been a threat to our liquidity, as we cannot import periodically according to our demand because it expires and through time its productivity decreases," the manager told Fortune.
The arrival of suppliers will benefit the tanneries, as they will be able to purchase in bulk and get closer to the chemicals they want, Abdisa Adugna, secretary general of the ELIA explained. He believes that importing chemicals through such international companies will minimise the cost.