Ministry of Industry (MoI) officials have taken exporters by surprise, imposing minimum export prices for 12 leather products, a move they say is designed to raise foreign currency earnings and fight under-invoicing. The directive, issued by State Minister Tarekegn Bululta to the Ethiopian Customs Commission, came into effect without giving exporters much time to react, leaving many unable to meet their contractual obligations.

Under the new rules, 12 types of semi-processed and finished leather should be sold abroad at prices that meet or exceed specific thresholds. Semi-finished sheep wet blue skins, for instance, now carry a minimum price of 24 dollars a dozen, while goat wet blue is set at 15 dollars. Finished leather prices range from 0.70 dollars a square foot for cattle lining to 1.25 dollars for sheep dress glove leather. One of the higher-end materials, finished sheep upper, often used in fashionable shoe manufacturing, is priced at 1.20 dollars a square foot.

The Customs Commission's enforcement of these new floor prices created a new challenge for exporters struggling with shifting global conditions. Many had negotiated supply contracts at prices below the newly mandated minimums, putting them at risk of contract cancellations. Exporters say they feel caught off guard, as no clear transitional period was provided to adjust their existing deals.



Ministry officials blame persistent discrepancies between export volumes and foreign currency earnings for the intervention. In his half-year report to Parliament, Melaku Alebel, the minister, disclosed export volumes from the manufacturing sector reached 95,167tns, equal to 80.93pc of the 117,586tns target for the period. This represents a marked jump from 74,954tns exported during the same period last year.

However, revenue has not kept pace with that increase in volume. Foreign currency earnings of 149.33 million dollars, amounting to just 58.18pc of the projected 256.69 million dollars, were 9.02 million dollars higher than the same period last year. Officials argue that the gap uncovered how lower prices and invoice values have eroded the sector’s potential revenue.

“Export volumes are rising, but our revenues are not,” said the Minister. “We believe the biggest factor here is the reduced product prices and inaccurate invoices. The minimum pricing strategy is meant to address that imbalance.”

In the past six months, 20 tanneries generated 13 million dollars in combined export revenues.



Rising logistics costs and extended maritime routes have exacerbated the situation. Shipments that once took 45 days to reach European markets could now take up to 65 days, and security threats along the Red Sea corridor are often blamed for these delays.

“We chose this sector because of its high capital flight and under-invoicing,” said Tilahun Abay, strategic affairs lead at the Ministry. “The plan is to review and adjust these prices in line with international market conditions."



Both officials and industry operators agree that the leather industry has been in decline for quite some time, especially in the quality of raw materials and revenue generation.

"We believe this policy can help reverse that downward trend,” said Tilahun.


Industry insiders say the leather sector's overall performance has suffered under tough global conditions, but some also point to practices within the sector itself. According to a veteran exporter who asked for anonymity, he signed contracts before receiving news of the price floors, creating a situation where he may have to renege on his deals. He associates the season with lower-quality leather due to weaker local purchasing power and greater dependence on alternative materials like silicone.

“We don’t have any choice but to export lower-grade leather,” he said. “However, that lower grade does not meet the new minimum price.”

According to this exporter, foreign investors who have entered the leather industry in recent years have contributed to stagnant market conditions and a perceived drop in quality. He recalled that before the influx of foreign capital, domestic exporters could collectively surpass 100 million dollars in annual exports. The sector now struggles to earn even 30 million dollars annually despite foreign investors' participation. His company once exported up to 10 million dollars worth of finished leather annually but now barely hits one million dollars.


He also criticized the Ministry for not including enough stakeholder input before enforcing the new rule.

“When dealing with natural products like leather, you’re bound to get a percentage of lower-quality raw materials,” he said. “I would estimate about half of the raw hides we buy from local traders are low grade, which is impossible to sell at higher prices. Sometimes, to keep your business running, you have to sell below the new floor price.”

The question of how grades should be treated under the new regulation worries tanneries of all sizes. The Ministry’s letter to the Customs Commission did not differentiate among the seven grades of finished leather, even though top-tier products can be twice as expensive as lower-grade materials. Many exporters are concerned they will be forced to store subpar leather or risk shipping it at a loss.

“Quality variations are important,” said an exporter who has dealt in various grades for years. “You can have top-grade leather commanding a price 100pc higher than the set minimum. Meanwhile, lesser grades go for much less. That difference hasn’t been taken into account.”

Others in the industry appear cautiously optimistic.

Bruk Haile, deputy general manager of Bahir Dar Tannery, believes the new initiative is essential for boosting foreign currency earnings. However, he doubts its implementation and warns that strict controls could unintentionally delay export processes.

“Precise and swift execution is needed to prevent disruptions to delivery timelines,” he said.


Bruk criticised the lack of clarity about leather grades, stating that the rules fail to address the different types definitively. He argued that branding and marketing often involve varying product names, which the Commission does not recognise. His company exports up to three million dollars worth of leather annually, focusing on higher-quality grades up to grade four, less affected by price changes.

For Dagnachew Abebe, secretary of the Ethiopian Leather Industries Association (ELIA), the floor price is the right step. He observed a price gap between domestic and foreign direct investment players, which he believes could be rooted in questionable pricing practices.

“We see export numbers going up, but the revenues have been stagnant, which suggests under-invoicing," he told Fortune. "If we want to bring more foreign currency into the country, we have to deal with that issue directly."

Dagnachew believes that price regulation of this kind is not new. He recalls that the National Bank of Ethiopia (NBE) used to follow a similar approach.

"It brought some results,” he said.

During recent discussions with the Ministry of Industry officials, exporters voiced concerns about the contracts they had signed before the rule’s introduction. Ministry officials acknowledged that these specific deals might be treated as exceptions, but how that will be applied remains unclear. Some exporters also contended that foreign-owned tanneries, importing semi-processed leather and exporting finished products, should face a higher minimum price to reflect the added value.

Yet, some experts caution that the new rules lack essential detail and have arrived with little runway for exporters.

“They've the right to sell lower-grade products at reduced prices,” said leather technology specialist Kebede Amede, arguing that the government’s strategy overlooks major benchmarks in leather marketing. While he supports the measure, he doubts about its practicality. “Compliance is also tough because you’d have to inspect export-ready stock for quality. That’s not always practical."



PUBLISHED ON Jan 25,2025 [ VOL 25 , NO 1291]


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