Leather Industry Struggles to Balance Tax Policy, Capacity, Export Performance

Apr 10 , 2026. By NAHOM AYELE ( FORTUNE STAFF WRITER )

A 150pc tax on raw leather exports has coincided with a 22pc decline in export volumes over eight months. While higher prices pushed revenues up by 35pc, the sector continues to struggle with inefficiencies in supply and processing. Tanneries operate far below capacity, and large volumes of hides go unused. The policy’s objective to promote value addition has yet to translate into stronger domestic production. This gap reflects broader structural weaknesses in coordination and enforcement.

The 150pc tax on raw hide exports has sharply impacted the leather sector performance, slashing export volumes by 22pc over the first eight months while boosting revenue 35pc through higher prices. During this period, the country shipped nearly 1,200tns of leather, down about 22pc from the same period last year. Yet, export revenue rose 35pc, driven by higher prices.

The decline in export volume drew scrutiny in parliament during a performance presentation by Trade & Regional Integration Minister Kassahun Gofe (PhD) two weeks ago. Members of the Trade & Tourism Affairs Standing Committee, chaired by Asha Yahiya, questioned the ministry over weak sector performance. Committee member Abate Arega said leather earnings remain far below potential, given the country’s large cattle population.

“The ministry must do more to maximise the sector’s contribution,” he said. Kassahun, however, attributed the shortfall to the 150pc tax on raw leather exports. Introduced a year ago, the levy was designed to discourage raw exports and promote semi-processed and finished leather goods. Ethiopia mainly exports raw hides to Nigeria, Togo, and Ghana, where they are reportedly sometimes used for food. The policy is intended to support domestic tanneries and manufacturers.

Historical data underscore the shift. At its peak, the sector earned between 110 million and 130 million dollars from semi-processed and finished leather products. Last year, earnings fell to 30 million dollars. Kassahun argued that the tax depressed raw leather prices, reducing export earnings. He noted that hides previously sold at around 9 dollars per unit could have fetched up to 20 dollars without the levy.

Official figures show Ethiopia slaughters nearly seven million cattle annually, yet only 40pc of hides enter the market, while the rest are discarded. The country has 11 tanneries, four focused on cattle hides and the rest on goat and sheep skins. Of the collected supply, tanneries process only about one million hides, leaving a significant surplus unutilised.

Tanneries say sourcing remains difficult as exporters buy directly from abattoirs and collectors at high prices, often prioritising volume over quality. This has increased input costs and strained local processors.

Kassahun defended the policy, saying it was meant to strengthen domestic tanneries and factories. He acknowledged, however, that the sector has not fully capitalised on available resources, contributing to wastage. The Ethiopian Leather Industries Association (ELIA) and industry practitioners strongly disagreed, arguing that raw leather exports weaken local tanneries, which operate at only about 25pc capacity.

Kassahun said the ministry is consulting with the Ministry of Industry to review the tax and improve export performance. The Ministry of Industry declined to comment when contacted.

ELIA Secretary General Daghachew Abeba criticised any move to relax restrictions, saying it would threaten domestic producers. He argued that raw exports should remain limited to protect local industry. Sector practitioners also noted that exporters often purchase hides at inflated prices without regard for quality, creating further pressure on tanneries.

Yeheyis Asfaw, advisor at Addis Abeba Tannery, said the minister’s remarks did not reflect conditions on the ground. He noted that export earnings remain below expectations despite volume targets. Processed leather, he said, generates higher value, creates jobs, and supports wider manufacturing chains. He warned that easing restrictions would endanger tanneries and related industries, including producers of military and police footwear.

For the year, Ethiopia set an export target of 9.4 billion Br and achieved 6.7 billion Br in the first eight months, surpassing the proportional target by 115pc. Agricultural exports contributed 2.45 billion Br, manufacturing 333.1 million Br, and minerals 3.6 billion Br.

Veteran expert Kebede Amed said the issue goes beyond taxation. He cited declining leather quality, weak sector ownership, and poor enforcement as core challenges. He added that under the former Ministry of Agriculture, leather quality was closely monitored from livestock rearing to slaughter. Since oversight shifted, focus has moved toward export volumes rather than quality, creating systemic gaps. He warned that easing raw leather restrictions could further weaken local tanneries and manufacturers.

PUBLISHED ON Apr 10,2026 [ VOL 27 , NO 1354]