Ethiopia: government support for BASF
05/05/2010
Traditionally the 20 tanneries operating in Ethiopia have had to buy around six months' chemical supplies at a time, with deliveries taking a long time to reach the land-locked country and the payment system obliging the tanneries to pay out substantial amounts of working capital at once.
Under a new arrangement, BASF has been selected as a key supplier of leather chemicals from a shortlist of six possible providers. With government help, it will set up a well-equipped warehouse at a dry port facility the government runs at Modjo and keep it well enough stocked for tanneries to be able to place much smaller, more frequent orders.
The government will also help by offering an exchange facility for BASF, which means tanneries will be able to pay the chemicals supplier in the local currency, the birr.
Dagnachew Demelash, finance director of the Ethiopia Tannery Share Company, recently named by World Leather as the Tannery of the Year for 2009, commented: “This is big news for us. We use more than 80 chemicals, which cost us 25 to 30 million birr ($1.8 million to $2.2 million) for six months' stock. Now we can use this money elsewhere. And it is very convenient for us to buy from Modjo."
The Ethiopian government has said it wants to make $500 million a year in revenue from the leather industry. With that in mind, it has facilitated the expansion of the industry and discouraged the export of unfinished raw material by subjecting it to a 10% tax. But the government has also realised that if Ethiopian raw hides and skins are to be processed more fully on home soil, access to leather chemicals must improve.
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