Dire Tannery, Addis Ababa, Ethiopia
01/06/2014
Upon taking over the Dire Tannery, Mr Bedada was the only Ethiopian business figure to run a tannery in Ethiopia at the time; he specialised in making belt leather for the local market. There were other facilities in the country at the time, but their owners were from Armenia, Greece, France and elsewhere. Mr Bedada’s son Elias, who today is deputy general manager of the Dire Industries group, recalls vividly that many of the operations at that time were carried out by hand. There was great upheaval in this period of Ethiopia’s recent history, with Emperor Haile Selassie I being deposed in September 1974 by a communist regime, which moved quickly to nationalise most manufacturing operations in the country. When government representatives came to Dire Tannery to inspect it and take it over, Mr Bedada was able to convince them that the facility was too small to be of interest to them and they let him continue; the rest of Ethiopia’s leather production was nationalised with the Dire facility remaining as the only privately owned tannery in the land “throughout the 15 years or so” that passed before, in the words of Elias Bedada, things returned “more or less to normal”. By the 1990s, private companies were coming into the Ethiopian leather sector again and now all tanneries are privately owned. For its part, Dire Industries became a limited company (with shareholders) in 1993. “We used to export raw hides, then pickle and now it’s finished leather,” Elias Bedada says. “This has been a long journey, but we are now surrounded by professional, well qualified people. Our team works hard.”
An important part of this team is his younger brother, Biniyam, who is now the manager of Dire Tannery. Young, intelligent, hard-working, US-educated and with an international outlook, he has important ambitions for the tannery’s future and has a clear understanding of how important this part of his father’s business empire remains to its founder. “The tannery is still my father’s passion,” he says. “There are probably parts of the group that he visits only a few times a year, whereas it’s rare for him to allow a week to pass without coming here. It’s in his blood. He always knows what’s going on here and what needs following up. He keeps up with what’s going on around the global industry too and wants to keep travelling overseas to see developments for himself and expand his knowledge further.”
Because primary treatment is not enough
Biniyam Bedada says his father’s main driving forces are his passion and determination, adding: “He wants to push the tannery to maximum capacity and work in a way that shows we care for the environment, for our workers and for our neighbourhood.” Ten years ago Dire Tannery was one of a group of five facilities in Ethiopia that secured a grant from the United Nations Industrial Development Organization (UNIDO) to set up primary effluent treatment on site, with Italian tanning technology provider Italprogetti supplying much of the equipment. Dire’s founder quickly set about extending this to carry out secondary treatment on site too. This is important because the Ethiopian government has made it clear it wants all tanneries in and around Addis Ababa to relocate to a purpose-built site in Modjo, about 80 kilometres to the south. The new site will have a common effluent treatment plant. “The environment ministry wants that move to happen immediately,” Biniyam Bedada explains, “while the industry ministry wants to find funding first to help construct the treatment plant. Everyone agrees we have to move; it’s only a question of when. The environment ministry is very strong because we have a lot of emphasis here on having a green economy.”
Nevertheless, Dire Tannery still harbours some hope that if it can achieve the same level of environmental performance by carrying out secondary treatment effectively at its current location, the same as it would be able to achieve in Modjo, it may be able to continue producing leather there. If not, it will move; Modjo, after all, is already the location of the group’s other tannery. “Government in Ethiopia can work very quickly,” the tannery’s manager says. “If it takes a decision, the decision’s made and you have to move on.”
Abattoir rota
Dire Tannery still works with hide and skin traders with whom Mr Bedada began building up relationships decades ago. A devout Muslim, he woke up in time to say the first prayer of the day before sunrise, but instead of going back to bed afterwards, he went immediately to the marketplace to start picking up skins and trading, stealing a march on the competition. “Later, he understood how important it was to operate internationally and, therefore, that there was a need to learn English,” Elias Bedada says. “So he got into the habit of getting up even earlier, at about three o’clock, to listen to language tapes and learn English.”
A great deal of Ethiopia’s slaughter remains informal, with people carrying much of it out in their own backyards. The major cities have abattoirs, but even the one in Addis Ababa, a city of four million people, only has a daily slaughter capacity of 800 head of cattle and there is a complex rota system in place for distributing the hides among the 12 different tanneries that operate there. They each take turns to take the hides from capital’s abattoir for ten days at a time. If your turn coincides with a period of fasting and low meat consumption, which are more frequent for Ethiopian Orthodox than for most other Christian communities, it’s tough luck. Your tannery could also come up on the rota at festival time, when slaughter goes up.
Group commercial manager, Zewge G/Meskel, says slaughter rates across the country have remained relatively constant in recent years and he believes the volume would be enough to sustain 20 or 30 tanneries in Ethiopia if they all took production all the way to finished leather, he says. “No one knows what will happen to the price of raw material, but in this region, Ethiopia is the country with a 100-year tanning history, so we believe we can be a centre of production for the whole of this part of Africa. People are already importing hides and skins from Kenya, Uganda, Sudan and elsewhere.”
Expansion plans for Dire Tannery and, probably, most of its rivals may need to wait until the situation regarding the enforced move to Modjo becomes clearer, but something Mr Zewge makes clear is that Dire Tannery will not lack the backing of the banks when the time comes. Its credit is better than good. Its relationships with the Commercial Bank of Ethiopia and with the Awash International Bank are long-standing. “Trust is very important,” he says. Biniyam Bedada takes this further, saying that it’s well known in Ethiopia that the company “will do what we promise to do”. In March of this year, it received a certificate from the customs authorities confirming that goods it has imported can go straight to the tannery without the need for checks and inspections, and, in June, his father was a guest of honour at the launch of new container ships at the port of Djibouti, landlocked Ethiopia’s main gateway to the world. Pride of place in the Dire Industries boardroom goes to a photograph of Mr Bedada receiving an award for performance in exports from former prime minister, the late Meles Zenawi. “He isn’t just a businessman; he’s an elder statesman,” his son says of the Dire Tannery founder.
Equal opportunities
At the moment, 480 people work at the Dire Tannery, 197 of them women. The company has built up an anti-harassment culture and the women feel safe there, which means the worker retention rate among women is particularly high. Most of the women live in the neighbourhood around the tannery and are able to walk between work and home in ten minutes or so. There is a second shift that usually finishes in the early hours of the morning, so, for safety reasons, the management team has made the second shift ‘men only’. Conscious of worker security generally, Dire Tannery pays night-shift workers to stay on until daylight before leaving for home. If there is work to do, they do it, and if not they simply wait the night out. Incidents are few, but there was a spate of muggings, specifically on pay-day, a few years ago. These incidents became an incentive for the authorities to supply a better police service in the district in which the tannery is located, and in the interim, it offered its own security guards to keep an eye on things in the wider local community.
Biniyam Bedada describes the relationship between the management team at the tannery and the trade union that represents the workers as very strong. Union representatives make considerable contributions to collective bargaining agreements, suggesting ways in which workers can and should increase productivity in addition to their obvious focus on levels of pay.
The site has its own union, the Dire Tannery Leather Union. Representative Fikadu Bekele confirms that the relationship is on a sound footing. “We have a good understanding,” he says, “and we have no need of a third party coming in to carry out arbitration when we negotiate. There is no pressure on us, and the company even provides stationery for union communications, for which we are grateful.” He makes it clear that money is tight for his members because the cost of living is high. “It’s difficult, even with an increase in salary once or twice a year because the cost of living keeps going up,” he says. Most members of staff don’t own their own homes and rental costs, for a married employee with a family, could easily swallow up half a month’s salary. Families’ basic healthcare and education needs are taken care of by the state, but after buying food, Mr Bekele makes it clear that most Ethiopian workers will have little money to spare at the end of the month.
Where the leather goes
Around 55% of Dire Tannery’s finished leather goes into shoe uppers at the moment, mostly to export customers. Of all the tannery’s shoe upper leather, 85% goes for export to customers that include major European footwear brands, although the tannery often ships directly to these brands’ outsource manufacturing partners in places such as China and India. The tannery’s relationships in these cases are strictly with the brands. “They like our leather,” says Biniyam Bedada. “It meets their quality requirements and they pay us a quality price for a quality product. We would love it if their product labelling made it clear that the leather in their shoes comes from Ethiopia, but so far they are not taking this extra step.”
The other 15% of the tannery’s shoe upper output stays in Ethiopia, supplying local footwear manufacturers, including Peacock, which is itself part of the Dire Industries group and which makes men’s shoes for important brands in the US and other markets. Of all the finished leather that comes out of the tannery, 30% goes into gloving, with the main customers in India, Japan, China, Taiwan and the Czech Republic. Ethiopian highland sheepskins make a highly prized gloving leather with a high level of tensile strength. The remaining 15% goes into shoe lining, two-thirds of it for export and the other third going to Ethiopian shoe producers.
There is ambition and desire among Ethiopian manufacturers to publicise more widely the value of the leather and finished products they are making. Peacock, for example, has had experience of the retail brands it produces for telling it that if trade rules require it to put a label of origin on its shoes, the label should go in as unobtrusive a position as possible, such as at the very bottom of the tongue, with the smallest letters possible so that consumers won’t notice. There is a feeling in Ethiopia that these brands are missing an opportunity. There is a great appetite among consumers these days for authenticity, and back-stories of goods produced responsibly and fairly in Ethiopia and other African countries can resonate powerfully in the marketplace.
Trade not aid
Bedada Chali has been promoting not just the Ethiopian but the entire African leather industry for years, according to his sons. “His belief is that this is a good way to address poverty and unemployment,” Elias Bedada says. “We need to industrialise, to manufacture things and then secure trade, not aid. This is a passion for my father, and he believes that if he has done it, anyone can.”
Mr Bedada himself says that he thinks leather has an important place in the market because of the way it works with the human body. “Synthetics are not very good at that,” he adds. His vision is for a tanning group that will continue for three, four, five generations. The demand will be there, the knowledge and the skills will be, too, so he believes this is entirely achievable.
“He’s an eternal optimist,” Elias Bedada says. “He only sees good things for leather. He’s seen and lived all the recent developments and for him it’s just optimism all the way. For example, yes, there are lots of shoes that are made from synthetic materials, but in terms of value, 50% of all the value in the global footwear industry is in leather shoes, and in each leather shoe, 50% of the cost is the leather, meaning that you would have to add together the value of every other component in that shoe to reach the other 50%.” He goes on to explain that, at the start of this century, everyone in the Ethiopian leather and footwear sector had to stand back as “a flood of synthetic shoes” came into the country, mostly from China. This devastated the local shoe manufacturing industry; the shoes from China were cheap and looked much more fashionable than traditional Ethiopian-made leather shoes. “It only took a year for people to say they wanted shoes with leather uppers again instead,” Elias Bedada says, echoing his father’s opinion. “The synthetic ones smelled bad and in January and February, when the sun is very hot in Ethiopia, people felt that their synthetic shoes were practically burning them.”
The value of people
As well as a love of leather and a vision for the industry’s future, Bedada Chali has given the next generation of leaders of the Dire Industries group a clear understanding of the value of the people who go to work there every day. “He is always thinking of the workers,” says tannery manager, Biniyam Bedada, “and encouraging us to do the same. He tells us all the time.” Another brother, Husain, led a programme to help key workers at the tannery fund the building of their own houses, depositing money to help them buy land, get the necessary permits and source enough materials to get construction under way.
Production and technical manager, Asmare Mebrate, who was one of the workers to benefit from this, explains that he has worked at the tannery for 17 years now and that, in his opinion, the relationship between the Bedadas and the workforce is more of a family relationship than a business one. The tannery’s chief mechanic, Girma Awata, died of cancer in 2013, but during his illness, Mr Bedada helped him by importing medicine that would otherwise have been unavailable in Ethiopia, and since his death, he has continued to pay this man’s salary to his family and to take care of his children’s school fees. “I have had direct experience of this kindness too,” Mr Mebrate continues. “My wife, Genet, died six months ago after a long illness. Mr Bedada took the time to go and see her in hospital, to ask if he could do more to help her, to console her and to reassure her that he will continue to help me and help our three children. He has done similar things for lots of the workers here. And because I know my boss’s mentality, I am trying to take care of the workers in a similar way when I can.” He thinks it’s possible some people at Dire Tannery might be able to earn slightly higher salaries elsewhere in the industry, but he asks: “Where else could we find this type of family support?”
Share this story:
