1. Product Description: Leather soles which are made from hides constitute major inputs in the manufacture of leather shoes. Leather soles are usually used for the manufacture of high quality leather shoes, and these shoes are mainly produced for the export markets. Leather soles are exported as semi finished products to be used as inputs in the manufacturing of leather shoes.
2. Rational: Ethiopia is reputed to have the largest livestock population in Africa. According to the Central Statistical Agency, in 2001/2002, the country had about 42 million heads of cattle of which 11 million were in the Amhara Region. With this resource one could have expected to find a very vibrant leather processing industry in the Amhara Region. But, unfortunately this is not the case. It is only very recently that one or two hides and skins processing plants were established in the Region. To utilize the livestock resources of the Region and to get maximum benefits from this sector, plants which manufacture leather garment, leather goods and other leather products such as leather soles should be established. So far all the hides and skins produced or harvested in the region are sold to merchants in Addis Ababa, and these merchants sell the hides and skins to local processors or export them to foreign markets. In this situation, the benefits that regions farmers and traders receive from the livestock resources of the region are very small compared to what exporters and processors receive. To maximize the benefits of the region’s resources to the people of the region, all value adding activities have to be done within the region.
3. Market Potential: The demand for leather soles is met by local production and imports. A study on the market for leather soles indicates that in 2006, the projected demand for this product is 281000 pairs; and this demand is expected to grow by about 7 percent every year. The Amhara Region has more than 26 percent of the country’s cattle population. Given this, it gives economic sense if a leather soles producing plant is established in the region.
4. Source of Raw material: Cattle growing localities of the region.
5. Process and Technology: The major operations include leather cutting, leather sole splitting, roughing, trimming, edge making, stamping and cementing. Main machinery include roughing machine, sole edge cementing machine, sole drier, double side laminating, automatic splitting and automatic sole producing machines, hydraulic press, band pressing and decorating machine.
6. Estimated Investment: For a plant that will produce about 90,000 pairs of leather soles, the estimated investment will be the following.
· Buildings/shade 500m2 at Birr 2000/m2…………. = Birr 1,000,000
· Machinery ………………………….. …………… = Birr 1,000,000
· Working capital …………………….……………. = Birr 100,000
Total ……. ………... = Birr 2,100,000
7. Benefits: Substitutes imports which saves foreign exchange, utilizes regional resources and improves the income of cattle growers and traders of hides and skins, has export potential to earn foreign exchange, introduces new skills and technology.
8. Location: Any urban center which is central for the purchase of processed hides and skins.