Leather & Leather Goods - INVESTMENT OPPORTUNITY - iDiasporan

Leather & Leather Goods

by Embassy of Ethiopia

Description

Ethiopia’s footwear industry and its leather sector in general enjoy significant international comparative advantages owing to its abundant and available raw materials, highly disciplined workforce and cheap prices. Ethiopia boasts the largest livestock production in Africa, and the 10th largest in the world. Ethiopia annually produces 2.7 million hides, 8.1 million sheepskins and 7.5 million goatskins. This comparative advantage is further underlined by the fact that the costs of raw hides and skins constitute on average 55-60% of the production of semiprocessed leather.

Ethiopia's leather and leather product sector produce a range of products from semi-processed leather in various forms to processed leathers including shoe uppers, leather garments, stitched upholstery, backpacks, purses, industrial gloves and finished leather. Ethiopian leather products have been exported to markets in Europe (especially Italy and the UK), America, Canada, China, Japan and other Far Eastern countries
and the Middle East. Leather is also exported to other African countries including Nigeria and Uganda. 

 

Leather garments

Ethiopian footwear factories produce men’s casual shoes and children’s shoe-uppers made from pure leather. Additionally, the factories:

  • Sell directly to overseas importers/wholesalers, or to direct buying offices;
  • Facilitate the production and export of footwear under the private labels of department stores, boutiques, shoe retail chains and mail-order houses;
  • Source out from Ethiopia and other nations in East Africa and re-export;
  • Facilitate the production and export of internationally well-known brands under contract.

The Ethiopian footwear industry produces shoes that are globally competitive in terms of both quality and price. Due focus is given to maintaining the quality of the hides and skins, leather and leather products for export. All exports are tested by the Quality and Standards Authority of
Ethiopia (QSAE).


  •  Stable Economic Environment:

    • Ethiopia has been able to achieve macro-economic stability
    • Stable annual economic growth in double digits since 2003
    • Stable exchange rate
    • Government commitment to private sector
    • Safe and secure working and living environments identified by the U.N. and the International Chamber ofCommerce (ICC) as key assets for investors in Ethiopia
    • Absence of corruption - Ethiopia is described by the U.N. and ICC as “exceptional…in its almost complete absence of routine corruption.”

     

    2. Liberalized Economy:

    • All major economic sectors are liberalized for investment and marketing
    • Remittance out of Ethiopia from invested capital (dividends and interest) is permitted
    • Remittance also permitted for principal and interest payment on external loans, payments associated with technology transfer, proceeds from sales or liquidation of an enterprise, salaries and other payments
    • 100% foreign ownership of investment is permitted.
    • $100,000 minimum initial investment required from foreign investors to start a business, reducing to $60,000 where the foreign investor is in a joint venture with a domestic partner ($50,000 for consultancy or publishing business). This figure reduces to $25,000 (in cash or in kind) for foreign investors working in partnership with adomestic investor in the areas of engineering, accountancy, architecture, auditing services or business/management consultancy.

     

    3. Security of Investment:

    • Government guarantees (Investment Code 1991) and constitutional protection from expropriation
    • Ethiopia is a signatory to the main international investment related institutions, for example, it is a Member of the Multilateral Investment Guarantee Agency (MIGA)
    • Ethiopia is also a signatory of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States
    • Professional one-stop-shop for foreign investment through the Ethiopian Investment Agency (EIA)

     

    4. Significant Tax Incentives:

    • Customs Import Duty - 100% exemption on all import of investment capital goods (plant machinery, construction 
    • materials, etc.) including spare parts worth up to 15% of
      the imported investment capital goods; plus exemption for
      import of raw materials needed for the production of
      export goods
    •  Export Customs Duty - Products and services developed
      in Ethiopia are exempt from export tax

     

    5. Conducive Tax Environment:

    • Corporate income tax (tax on profit) is 30%
    • Excise tax is levied (minimum 10%) on selected local or imported products
    • Turnover tax at 2% for priority sectors such as tractors, combine harvesting, grain mill etc. and 10% on other
    • sectors Customs duty on unexempted imports ranges from 0 to 35%
    • Income tax ranges from 10 to 35% on monthly income of $16.50 and above
    • Withholding tax is payable on imports at 3% of cost, insurance and freight
    • 15% VAT is payable on businesses with a turnover above$54,000
    • Dividend tax (on income derived from dividends from a share company or withdrawals of profits from a private
    • limited company) at 10% Royalty tax (on income derived from technology and intellectual property rights) at 5%
    • Capital gains tax - share of companies 30%; business, factory or office buildings 15%; residences 0%
    • Rental income tax (on annual rental income) between and 35% dependent on level of rental income
    • Stamp duty - Leasing 0.5% of value; registering title to property 2% of value; contract of employment 1% salary; bonds 1% of value, etc.Tax treaties to avoid double tax payment are signed withseveral countries, along with bilateral treaties for theprotection and promotion of investments 

     

    Trainable Labor:

    • Ethiopia presently turns out more than 10,000 university graduates per year, including business, management, economics, accounting, law and engineering graduates
    • 151 technical and vocational education and training schools in Ethiopia
    • Private universities and colleges flourishing in Addis and regional cities
    • The average private sector wage is about $25 per month, with graduate salaries ranging from approximately $85 to $105.
    • Expatriate employees permitted in senior positions, with prior consent from the Ethiopian Investment
    • Commission (where employer is sole or major owner or shareholder of enterprise). Expatriate experts are also permitted, as long as the investor trains his/her replacement within a designated time period.
    • Good standards of spoken and written English

     

    Land:

    Land is available on a leasehold basis of up to 99 years. In response to the country’s drive to attract foreign investment, regional governments are now expected to allocate land to investors within 60 days of receiving their applications. The lease of urban and rural land varies according to location, type of investment and class of land. In the capital city of Addis Ababa, prices range from approximately $1.50-$13.25 per square foot in the Central Business Zone. The Government generally is willing to negotiate with individual
    business to provide incentives to get the capital investment required.

     

    Security:

    Ethiopia is politically stable and its popular tourist destinations are safe and secure.

  • In recent years, the global market has become increasingly accessible to countries such as Ethiopia. New export opportunities were created through initiatives such as AGOA (the African Growth and Opportunity Act), COMESA (the Common Market of Eastern and Southern Africa) and the many bilateral trade agreements concluded with Western countries, including the Netherlands, Belgium and Luxembourg.

    Ethiopia is also part of the “Everything But Arms” program that has been set up to provide access to the E.U. market for Lesser Developed Beneficiary Countries, free of duty and without quota restrictions, for all export products except arms.

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