Ethiopia Cluster Approach Helps Small Leather Goods Enterprise to Grow

Across the world, micro, small and medium-sized enterprises (MSMEs) play a crucial role in business and employment, accounting for 90% of all businesses and providing 60-70% of all jobs. What is more, start-ups and newly-established firms, which are generally micro or small enterprises, are the driving force of innovation and sustainability in the private sector.

In the Ethiopian capital, Addis Ababa, 42-year-old Abaynesh Beyene runs a small business making leather products.

“I was inspired by my father who used to make and repair leather sofas and vehicle seat covers. I learned the skill while supporting my father and developed it into making leather jackets in a rented shop with 5,000Birr (US$90) given to me by my father.”

In 2014, she joined LOMI Leather, an association of women entrepreneurs producing leather goods and garments, formed with the support of the United Nations Industrial Development Organization (UNIDO).

The Amharic word ‘lomi’ means lemon in English. As the Ethiopian proverb goes: ‘One lemon is precious for 50 people, but 50 lemons are a burden to one person’. The group came together to bring individual resources together so they can afford leather inputs, accessories and use one voice to find market and training opportunities.

Beyene comments, “Tanneries sell a minimum of 100 square metres of leather, which is not affordable for an individual entrepreneur. So we put our money together to buy this amount and share it among ourselves. In addition, as a group, we better find market opportunities and buy accessories and tools that we need. We manage big product orders together.”

Starting with the 5,000 birr loan from her father in 2007, Beyene has grown her working capital to 5m. birr and has assets of 10m. birr. Her business employs 25 young people, most of them women, and produces leather products for the local and export market. LOMI Leather has orders for jackets and bags for markets in Norway, Sweden and the USA.

UNIDO has supported LOMI Leather with skills training, market access and new technology. LOMI members have benefitted from training in design and cutting skills, as well as from the provision of six machines for leather cutting, trimming, splitting and softening.

The support is part of the UNIDO project, Upgrading of the Ethiopian Leather and Leather Products Industry, funded by the Italian Development Cooperation and implemented in collaboration with the Leather Industry Development Institute (LIDI). The project increases the competitiveness and income of SMEs engaged in manufacturing leather footwear and products. It targets selected SME networks in Addis Ababa involving women and youth who lack access to opportunities and financial resources. The local authorities provided capacity building and coordination services, and incentives such as manufacturing workshops for reduced rent for a period of five years. In all, 12 networks have received support, totalling 377 enterprises and involving around 3800 workers.

Another UNIDO project, “Leather initiative for sustainable employment creation”, funded by the European Union, is supporting the establishment of a leather manufacturing cooperative with 125 women and youth in Modjo City, 64 kilometres from Addis Ababa. The project is supplying the cooperative with machine, tools and skills training, while the government has provided a manufacturing workshop.

The COVID-19 pandemic meant that LOMI Lather and many other small leather clusters to lost income as a result of reduced demand for products and increased operating costs. In addition, they faced difficulties in access to credit, high inflation, and shortage of raw material supplies as well as tools and accessories for their machineries. To help tackle the pandemic’s impact and to aid recovery, four UN agencies – UNIDO, UNDP, ILO and UN Women – implemented a joint programme, “Sustaining businesses and protecting jobs in the informal economy of Ethiopia”. Nearly 1,600 SMEs, with over 2,200 employees, have benefitted from the programme.

“This support was crucial for my business to stay operational and to retain my employees,” said Beyene.

Her advice for those interested to join the leather products business is: “In this sector you need the interest and determination to succeed, but also courage, patience and hard work.”