Companies in the construction industry are worried about meeting the annual gross revenue requirements as construction input costs skyrocket. The mounting prices of steel and cement have become a barrier for contractors to advance their grades.

This has led regulators at the Ethiopian Construction Authority to revise a directive governing construction registration and certificate of companies and professionals for the second time in a few years. The draft is expected to be completed in two months.

It will lower the capital requirement and narrow the contractor grading system in an industry growing by an average of 15pc over a decade, higher than any other economic sector.

A year ago, the Ministry of Urban Development & Construction revised the directive, setting the minimum turnover for all but grade-one contractors to over 350 million Br. A grade-two contractor was required to register a 300 million Br turnover, 50 million Br lower. The requirements were halved for grades three and above. The directive also fails to clarify the criteria to qualify a professional.

Biruk Abera, a grade-three contractor, started nine years ago with 45,000 Br in paid-up capital, handling four projects worth 350 million Br.  Biruk, the major shareholder, believes demands in high annual turnover need to be considered for larger contractors.

“They can’t compete in giant projects,” he told Fortune.

A study conducted by professionals in the industry echoed his position, recommending that the Authority lower the annual turnover by 30pc.

“The study was helpful,” said Meaza Gebre Abizigi, the Authority’s construction code and standards director.

Experts at the Authority are taking assessments to set a project cost margin considering the costs of grade-one to grade-three contractors prohibited from signing contracts below a certain threshold. The limitation led contractors to diversify their portfolios to other African countries.

The construction industry is in paralysis despite hogging public projects and private investments. Grade-one contractors complain of the inadequate workforce, capacity limitation to manage projects and stiff financial and technical requirements. They take projects below their capacity, competing against low-grade contractors.

Of the 32 major construction projects in the country five years ago, 80pc were contracted to Chinese firms, known for their better performance and delivery records outdoing local and international competitors.

“Contractors and construction companies are struggling to compete in the market,” said Girma Habtemariam, president of the Contractors’ Association, formed 30 years ago, lobbying for the industry.