Ethiopia's parliament established an 18-member think tank focused on addressing the construction industry woes. Under the leadership of Hiyaw Terefe (PhD), the team is entrusted with the responsibility of identifying the construction sector's most pressing issues and devising practical solutions. This initiative was prompted by a series of four research papers that illuminated issues: the presence of unqualified professionals, the lack of bridge financing, reliance on imported raw materials, and deficiencies in existing laws.

At the launch session in Parliament last week, Tagese Chafo, speaker of the House, Chaltu Sani, minister of Urban & Infrastructure, and Wendimu Seta, state minister, were in attendance. They were joined by leaders from professional associations within the construction sector who presented papers, igniting a lively discussion on possible courses and strategies.

Esayas Gebreyohannes (PhD), a researcher involved in one of the papers and a member of the newly formed team, outdated construction standards on infrastructure projects have detrimental impacts. He said a 14-year-old building standard that persisted long after European countries had abandoned it, is exacerbating the design and construction defects.

Esayas urges lawmakers to craft contemporary regulatory standards, considering the ambitious projects outlined in the 10-year national strategy, including the construction of airports, millions of homes, and extensive roads. He called for the development of multipurpose water infrastructure projects to address scarcity.

He recommends conducting proper audits of road infrastructures, independent design reviews, contractor accountability, and incentivising the use of locally sourced construction inputs for long-term sustainability in the construction sector.

Ethiopia's construction sector has been on a steady upward trajectory for nearly two decades. It accounts for a quarter of the GDP while relying on imports for nearly a third of its inputs. However double-digit inflation over the past few years and an austere monetary policy cutting back on capital expenditures has weighed heavily on the industry.

The failures of the construction industry stem from a complex array of limitations beyond individual contractor shortcomings. Another member of the think tank, Wubishet Jekale (PhD) is a lecturer at Addis Abeba University and general manager of Jekale CM Consultancy (JCMC). His research identified a concerning trend for over eight years: a steady decline in yearly growth coupled with a gradual decrease in the frequency of new project announcements.

One of the key factors, according to the study, is the sector's heavy reliance on imported inputs, which is further compounded by foreign currency shortages. Contractors are failing to complete projects due to price variations and security concerns, leaving employers with unfinished projects and banks compelled to settle them with payment guarantees.

"It has created an interlinked systemic bottleneck," he said.

Wubishet outlined weaknesses in contract administration, which fail to address the unpredictability of prices or the interests of employers.  He recommends exploring alternative solutions where funds are voluntarily extended to cover damages or unforeseen project changes, even when not legally obligated.

Following the presentation of the papers, a panel discussion moderated by the speaker of the house ignited a lively discussion on possible courses and strategies.

Wendemu Seta, state minister for Urban & Infrastructure, said government contracts lack procurement procedures capable of attracting quality professionals. He said the approach towards giving out contracts to whoever brings the lowest price is unsuitable for the sector.

"Practical training is also necessary," he said.

The introduction of road funds and wider application of Public-Private Partnership (PPP) models were also raised. Getahun Tagesee, president of the Water Related Works Construction Contractors Association, suggested that despite intense price fluctuations during project cycles, they have never received a penny. He recalled an incident in which an initially 180 million Br project ballooned to nearly five times the amount after the client declined to adjust the terms with an additional 30 million Br.

"The industry has a primitive procurement culture," he said.

Some industry players suggested that it also has poor professional standards. Architects like Habtamu Getachew, who represented the Association of Ethiopian Architects, called for contemporary laws targeting professions already practised in several other countries.

"Everyone working is not a professional," he said.

Dawud Orgecho's presentation, "Looking Beyond the Challenges," echoed this sentiment. which highlighted the lack of research-based diagnosis of project delays and problems. He stated that the poor adoption of laws and regulations to oversee professionals undermined the sector's ability to create job opportunities and mobilise finance.

A 'mother law' to oversee the construction industry is currently being drafted at the Ministry of Urban & Instracture which the officials expect to address major regulatory hurdles faced by the industry.

Minister Chaltu suggested that the massive inflation of construction inputs partly arose from the sector's stellar growth while acknowledging the need to develop better standards for construction procurements. Meanwhile, House Speaker Tagesse instructed the Ministry to begin drafting legal frameworks for the operations of more think-thank groups. However, some industry observers are not quite convinced of the positive prospects.

While acknowledging the value of think tanks, Haben Abraha, a contractor and industry veteran, believes that the pervasive issues stem from deeply ingrained structures that cannot be resolved by that alone. He said that academic groups, disconnected from the realities of those working on the ground, may struggle to generate tangible solutions.

"Structural policy bottlenecks and inflation are the primary issues," he said.

PUBLISHED ON May 11,2024 [ VOL 25 , NO 1254]

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