Fortune News | Feb 22,2020
Close to a hundred contractors hired by the Addis Abeba Housing Development Corporation to work on nine condominium projects pleaded for the settlement of 210 million Br in unpaid arrears. Despite completing the projects two years ago, the contractors remain grieved over the outstanding payments from a Corporation strapped with cash.
Although the Corporation had hired over 500 contractors to complete construction works on 139 blocs under 18 project sites, only 89 have come together to plead their case. They have addressed their please in a letter to the Addis Abeba Housing Development & Administration Bureau, asking for payments to be settled. Under Yasmin Wohabrebbi, a former state minister for Finance, the Bureau is tasked with constructing the condos and administering them through the Corporation.
The contractors say they are in dire financial straits, struggling to pay for bank loans, taxes, wages, and machinery rent. The arrears have prevented them from progressing on other projects they hold, though they are expected to pay for advance payment guarantee bonds and other expenses.
Close to 3,000 contractors and 10,000 subcontractors have been involved in the Addis Abeba low-cost housing scheme since it was launched in 2005.
Among those decrying payment holdovers are Sea Construction Plc. It was awarded a contract to construct three eight-storey condominium buildings at the Koye Fiche site in May 2019. The construction was completed in February of the following year, and the units have already been transferred to the homeowners. The project cost 55 million Br.
Sea Construction's managers say they have received a 15pc advance payment from the Corporation in addition to one round of payments. They expect an additional 16 million Br for the work, the highest among the 89 contractors voicing their complaints.
“The Corporation awarded the company for completing the project in less than a year,” said Eshete Tesfaye, general manager and shareholder of Sea Construction.
Incorporated in 2009 with 300,000 Br capital, Sea Construction was awarded another 16-storey condominium project at the Bole Beshale site in the outskirts of Addis Abeba in January 2020. The contract was valued at 73.3 million Br, though it was later adjusted to 89 million Br. The firm has received a 20pc advance and the first round of payment for the project.
Eshete was convinced there would not be arguments on payments this time around. He was proven wrong.
"The Corporation was not willing to pay," he told Fortune. "We stopped the construction."
The company has between 80 and 100 employees at a given time. It solicited loans and sold its assets to keep from flooring, according to Eshete.
"We need an immediate response," he said.
The building abandoned by Sea Construction is one of the 139 unfinished blocs in 18 project sites that have yet to be delivered, though they were scheduled for transfer to buyers by now.
The second phase of the low-cost housing project was launched in 2013 under the “Addis Abeba Grand Housing Program” to address the overwhelming housing demand accumulated in the capital. With a budget of 1.9 billion Br for this year, the Corporation has over 139,000 units on hand, with 59,000 having already been transferred to homeowners. Previously, the Corporation would transfer the units to homeowners upon completing construction. However, financial troubles have led it to hand over unfinished housing.
Officials of the Corporation say the issue is not only about payment delays but also the sluggishness of contractors. They blame contractors for allegedly misusing advance payments and delaying the awarded project. Gashaw Tefera, director of public relations, disclosed that the Corporation has pledged to pay the contractors as soon as loans from the state-owned Commercial Bank of Ethiopia (CBE) are approved.
“The Corporation has requested 10 billion Br in loans from the CBE,” Gashaw told Fortune.
The state-owned CBE has been reluctant to provide financing for the housing scheme due to the frequent delays. When the low-cost housing project was launched 17 years ago, the CBE provided financing for constructing units. Three years ago, it ceased funding for all sites but the capital. Neither are projects in the capital receiving adequate funding.
The Addis Abeba Housing Development & Administration Bureau planned to receive loans of over 38 billion Br in corporate bonds this year. Last month, its officials disclosed they had received 3.3 billion Br thus far. The Bureau has requested an additional 5.4 billion Br to complete the remaining 80,000 units.
However, Eshete argues that this should not have been the case.
“The budget would have been set when the project is planned, not when construction is completed," he said.
Imam Muhammad, chair of housing at the Ethiopian Institute of Architecture, Building Construction & City Development (EiABC), agrees. The government does not seem to realise the bulkiness of the programme, said Imam.
“Such neglect is costing the country,” he said.
Belachew Solomon is the general manager and founder of Belachew Solomon Building Contractor, established in 2002. It is mainly engaged in hydroelectric power construction projects, including building camps, finishing works, and offices. It was involved in constructing camps at the Beles and Gelgel Gibe hydropower dam projects.
The company is also awaiting payment for projects it completed for the Corporation. It was hired to finalise construction on three eight-storey buildings at the Bole Arabsa site, under construction by another contractor for seven years before Belachew Solomon was brought on board. The contractor was to be paid 14 million Br to finish the buildings, which stood at 80pc completion.
Although the contractor completed the work, meeting the six-month deadline, it has yet to receive full payment.
Imam observed that such prolonged delays are partly related to inefficiencies and illicit activity in project management practices.
“Many contractors and subcontractors are involved in the housing scheme,” he said. “It's prone to corruption and malpractice.”
This should be a lesson for the government, says Imam.
“The state should hand over the housing scheme to more capable developers,” he said.
PUBLISHED ON Apr 16,2022 [ VOL 23 , NO 1146]
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Radar | Jul 31,2021
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Commentaries | Jun 15,2019
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Featured | Dec 21,2019
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