Fortune News | Sep 01,2024
The 18-storey Nib Insurance S.C. headquarters construction is in limbo due to a falling out with the China Communications Construction Company (CCCC), marking two years in May 2023.
The insurance company has planned to build its headquarters on a 1,435 sqm plot around the Bole Dembel area and floated a bid five years ago. Though it was processed carefully, the contract handling has had a contentious history where the insurance company had been obliged to float the bid three times.
The first bid was dismissed following an objection by the Ethiopia Grade One Contractors Association claiming exclusivity of tender. The Ethics & Anti-Corruption Commission halted the second bid, which had problems separating civil and foundation works.
Multiple companies expressed interest in the bid, with CCCC finally bagging the contract with 810 million Br in October 2018. However, the construction was suspended after three years and nine floors were completed, citing different contractual disagreements between the parties.
Insurance President Zufan Abebe confirmed to Fortune that the construction project was suspended for close to two years due to contractual disputes.
Nib was established in 2002 with 658 shareholders and a paid capital of 14 million Br. Its paid-up capital has grown to 629.9 million Br while total assets stand at 2.23 billion Br.
At the general assembly held at an inter-luxury hotel in October, the Board of Directors told shareholders that negotiations are underway as they revealed a 179 million Br of gross profit.
There is palpable tension among all stakeholders associated with the construction project.
Insiders close to the project also told Fortune that the contractor had used the now-resolved conflict in the north as a pretext to jack prices to an unreasonable level.
"We're engaged in negotiations to resolve the issue," said Siraj Abdella, board chairman.
He pointed out that the Chinese contractor has requested price increments that the insurance firm finds too high. Siraj expressed considerable pressure from shareholders to either proceed with the construction or sell the project under its current state.
The recently appointed chairman implied that the insurance company is small and feeble compared with the enormous economic resources of the Chinese contractor.
A staff from Dunya Consulting Architects & Engineers Plc, tasked with the consulting service, confirmed its derailment but was unwilling to comment further.
Sources close to the project revealed that the Nib has two bank guarantee bonds it is still holding onto. They told Fortune that it is no one's desire at the insurance company to go into confrontation with the construction company and only hope for the completion of the project.
Tamene Lema is one of the shareholders of Nib Insurance who has concerns over the cost implications of the delayed project during the galloping inflation facing the global economy.
"Of course, we are concerned," said the calm and collected engineer, referring to the project cost, which seems to be rising daily.
Consumer price inflation over the last five years has been increasing incessantly, reaching a high of 26pc in 2021, according to data from the World Bank. Even after an array of operational revisions by the Ministry of Regional Trade & Integration to control the cement market, it remains in short supply with an exaggerated price of 1,800 Br.
Tamene said that the issue was raised to the board during the general assembly, and they were told that negotiations are underway. The project office handling the construction from the insurance company side also confirmed that "a slow yet progressive negotiation is taking place."
The legal expert Gemechis Mekonen says there are three ways a contract can be terminated; either through agreement of the parties, unilateral suspension of the contract with the possibility of lawsuits, and court order.
According to Gemechis, construction contracts rarely make it to court since most contracts contain stipulations for extreme external conditions.
"A specific bench is set up for construction even if they make it to court," he said.
CCCC has been tasked with constructing several large-scale projects, including the Addis-Adama express highway, the Bole main road and Meqelle Industrial Parks. Its management was not available to comment on this story's reporting.
Until the disputing parties see eye to eye, it seems the Bole skyline will have an incomplete grey building disparaging to both parties of their reputations.
PUBLISHED ON
Jan 14,2023 [ VOL
23 , NO
1185]
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