The Building Boom That Rans Out of Fuel

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Two unfinished buildings owned by Roman Tahir on Omedla Street near a roundabout in the Ferensay Legasion in the Gurara neighbourhood have become a quiet measure of stress in Addis Abeba’s construction market.

They were meant to move steadily toward completion under the supervision of Addis Kindeya, a site engineer and project manager. Instead, they have been waiting on money, materials and a market that no longer gives builders a reliable price.

For six months, work paused, not caused by a design change or a technical failure, but a financial retreat so the owners could, in Addis’s words, “regroup financially.” One structure, a four-storey building designed for commercial purposes with a basement on a 104Sqm plot, is almost complete, waiting for paint, terrazzo and stair marble. Another, a two-storey building on a larger plot, still needs its finishing phase. When work was about to resume, the cost of construction material moved again.

“The surge hit us at the worst possible time,” Addis told Fortune. “It added pressure we never planned for.”

Sixteen cubic meters of sand that once cost 60,000 Br now costs 135,000 Br. The price for gravel jumped from 70,000 Br to 150,000 Br. Cement increased from 1,200 Br a quintal to 2,000 Br. Gypsum climbed from 400 Br to 1,000 Br for 25 kilograms. Stair marble, once estimated at 250,000 Br, now requires 380,000 Br. Labour has also become costlier. Skilled and semi-skilled workers, from gypsum and ceramic specialists to electricians, sanitary workers and daily labourers, are now expected to cost about 1.6 million Br, up by 640,000 Br from six months ago.

“We had budgeted about 1.5 million Br for the first phase of finishing,” he said. “Now that estimate is no longer reliable.”

He estimated that this cost could double. For Addis, the worry is not only the speed and size of the cost escalation. It is the absence of a ceiling.

“It's difficult to predict where it will stop,” he told Fortune. “It puts the entire project in a difficult position.”

If the projects remain stalled, the commercial building will miss rental income, while the residential structure will miss its intended purpose and timeline.

Across Addis Abeba, the uncertainty is moving through cement yards, hardware stores and construction sites. A fresh round of increases in construction material costs is weighing on retailers, contractors, labourers and manufacturers as fuel shortages disrupt transport and slow imports. Traders say one of the sharpest cost surges they can recall, with demand falling, deliveries delayed and customers hesitating in a sector closely tied to employment and urban expansion.

In Casanchis, where hardware shops serve small contractors and households, Mohammed Mejid has watched prices change faster than customers can absorb. As a retail businessman selling construction materials, he found the latest increase unlike the usual market swings.

“There is a price rise which hasn't been seen before when we buy from wholesalers,” he told Fortune.

According to Mohammed, transport costs jumped after the fuel shortage worsened. Wholesalers who once delivered materials directly to retailers have largely stopped the service.

“Even when I visit wholesalers, some don't want to sell,” he said. “They expect to sell later at a higher price.”

Delivery charges have followed the same path. A one-way trip by a taxi that used to cost 800 Br has now nearly doubled. Pickup transport, which once cost 1,000 Br, has surged in price. Hiring larger trucks, including Isuzu vehicles, has become more expensive. In shops like Mohammed’s, minimum increases are around 20pc, while many materials have doubled or increased by more than 100pc.

Another retailer in Casanchis, Siude Seni, estimates the average increase at roughly 70pc. He, like several retailers in the neighbourhood, is passing on costs to buyers because importing construction materials has become harder, and wholesalers are raising prices sharply. Stockpiling has added to the pressure.

“Many are also holding stock, expecting even higher prices,” Siude said.

Motorcycle deliveries to buyers, once routine, were discontinued after transport costs jumped to about 1,500 Br.

“The demand has fallen, and our business is declining,” he said.

The slowdown was evident to any visitors to these stores. Half an hour at Siude’s shop, no customer entered. During the same week, two potential customers walked into Mohammed’s outlet, asked for the price of a screwdriver and left without buying. They claimed it was too expensive.

The pressure has moved beyond retailers, reaching workers whose daily meagre income depends on active construction sites. For someone like Ermias Yimer, 42, a father of four, construction jobs were once seasonal but usually available. Having two decades of experience, he is working on a corridor development project around Winget neighbourhood, northwest of the city, almost on the opposite side to where he lives in the Kotebe area.

He pointed to materials that small builders use every day. Nails that cost 2,000 Br a kilogram have gone up to 3,000 Br. Wire that once sold for 3,000 Br now costs 8,000 Br. Prices for a truck of sand have climbed from 80,000 Br to 150,000 Br.

The rising costs now threaten continuity, as Ermias's employer told him work on teh construction site may cease after one week.

“I may need to look for another job,” he told Fortune.

The threat of layoffs comes as workers face higher living expenses and transport costs. For labourers paid only when projects move, a delay in materials quickly becomes a delay in food, rent and school costs.

The construction industry has moved from the margins of national output to the centre of the economy’s structural change, overtaking manufacturing as a larger contributor to GDP and becoming one of the clearest markers of a public investment-led growth model. Federal officials claim construction’s share of GDP peaked at 21pc in 2024, a dramatic rise from about 11pc a decade before. The sector is projected to grow by an average annual rate of 7.7pc to 7.8pc between 2026 and 2029.

GDP from construction reached 546.46 billion Br in 2023, up from 501.49 billion Br the year before, according to data from the National Planning Commission. A decade earlier, its contribution averaged around 336.72 billion Br, confirming the scale of the sector’s upward movement compared to agriculture, whose share of GDP has declined from 44pc to roughly 35pc. Manufacturing, by contrast, continued to underperform relative to the size of the economy. It accounted for only 4.4pc of GDP in 2024, below the world average of 12.37pc.

Construction and manufacturing each account for 11pc of formal private sector employment. In the broader industrial category, which includes construction, manufacturing and mining, 6.47pc of total employment was in industry as of 2023, according to World Bank estimates based on ILO data. In urban areas, manufacturing, mining, quarrying, and construction together accounted for 13.9pc of employment.

According to a UNFPA policy brief, the number of jobs created by construction is lower than in the service sector, while construction has the highest worker turnover and churning rates of any sector.

For Shewangizaw Kebede, a multi-skilled construction professional and contractor, the slowdown is no longer something to measure. It is something to endure. After 25 years in construction, he does not see the current situation as another market dip. He has seen cycles of decline and recovery, but says “this time is different.”

“The activity we see now isn't just slowing down, it is dead,” he told Fortune.

According to Shewangizaw, the break came with the sharp rise in material costs. Individual home builders, once a steady source of work, began pulling back.

“People have stopped building and even renovating their homes,” he said, pointing to a collapse in new construction and small renovation jobs.

His most recent project, completed months ago, was a two-storey residential house on a 90Sqm plot. From foundation to finishing, it costs around eight million Birr. Today, he says, building the same house would be far more costly.

“With the current price increases in cement, sand, gravel, and electrical materials, the cost could easily double,” he said.

The change has frozen demand. In the past, renovation jobs helped contractors survive when new construction slowed. Homeowners would upgrade interiors, add rooms or repair existing structures.

“Before, even if people didn’t start new buildings, they would at least renovate,” he says. “Now both have dropped.”

It has been four months since Shewangizaw secured a construction contract. Rising living costs have made the gap harder to manage.

“It’s not just about covering expenses anymore,” he says. “Even managing daily survival has become a challenge.”

After more than two decades in the trade, he is considering other options.

Officials acknowledge the disruption and the slowdown, while insisting the sector has not stopped. The Ministry of Trade & Regional Integration (MoTRI) has linked the pressure to a broader fuel supply problem driven by global events. In a recent statement, the Ministry's officials blamed conflict in the Middle East for jacking up fuel prices and disrupting key supply routes, including the Strait of Hormuz, affecting availability. The government has turned to high-cost spot-market purchases to maintain supply and has adjusted domestic fuel prices amid rising subsidy pressures. Officials say the effect has spilt into construction, where fuel is central to production and transport.

The Addis Abeba Trade Bureau monitors prices twice a week, supported by broader data from the Central Statistics Agency's monthly reports. The Bureau expects additional reporting to help provide a clearer view of price movements over time.

Its Chief Officer, Habiba Siraj, argued that the main pressure comes from external factors, especially disruptions linked to the Middle East conflict.

“Manufacturers don't have enough fuel to produce and distribute construction materials,” she said.

That has contributed to higher costs across the sector. Still, the Bureau's officials insisted the market has not moved beyond reach.

“The increase isn't exaggerated and out of control," Habiba told Fortune. "It is being adjusted through the efforts and intervention of various government agencies.”

The recent spikes in prices for construction materials have yet to be captured in the official statistics. The latest data by the Ethiopian Statistics Service (ESS) is for March this year, which put headline inflation at 9.4pc, with non-food inflation lower by 2.4 percentage points. It has reported that prices of key construction inputs, such as cement and reinforcement steel, have "stabilised or declined" in the two years since 2024 "due to improved supply and government interventions."

For Mulualem Debeb, construction industry development head executive at the Ministry of Urban & Infrastructure, the immediate challenge has been to move materials amid a fuel shortage, compounded by import shortfalls.

“This has increased the price of construction materials and caused delays in projects,” he said. "The supply challenge could deepen if manufacturers cannot secure fuel."

Mulualem see the disruption as a warning about Ethiopia’s dependence on imported inputs. Authorities are accelerating import-substitution measures, supporting domestic producers and considering alternative materials such as bamboo and wood where technically appropriate. They have also prioritised the completion of major projects, the improvement of bulk transport of materials, and the better use of available resources.

“The construction sector has not stopped, but there is a decrease,” Mulualem echoed Habiba. "No major national project has fully ceased."

A strategic research on affordable housing in Addis Abeba is underway with support from McKinsey & Company, while the Construction Management Institute and the Ethiopian Economics Association are studying import-substitution opportunities.

For Mesele Hailu, a civil engineer and lecturer at Addis Abeba University, the current moment is a stress test for the construction sector. For real estate developers and contractors, it is “highly challenging,” shaped by several pressures rather than by a single cause. Beyond material prices, fuel supply is a decisive constraint for large projects. Excavation, structural work and transport all depend on fuel-powered machinery.

“When fuel supply is unstable, the entire project timeline and cost structure are disrupted,” he told Fortune.

Mesele called the disruption temporary but serious, a “little bump” only if it remains short-lived.

“If fuel supply returns to normal and prices stabilise, the sector can recover,” he said.

His advice is cautious, arguing that building under volatile prices could expose developers to greater financial risk.

The risk is time. If the pressure continues for several months, Mesele warned, the effect will go beyond individual projects.

“A prolonged disruption will directly affect housing supply and slow down urban development,” he told Fortune.

Even a recovery in fuel supply may not be enough to bring prices down.

“Restoring fuel supply alone is not enough,” he said. “Unless the work is urgent, it may be wiser to pause projects temporarily.”

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