BY ABEBE WOLDEGIORGIS
It is understood that the construction sector is one of the sectors which is critically affected by the price hike of inputs. The sector plays pivotal role in the nation’s economy by creating job opportunities to thousands and linking various sectors through value chain.
However, due to the overwhelming inflation witnessed in the last couple of years, the sector found itself in uncertain situation.
“The sector was already suffered with the existing rampant corruption and misconduct and the unprecedented price hike in construction inputs witnessed currently further hit the sector,” the Ethiopian contractors association said.
The association’s president Engineer Girma Habtemariam said that the surge in construction inputs in the last three years forced various projects to cease. In addition to these, the crises left many contractors to face bankruptcy.
Not only had that, as to Girma, the crises forced construction companies to expel many employees. Some companies tried their level best to sustain their projects by withstanding the soaring price. But even though they accomplished their projects still face uncertain of their future.
The price hike in every item is expensive and left the sector in precarious situation. The default market system manipulated by brokers also has its own impact for the price distortion and still no solution is forwarded. In relation with surge of price, the association forwarded its plea to the government but still solution is yet to come.
Particularly, the absence of long lasting solution for shortage of supply and market distortion of cement aggravates the crises. As to him, though in the recent past various measures are taken to contain the price hike of cement products, still the price is galloping and has become intact. Currently the price of packed cement reached to 1800 birr. Other contractors on their part also said that the surge witnessed in iron and steel has been sky rocketing and illegal practice in the market also further aggravates the situation.
According to Girma, the price of iron and steel does not go in line with the price prevails in the market and some retailers hoard the products in their store which they imported five years ago in average price and supplied currently the products to the market with sky rocketed price. Five years ago traders imported one piece of steel with 25 birr and after hording it to date and by now they supply to the market by 122 birr.
He further said that in general illegal trade and misconduct which is rampant in the market system left the sector to be deteriorate day by day. Due to price hike of inputs and fluctuating market system, many level one contractors left idle in the last four years. Others still pay tax to the government but unable to find new projects. Some explain that the construction business is recessed and yet the inputs utilized in the construction work are alarmingly rising and this makes the situation very confusing. Nevertheless, it is obvious that the failure in the market is responsible induced by the chronic corruption.
As to Girma, though local steel producers import inputs used for their production, their price set for the piece of steel is very exaggerated which again poses inflation.
He further said that the price of the imported inputs, the tax they pay and the production cost is known but they sell their products beyond what they spend for the production and gain profit in unacceptable manner. The absence of the government intervention in stabilizing the market also made the matter worse.
Though there are institutions which have an authority to stabilize the market and supervise the price such as anti-corruption commission are unable to bring long lasting solution. Currently, steel products are coming here illegally through contraband and such venture again distorted the market and the practice indicates the weak institutional capacity of the law enforcing bodies.
As to him, previously steel and iron were imported by one family whereas currently brokers are emerged to supply the products up to the construction sites by their own transportation expense and this all indicates how anarchy is rampant in the value chain.
A level one contractor on his part said that while the price of steel and iron is deducted in the international market, the price of the product is not reduced and this indicates that how illegally imported products are disrupting the market.
A Person who works as an advisor in the construction industry said that the misconduct and anarchism prevailed in the industry flanked out many contractors from the game. Shortage of the product is simply artificial and the scarcity is due to controlling of the market by gangs. Rules have been introduced several times to resolve the problem but it was impossible to enforce it because the value chain is paralyzed by financially big men.
The Ethiopian construction works corporation on its part announced that the price hike witnessed in the construction inputs has been a challenge for contractors and many are unable to accomplish their projects on time due to shortage of raw materials and exaggerated price. Projects that are intended to be carried out in the future face uncertainty.
The Construction Corporation Communication affairs Department Head, Tinfu Kebede, on his part said that the price of construction materials is increased by two to threefold which intern creates havoc on contractors and to address the problem, it will exert its energy relentlessly. He further said that due to shortage of inputs, significant number of contractors ease their activities. He also said that if the market is not stabilized it is hard to continue taking contract from customers because working by the current price is not feasible. The corporation in the last budget year carried out 49 projects worth 37.1 billion Birr and mostly used inputs derived from local sources. To substitute imported inputs by local one, it is aggressively working.
Professor Abebe Dinku who works at Addis Ababa University Engineering Department, on his part said that previously some efforts were exerted to substitute imported construction inputs by local one but with no tangible result and ultimately things became hard.
He further said that currently due to security problems in various parts of the country, substituting the importing products by local ones might be a challenge even utilizing raw materials such as marble in the remote areas of the country has been hard. The price of the commodity also increased.
The construction work needs long time and when the work begins, the construction work might be low or high and the prolonging of the construction due to various reasons might increase the cost.
The contractors Association President Girma Habtemariam, on his part said that there are factors contribute to the price hike and among others shortage of hard currency in the bank to import the inputs, the increase of the price of petroleum oil due to fluctuating international market, increment of electric tariff and artificial price hike of electric power.
Ethiopia as a developing country needs more infrastructures such as bridges, hydropower dams, roads, schools, clinics, hospitals, real estates, residential houses, sport gymnasium and recreational resorts and to meet the demand the construction sector plays pivotal role.
Currently, both government and private construction companies are engaged in construction work. While some construction projects are completed on time, others delayed and others also are interrupted due to the above mentioned reasons. Cognizant of the problem particularly shortage of cement, the government provided investors licenses to construct cement industries and to involve in cement production and marketing. Only in the last budget year four investors have obtained license to construct the industries and it is expected that within two years they will be operational and soon the market will be stabilized.
There are also local industries engaged in still and iron production and according to the government sources, in the last budget year they could substitute iron and still products worth 24 million Dollars and if other investors engaged in production instead of importing iron and steel, the market can be stabilized and the government in this regard pledge to support the investors.
THE ETHIOPIAN HERALD TUESDAY 13 SEPTEMBER 2022
