The construction sector that plays crucial role in the economy via creating job opportunities to thousands and linking various sectors through value chain is obviously affected by critical price hike of inputs.
As a result, the sector found itself in uncertain situation due to the overwhelming inflation witnessed especially in the last couple of years.
According to the Ethiopian Construction Association, the sector has already been suffering from the existing rampant corruption and misconduct and the unprecedented price hike currently witnessed in the sector’s inputs further aggravated the situation.
The association’s president, Engineer Girma Habtemariam said that the surge of price in construction inputs observed in the last three years left many contractors to face bankruptcy and coerced various projects to cease.
As to Girma, the crises forced some construction companies to expel many employees. Some companies, however, tried their level best to sustain their projects withstanding the soaring price. Even though they accomplished their projects, they still feel uncertainty when looking forward. The price hike in every item seems limitless that put the sector in a precarious situation.
The default market system manipulated by brokers also has its own impact on the price distortion and gratifying solution is not forwarded yet. In relation with surge of the price, the association forwarded its plea to the government.
The absence of long lasting solution for the shortage of supply and market distortion of cement, in particular, aggravated the crises. As to Girma, though various measures have been taken in the recent past to contain the price hick of cement products, it is still galloping and seems ungovernable. Currently, the piece of a 100 kg packed cement rose 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 aggravated 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 supply the products to the market with the currently sky rocketed price. Five years ago, traders imported one piece of steel with 25 Birr and after hording it to date, they sell it by 122 Birr nearly 500% increment.
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 contractors at level one are left idle in the last four years. Others still pay tax to the government but unable to find new contract.
Some explain that the construction business is recessed and yet, the price of inputs utilized in the construction work is alarmingly rising and this makes the situation very confusing. Nevertheless, it is obvious that the failure in the market is responsible for the chronic corruption.
As to Girma, though local steel producers import inputs used for their production, the price they set for the 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 spent for the production and gain profit in unacceptable manner. Absence of the government’s 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 distorts the market and the practice indicates the weak institutional capacity of the law enforcing bodies.
As to him, previously, steel and iron was imported by one family whereas currently brokers are emerged to supply the products up to the construction sites by their own transportation and this all indicates how anarchy is rampant in the market chain.
A level one contractor, on his part, said that while the price of steel and iron is deducted in the international market, the local price 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 it is posed by gangs controlling of the market. Rules have been introduced several times to resolve the problem but they were impossible to enact because of the chain paralyzed by financially strong 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.
Head of Construction Corporation Communication Affairs Department, Tinfu Kebede, on his part, said that the price of construction materials is increased by two to three folds which in turn create havoc on contractors and to address the problem, it will exert its maximum efforts relentlessly.
He further said that, due to shortage of inputs, significant number of contractors cease 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 carried out 49 projects worth of 37.1 billion Birr during the last budget year and mostly used inputs derived from local sources. It is aggressively working to substitute imported inputs by local ones.
A Person, who works in the sector and asked anonymity, said that previously some efforts were exerted to substitute imported construction inputs by local ones 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 imported 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 by nature needs long time and when it is started, the construction cost might be low or high; but as the time is extended due to various reasons, it might be alarmingly increased.
President of Contractors’ Association, Girma Habtemariam, on his part added that there are factors contribute for the price hike and among others shortage of hard currency in the banks to import the inputs; increasing of price of petroleum due to the 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, and service providing institutions like schools, clinics, hospitals, residential houses, sport gymnasium and recreational resorts. The construction sector plays pivotal role to meet the demand.
Currently, both government and private construction companies are engaged in the construction work. While some construction projects are completed on time, others are delayed and others even 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. As a result, in the last budget year alone, 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 produce iron and still worth 24 million Dollars that substitute imports. If other investors follow this footstep and engaged in production, instead of importing iron and steel, the market can be stabilized. The government, in this regard, pledged to support the investors.
BY ABEBE WOLDEGIORGIS
The Ethiopian Herald July 14/2023
