The state-owned military-industrial conglomerate, Metals & Engineering Corporation (MetEC), has lost another contract, Yayu Multi-Complex Industries. This is the latest mega project terminated by government action.
The decision to cancel the contract came from the Office of the Prime Minister following repeated calls to terminate the contract by the Ministry of Public Enterprise, owner of the project. The Yayu Complex is the second largest project in the nation next to the four-billion-dollar Great Ethiopian Renaissance Dam.
A letter, which formalised the contract cancellation, was delivered to the Corporation, according to Teshome Toga, minister of Public Enterprises.
Launched six years ago as a 540-million-dollar undertaking, the project has reached only 43.8pc completion, which has become a source of frustration to Chemicals Industry Corporation, which oversees the complex under the Ministry.
In July, the Ministry requested the Office of the Prime Minister to make a final decision on the basis of the delay and cost overrun of the project, according to Wondafrash Assefa, communications director at the Ministry.
The last audit report of the Office of the Auditor General submitted to parliament shows that MetEC waspaid 60pc of the project budget, while only completing less than half of the complex. The project is located 600Km west of Addis Abeba in Yayu wereda, Illubabor zone of Oromia Regional State.
The complex is under construction on a 54,000Sqm plot and is designed to manufacture 300,000tn of Urea, 250,000tn of DAP fertilisers, 20,000tn of ethanol and generated 90MW of electric power annually using 9.2 million tonnes of coal. The finished complex calls for the hiring of 35,000 workers. The complex is also intended to have 75,000tn of solid waste that can be recycled as an input for the production of construction material such as bricks and cement.
About 18 years ago, the government set up a coal phosphate fertiliser complex project office to study the potential of a fertiliser producing factory in Yayu. The office conducted feasibility studies including geological, environmental and socioeconomic impacts. The studies were conducted with the assistance of Ging Sion Explorer and China National Complete Plant Import & Export Corporation. The research showed that 100 million tonnes of coal reserves are found in the Yayu area.
In 2012, MetEC signed an agreement with the Ministry of Industry to undertake the construction of a fertiliser plant, using Tekleberhan Ambaye Construction Plc (TACON) as the building contractor. MetEC was in charge of work on the mechanical parts, including procuring and installing the machinery to be used in the plant. The machinery was planned to be manufactured by Hibret Manufacturing & Machine-Building Industry, one of MetEC’s subsidiaries engaged in the production of machinery and spare parts.
After the contract was awarded, MetEC and the project owner rescheduled the delivery date of the project at least twice.
For the past year, former Minister of Public Enterprise Girma Amente (PhD) has been asking parliament to put an end to further costs and delays of the project.
Apart from Yayu, 10 sugar projects and the Great Ethiopian Renaissance Dam are mega projects terminated as a result of delays and cost overruns. Meanwhile MetEC has split itself into two entities – a military equipment manufacturing unit under the Ministry of Defence, and a separate commercial-industrial product manufacturing unit. The corporation is also in the process of changing its name to National Industrial Engineering Corporation, narrowing down its engagement to the manufacturing of industrial products only.
The split came into effect following the order by Prime Minister Abiy Ahmed (PhD), who had expressed his administration’s frustration over the performance of the corporation. MetEC was established eight years ago through the initiative of the late Prime Minister Meles Zenawi with 10 billion Br in capital by incorporating 15 military and civilian industries under one entity. It was envisioned to be one of the major tools for the industrialisation and transformation of Ethiopia into a middle-income country.
Abdulaziz Mohammed, vice director of MetEC, confirms that the letter terminating the Yayu project has been received by the corporation.
“We will hand over the project to its owner,” Abdulaziz told Fortune.
Once the handover is completed, the next step for the project is to hire another company to complete the construction, according to Teshome.
“We will be searching for a qualified firm to complete the project,” Teshome told Fortune.
Last year the Oromia Regional State terminated the concession of MetEC at a quarry located near the construction site. The concession was awarded to organised youth in the area.
All of the mega projects were awarded to MetEC before the corporation had built its internal and structural capacity, according to an expert, who worked as an adviser for MetEC.
“The engineering, civil, electromechanical, human resources and research capacities of the corporation were weak,” said the expert. “It also did not have proper financial management, a marketing strategy or an internal audit.”
However, he argues that the failure of MetEC on these projects cannot be fully attributed to the corporation.
“Most of the mega projects do not have a proper feasibility study and cost-benefit analysis,” he said. “The project owner failed to fulfill these requirements.”
Beyond the split, the government has to work on building the capacity of the corporation, recommended the expert.
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