Draining Out Inefficiency Takes More Than Words

Prime Minister Hailemariam Dessalegn was unusually bold in criticising the bigwigs of the construction sector. In a meeting that saw over 4,000 people, Hailemariam daringly stated that the sector was being a breeding ground for rent seeking and inefficiency. It was all caused by institutions that were “biting more than they can chew”, according to the premier.

It was indeed a bold statement from the policy chief of an economy that takes pride in investing hugely in infrastructure development over the years. It may have even taken some by surprise as Hailemariam has been criticised as a reactive occupant of the higher office with real power originating from EPRDF’s heavyweights stationed at head offices of member parties, the Council of Policy Advisors and regional governments.

Infrastructure development has been the mainstay of EPRDF’s economic policy. It takes the lion’s share from the public investment. Be it during the transitional government or its statist successor dominated by the same ruling party, infrastructure frenzy has been the norm rather than the exception. Some even argue that the EPRDFites are fond of infrastructure as much as the military dictatorship they overthrew was of ammunition.

Unfortunately, the science of economics somehow supports the policy inclinations of the ruling Revolutionary Democrats. In a country, such as Ethiopia, which experiences considerable backlog in basic infrastructure, the growth engine could not be started without investment in economic and social infrastructures. Even after the engine got started, smooth driving is not possible without incessant investment in infrastructure.

Basic factors of production – land, labour and capital – need infrastructure to be translated into economic outcomes. Markets operate smoothly if their infrastructure bases are fulfilled. Shortages in basic infrastructure provision are poised to create market failures. In a way, then, infrastructure is the vein of an economy that takes effective state and market atria and ventricles.

Of course, one ought to be sure that Hailemariam’s rather courageous speech did not play the economic card only. It was even more focused on the politics of it.

After all, the infrastructure development efforts of the administration are widely perceived as the hotspots of corruption, opportunism, illicit financial outflows and widespread parochialism. By far, they are perceived as the corners of getting rich overnight. Public disappointment over the dismal quality of deliverables, inattention to the human element and disorganisation in execution is rife.

Equally worrisome to the public is the increasing cost of projects. Projects in sectors as varying as roads, electric transmission lines and water supply systems, are witnessing a consistent rise in unit price to an extent that complementary budgeting has become a normal practice in the sectors. This is not to mention the costs originating from extensive project delays.

In both cases, the total costs of the infrastructure development efforts of the nation are getting way out of control. They are becoming the weak edges of the overall economy, which, if not attended as early as possible, could lead to an overall economic corrosion and hence a potential bust. At the base of it all, lies the very inefficiency that Hailemariam was concerned about too.

In being bold over the inefficiency of the system, therefore, it seems that Hailemariam’s administration wants to shift the blame to the heads of the institutions entrusted with the task of overseeing the sector, such as Mekuria Haile, minister of Urban Development, Housing and Construction (MoUDHC), Sisay Bekele, acting director of the Ethiopian Roads Authority (ERA), and Alemayehu Tegenu, minister of Water, Irrigation and Energy (MoWIE). The whole objective seemed to be about saving the skin of the ruling coalition, at this defining time of election, by shifting the blame away from the core to the peripheries. It was obvious that Hailemariam would not be interested in giving his opponents a functional political card to play by internalising a political thread that could sufficiently be externalised, albeit with little cost.

If one has to be honest about the whole issue of infrastructure development, however, it vividly relates to the statist approach of the Revolutionary Democrats. As the late Prime Minister Meles Zenawi noted in the World Economic Forum (WEF) in Africa, held in Addis Abeba, the state is the savour of Africa’s infrastructure doldrums caused by a colonial mentality. For Meles, and hence for the Revolutionary Democrats, this ‘colonial mentality’, which proclaims the private sector as the best fitting agent for infrastructure development, has created nothing but an infrastructure backlog that could not be addressed with centuries of speedy investment.

The solution, according to Melesnomics, a theory that remains a guiding principle for Hailemariam and his compatriots, is to dedicate the job to the state. The private sector, as Meles argued on the forum alongside reputed advocates of private sector development, such as Tdjane Thaim of Prudential Insurance, could do itself and African economies a better job by giving its surplus capital to the state and letting the state do the job. What was absent from Meles’ analysis was the fact that the state is an inefficient beast with multiple windows for opportunism, patronage, corruption and hence unceasing inefficiency.

Now that Melesnomics has been in vogue for about 20 years, it could be seen that the state’s engagement has been nothing more than shooting its own foot. The inefficiency that it bred through its ideological fixation has reached an extent difficult to control by its multiple executive units and is now haunting it back. Hence, the latest blame game in the corridors of power.

The root of the inefficiency in the nation’s construction sector is a public investment regime that lacks essential instruments and standards of prioritisation. There seems to be no evaluation of the level of priority that needs to be given to projects.

Everything that comes to the table gets the go ahead as long as financing is there. No pre-implementation economic impact assessment is done. Often, politics defines the decision. A project that adds even marginal political support to the ruling elite could get the nod.

Unfortunately, it is all done while the construction capacity in the sector remains low. Licensing of contractors and consultants is biased towards physical assets more so than professionalism. Mobility up the ladder of licensing is also related to assets.

This asset based licensing has created contractors who get projects without having the necessary professional execution capacity. Helping this matrix is the preference given to local contractors in the bidding process. In a way, therefore, the system is made to enrich the mediocre as it does little in the form of sorting.

Standards of planning, implementation and delivery of projects are not well-specified. They have so many loopholes that contractors can exploit in their advantage. This means the taxpayer pays all the costs of these loopholes that the authorities should have closed in the first place.

It is all the same with project and programme planning and management standards in the nation. No doubt programmes such as the Road Sector Development Programme (RSDP), the Universal Rural Road Access Programme (URRAP), and the Universal Electrification Access Programme (UEAP) involve projects with multiple windows of patronage and opportunism.

Undeveloped oversight capacity of respective authorities and the absence of a strong culture of accountability also play their own role in the matrix. The resultant outcome of all these factors is, therefore, the inefficiency echoed in Hailemariam’s concern, though late.

Addressing the inefficiency of the system requires attending all these fault lines. Certainly, it takes more than bold statements. It looks for a government that rolls up its sleeves, gives itself the job of reforming the sector and even reviews its long overdue statist approach to development. Such an undertaking, in the words of Meles, is like grabbing the tail of a wild cat; one may hesitate to puts his hands on it, but would never let it go.


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