The shortage of forex can be felt more severely than before, and even though the construction sector is seasonal, it has been highly affected. As prices of construction inputs become more expensive or harder to find, daily labourers are feeling the effect as it has been harder for them to find jobs. An expert points to the unexplored iron-ore in the Oromia Regional State as a solution to alleviate the burden of importing the materials needed, reports YARED TSEGAYE, FORTUNE STAFF WRITER.
About 40 men and Hussien Fantahun, 51, were gathered on Djibouti Street in front of Hayahulet Square, Addis Abeba on a recent cloudy afternoon.
Originally from Wello, Hussien is a daily labourer who works as a mason who daily waits to be recruited by construction companies. Lately, the job prospects have gotten harder, as opportunities are getting scarce and the price of goods throughout the city are on the rise. It also doesn’t help that his house rent has gone up 1,200 Br per month.
“I used to be able to work in two places, earning up to 300 Br a day. Now I have been forced to take loans,” Hussien told Fortune.
Hussien and most of the other daily labourers that wait with him sympathise with the contractors though, saying that construction inputs are the main culprit here.
The construction of the 10-storey Nibras Hotel, located in the heart of Piazza on Churchill Avenue is a witness to this claim.
The 25 million dollars project seating on a 1,500sqm plot is contracted by the Ethio-Canada Business Plc, a grade one construction company established with a capital of 9.3 million Br., and the construction has already taken seven years on the project.
“The project has been halted several times,” says Wondwossen Hailemariam, a foreman at the project. “The major cause is the escalating prices of construction material.”
The company, over the past few months, has been forced to reduce its labour force to 80 workers, a reduction of almost 50pc and the project is only completed only 60pc.
“We had to let go of some of our workers as we cannot afford to keep them as a result of supply shortages, the high expense of materials and the ever-increasing competition,” Wondowessen said.
One of Ethio-Canada’s employees is Ayalew Alebachew, a father of two and a carpenter by profession is now engaged in rebar and sheet-metal works and other labour tasks.
“Since I must continue to provide for my family, I do whatever is in my capacity,” Ayalew told Fortune.
This lag in the construction industry is in contrast to the rapid growth of the past few years. Of the total investments made last fiscal year, construction accounted for 42.5pc, beating out the manufacturing sub-sector with a total investment capital of over 132 million Br.
The construction industry also has a considerable stake in the country’s annual budget, amounting to over 60pc of the national budget. It also accounts for 9.5pc of gross domestic product (GDP) in 2016.
As the foreign currency shortage came to be felt more severely though, the momentum has changed. Either construction inputs were becoming expensive or hard to find.
This includes cement. As of last year, 14 active manufactures were producing over 8.4 million tonnes of cement in the country. Despite this competition, cement has over the past three months been selling 55 Br to 80 Br higher, with the price of a quintal of Ordinary Portland Cement (OPC) and Portland Pozzolana Cement (PPC) standing at 300 Br and 235 Br, respectively.
The price of reinforcement bar has also spiked, currently selling as high as 42 Br a kilogram. The hike has been attributed to the shortage of imported raw materials such as steel billets.
A study conducted by Grade One Contractors’ Association shows that the costs of major construction inputs such as reinforcement bars and cement have increased by 51pc since the devaluation of the Birr by 15pc last October.
Hence, the Ministry of Construction (MoC) has for the past one year been preparing a system that enables it to regulate unreasonable price hikes in the construction sector with a system known as CARIS. It is being developed in collaboration with the Information Network & Security Agency (INSA) and, it is not expected to be completed soon, according to a source from the Ministry.
“Shortage of raw materials has impeded delivery. It is also compounded by high tax rates,” Badeg Kebede, general manager of Walia Steel Industries Plc told Fortune.
The company produces holo sections, LTZ profiles, and sheet metals. It imports raw materials such as hot and cold rode coils from China, Ukraine, and Turkey.
It had to wait a year to open a 1.6 million dollars letters of credit (LC) from the Commercial Bank of Ethiopia (CBE). It was still not enough given the 2,000tn of coils they imported was only a fraction of the 500,000tn needed annually for production, according to Badeg.
“There are also construction companies that reduce the wages of their employees as inputs become expensive,” says Hadeshoum Teum, construction inputs sector deputy general-director at the Construction Inputs & Industry Development Institute.
The Institute was only able to succeed with 46.5pc of its targets to export construction materials in the past nine months of this year.
The hardships that daily labourers such as Hussien are facing has been noticed by the Ministry of Labour & Social Affairs (MoLSA), which believes that the issue can be addressed by discussing it with employers in the construction sector.
“Jobs in the construction sector are seasonal, usually thinning out during the rainy season,” says Werku Alemnew, Industrial Relations expert at MoLSA.
“If they have complaints towards their employers, contractors, and other issues they must take them to MoLSA branches,” Werku told Fortune. “The ministry is also ready to engage them in the small and medium-sized enterprise (SMEs) schemes.”
Muluneh Dessalegn, head of Industrial Relations & Union Support at the Confederation of Ethiopian Trade Unions (CETU), argues that the core problem is the lack of workers’ associations.
“We are currently reviewing more than four cases where private contractors have fired employees that tried to form unions,” says Muluneh.
Adem Ali, a daily labourer, who has been looking for jobs in Hayahulet says that they have been waiting for months for someone they can talk to.
‘‘If not addressed properly, the problem will seriously challenge one of the emerging sub-sectors with the biggest potential,’’ says Abubeker Yimer (PhD), dean at the Addis Abeba University’s School of Chemicals & Bio-Engineering. “It is under threat due to lack of domestically sourced materials.”
He points to unexplored iron-ore in the Oromia Regional State and the northern parts of Ethiopia that if explored can alleviate the burden of imports.
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