Construction Industry is Bolstering Economic Growth in Ethiopia

Ethiopia is a rapidly growing country that has been scoring a double digit economic growth for a decade. The availability of untapped natural resources coupled with its being the second populous country in Africa further makes the nation advantageous. Among others, the construction sector is instrumental in catapulting the nation to higher levels of development.

Without the construction sector, the burgeoning of all the economic sub sectors such as modern agriculture and manufacturing is unthinkable. Infrastructural facilities that have been put in place for decades and a half namely, roads, schools, health centers and residential houses are part of growth. At the same time they enable the tapping of the nation’s human and material resources. The second Growth and Transformation Plan also emphasizes achieving economic growth bringing structural change as its main objective. That means of transforming the agricultural-led economy to the industry led one, which needs shifting agricultural labor to that of manufacturing and service, enables the nation to obtain demographic dividend. This, in turn, indicates the vitality of the expansion of urbanization which needs more construction work. Currently, the construction industry has tremendous impact on the Growth Domestic Production by creating value chains with other sub sectors such as cement industries, small scale enterprises. Such enterprises are engaged in metal and wood work production utilized as an input for the building construction and stone crushing companies. As a result of the booming of the sector, metal, paint, aluminum and electrical cable industries have been established by local and foreign investors. And, so far, their could substitute the imported ones and save the nation’s hard currency earning that would be spend for importation. In order to utilize the bamboo tree for construction vast areas of land are cultivated by the private sector in Beneshangule Gumuz state. This as well will again create good chance for out growers. The geological landscape of the country is also supportive for the sector because stone and sand are found abundantly and cheaply. The other thing which can be mentioned is that, the booming of the sector necessitates the demand for qualified personnel in the market.

To meet the demand higher educational institutions, both public and private, have been mushrooming. Annually thousands of Engineers and Architectures graduate and join the industry and strengthen the professional ground of the construction industry. By now, it is common to observe very impressive buildings designed by local architects and. Based on this achievement we can predict that Ethiopian architects can compete with other foreign companies. Currently part of the civil and the electoro-mechanical work of the Hiddassie hydropower dam is sub contracted by local companies. All these indicate how the industry has a potential to penetrate not only the huge projects at local markets but also at global level.

The involvement of local companies in the construction of sugar and agribusiness projects, in addition to enhancing the local capacity also curtails the outflow of hard currency which the nation badly needs. However, though the sector is growing, still now huge road and other infrastructural projects are given to foreign companies, which consumes the nation’s hard currency. Of course, as compared to the international companies the local ones are less competent in terms of capital, technology, skills and experience. However, to take over their role in the long run, initially the local companies should try their level best to carryout the construction work in a joint venture with them. In the meantime they could play crucial role in technology and knowledge transfer. But, currently according to the official report, numerous inhibiting factors which retard the sector’s pace of growth are identified. Among others, capacity limitation on execution,input limitation,low level productivity rate, outdated technology, deep entrenched rent-seeking attitudes and lack of good governance are singled outcritical. In addition to that, the paper-tiger rules and regulations and inept institutions which do not deliver up to their responsibility have a deterrent impact on the sector’s growth.

It is obvious that, the construction industry is one of the single largest sectors, which accommodate thousands of private companies and it is an indicator that how the private sector can be a reinforcement force to the public sector. Yet, companies have their own inherent weaknesses. Among others, they organize themselves along relative and nepotism lines, which do not go in line with the merit system. In addition, some of them are not visionary. They target their immediate benefits rather than their ultimate goal which uplift them to a higher level. Tax evasion,doing the job without license and forged documents are some of the critical issues which need remedial actions. There are also shortcomings which curtail the development of the sector on the side of the client of the industry.

The non transparent bid for the construction, the tardiness of payments for the contractors and taking to much time in settling dispute with regard to the clearing away of the residential houses and removing old electric and sewerage infrastructures are the major stumbling blocks, which hamper the sector’s growth. Unless such situations are redressed, attaining the sector’s aspiration might be hard.

In sum, the construction work is both a means of development and a goal by itself and to continue its paces, the inherent weakness of the sector should be addressed. And for that, all stake holders should be part of the solution.

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Source: The Ethiopian Herald

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