December 18, 2011

Ethiopia construction policy kills investment, hurts poor

Filed under: Ethiopia,Meles Zenawi — ethiopiantimes @ 8:21 pm
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New laws by the Meles government and incompetent Addis Ababa city officials has slowed down the construction sector in Addis Ababa and other cities, the last remaining promising sector in an otherwise disastrous economic situation in the country, according to a report by Addis Fortune Newspaper.

There have also been several reports of corruption and ineptitude at the Kebele (local) level in the cities. According to reliable sources, some Kebele administration employees who are in charge of managing land, make counterfeit documents for a plot (illegal “Carta”) for themselves and sell land to investors for thousands of dollars. Usually, these lands were forcefully confiscated from the urban poor without compensation to the original residents, in the name of development.

Thousands of Ethiopians continue to be displaced as the government seeks to change urban slums to high rise buildings. “Some neighborhoods are being deserted and poor people are becoming homeless” decried one resident of Kirkos district. And for Ethiopians living alongside the major roads connecting to the newly constructed Gotera interchange and highway, low-income and middle-income residents have recently received an ultimatum from the Meles government to move out of their homes or go to prison. The local city officials have declared that even two-story buildings will be demolished because the minimum height requirement alongside the main road is eight-stories high for every building. A resident in the Kera district close to the Gotera interchange said that even middle-class or middle-income Ethiopians cannot afford the deposit percentage (up to $3 million birr) required by the government to construct one building to the minimum height requirement.

Currently, residents and tourists who recently visited Addis Ababa say that the city is filled with homeless people and beggars walking around unfinished buildings as local Ethiopian investors do not have the capital to finish the buildings. Analysts say that the Meles government has not created jobs and has not built a strong middle-class in Ethiopia that can fuel the construction sector that was previously driven by the Diaspora.

Ethiopia based private newspaper Addis Fortune reports more below on the crisis in the construction sector and its impact on average Ethiopians.

By Girma Feyissa
The recent land lease proclamation seems to be affecting many people, from daily labourers, who would rather assist at construction sites than beg for bread, to investors, who would rather spend their wealth on something long-lasting than simply live for today.

The recently issued proclamation on urban land leases has been elaborated by the concerned minister and the mayor of the 125-year-old metropolis. Panellists have also thrown some light on certain issues and unaddressed questions raised by stakeholders.

Many observers are riddled and still think that what the minister tried to explain over the media does not confer with what is enshrined in the relevant proclamation. Others are of the opinion that the issue ought to have been discussed thoroughly by the general public before it was presented to Parliament. They hope for reconsideration, as it is over a vital matter.

One such individual is Tesfaye, a broker of property transactions who has stayed in the business for over 30 years. He works around Dehab Hotel, Eden Street, usually sipping coffee and reading newspapers in his spare time. His main preoccupation is to collect information from a range of sources, particularly from people who want to sell or buy vehicles, houses, and other property.

He was asked about how business, particularly house transactions, is going since the lease proclamation was issued, recently. He did not hesitate for a moment to comment.

He makes comparisons about the intensity of the number of people that used to crowd in and around the Document Authenticity & Registration Office (DARO) before and after the issuance of the land lease proclamation.

“That department is now almost deserted,” he said. “It is puzzling how we can survive if we are classified as rent seekers for the mere two per cent commission we seldom earn and our self-employment is disregarded.”

Similarly, a well dressed middle-aged man with a cap on his head parked his car in front of a bakery, on one bright day last week. Hardly had he locked the door of his car when a young man rushed to him from across Dejazmach Belay Zeleke Street and asked him if he was looking for labourers. Looking a bit shocked and puzzled, the gentleman was taken aback by this sudden encounter and remained dumb for a while. He shook his head, both in bewilderment and in a negative reaction, and left for the bakery.

The young man waited a long time until the man returned carrying a parcel with bread in it and, then, tried to display his desire just by rubbing his stomach conspicuously as a sign of hunger. The man rolled a 10 Br note to him and left. The young man almost snatched the money from the man’s hand and went to the bakery without showing any sign of courtesy for what the man had done for him.

After a while, he came back with his own parcel and crossed the road back to his friends with the intent of sharing the bread with his fellow job seekers. Some of them greedily crowded him, while others stood by calmly.

These young men used to work as assistants for skilled craftsmen working in the construction industry. For Tesfaye, the scene signifies the paralysis in the private construction sector resulting from the uncertainty caused by the recent and lease proclamation.

“Have you noticed the recent downturn in the construction industry, even under the price slump of cement?” he asks. “I wonder how much the price of cement will go down in the market when the new cement factory owned by that billionaire starts production in the not too distant future.”

This state of affairs surely poses a serious question in the minds of private investors. Indeed, of what good would accumulating wealth be if it cannot be used for investment in one form or another?

People do not live only to spend their money today. They also live for the destiny of their offspring of tomorrow. Investment is nothing but a wise decision to use one’s money with the assumption of a better tomorrow.

Ethiopians living abroad work up to 16 hours a day and remit money back to their families not only to help them cover the rising cost of living but also to invest in the acquisition of shares and bonds in many sectors. They do so hoping to return home and secure a decent life with their families.

It is to be hoped that, at a time when the country has robustly launched multifaceted development projects and the rather ambitious plan for economic transformation has just started to take off the ground, the proclamation that meant to fight against clandestine actions designed to take advantage of market momentum should not, on the other hand, discourage genuine investment.

Real estate developers, however, seem to have safely continued to function in full swing. With the growing supply of cement, their building activities are expected to accelerate even faster than at other times. But one cannot say that the construction activities carried out by a few companies can meet the demand for housing.

The transaction of houses is a vital element in any growing economy, particularly where population grows at an accelerated rate, economists say. The industry has various cumulative effects and linkages.

The small plastic sheds or makeshift shelters, where women vend local brews and food for daily labourers, are typical examples of backward linkages. People engaged in the production and transportation of quarry and building materials and their dependents are also affected directly or indirectly by whatever goes on in the construction industry.

Even with the gloomy economic reality, the land lease polemics presented over the media does not seem to be well defended and substantiated by ample facts and figures of specific cases, although there could be many instances of malicious rent collection and corruption.

The proclamation is intended to optimise the equitable use of scarce resources. One way of addressing the question of equitable distribution of resources has been the construction of condominium buildings to be jointly owned by low-income groups provided by casting lots.

But, these dwellings are either transferred or leased to middle income groups, who can afford to cover the rent. The low-income groups can only benefit from the rentals, while still living in misery, an act that contravenes the basic goals of the construction of the apartment buildings.
Virtually, the construction sector remains filled with ever-increasing paradoxes amid stagnation that is squarely affecting the poor.


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