Capital Ethiopia Newspaper

Construction industry fails to make good on bond pledge

Urban Development and Construction Ministry (UDCM) urge the construction sector business community to conclude their pledge that they promised to buy government bond for the construction of the Grand Renaissance Dam project before the end of June.

The ministry office has paid several discussion with the business community in the past week to evaluate the investors accomplishment about the purchasing of the bond that issued by the state owned Development Bank of Ethiopia (DBE) in last year. Few months ago the ministry office was insisted the business community to conclude half of the total amount that they promised to buy in the beginning of the budget year.
Participants, who attend the meeting that come from aluminium sector, said that Mekuria Haile, Minister of UDCM, insisted the participants to conclude the balance amount that they promised.
He said that however the business community promise to buy billions of birr worth of bond, the pledge is not successfully done. We were expect most of the construction sectors paid the expect amount but the collected amount is not under the expectation.
Participants who attended the meeting that held on Friday June 1 evening said that about 90 percent of aluminium sector investors have concluded the first half of the total amount the promise to buy. “But the minister told us that most of the business community on the other construction sectors did not pay their promise,” participants told Capital.
They said that the minister insisted them to finalize the bond purchasing process before the end of the budget year, which is July 7, 2012.
According to sources other ministry offices are also discussing with relevant business communities about the pledge that promised few months after the commencement of the dam.
Since the Grand Renaissance Dam construction officially commenced in May 2011 the business community and their employees were pledging various amounts of money to support the project. On September 11, 2011, the eve of Ethiopian New Year, the government announced that all financial supports are to be changed into bonds as opposed to free contribution.
DBE’s bond was issued in March 2011 with the goal of obtaining sufficient finance for projects that are undertaken in the Growth and Transformation Plan (GTP). The Great Renaissance Dam that is being constructed by the Italian firm Salini Costruttori will cost 4.8 billion dollars and is being fully financed through local sources mostly from bond sales.
At 6,000 Mega Watts, the dam being constructed on the Blue Nile River about 40Km east of Sudan in the Benishangul-Gumuz Region of Ethiopia will be the largest hydroelectric power plant in Africa when completed, and the reservoir at 63 billion cubic meters will be one of the continent’s largest.
The DBE bond ranges from 50 to 100,000 birr and does not have a maximum purchasing limit. Bonds with a maturity date of one to five years will have a 5.5 percent interest rate and for over five years the interest amount will be six percent.