Ethiopia’s construction industry is struggling with chronic delays, budget overruns and quality defects because major projects are still awarded largely on the basis of the lowest bid rather than best value, according to the Ethiopian Consulting Engineers and Architects Association.

Engineer Dawit Ergicho, president of the association and founder and managing director of ELDA Engineering Consultants, told Capital that the industry’s problems go beyond visible project failures. He said the real weakness begins much earlier, in planning, tendering and procurement, where a system meant to favor quality and cost-based selection often ends up rewarding the cheapest offer.

“The truth in the construction sector is the same as buying cheap shoes that only last six months,” Dawit said, arguing that selecting consultants and contractors mainly on price creates far greater costs later through rework, delays and poor performance.

He said the sector’s persistent problems should not be viewed only as isolated project failures, but as symptoms of a broader structural weakness that affects the entire project life cycle, from design to execution. In his view, the issue is a violation of the international principle of value for money, where low upfront cost is prioritized over long-term efficiency and durability.

The association says a study on developing fee guidelines for construction consultancy services has already been completed and submitted to the Construction Management Institute in December 2025. The study, carried out by independent firm Habcon and reviewed by the Addis Ababa Institute of Technology, is intended to provide a market-based reference for construction consultancy fees and help identify bids that are unusually low or high.

Officials say the guideline is meant to support more rational procurement decisions and reduce the risk that public projects will be awarded to bidders who cannot realistically deliver quality work at the quoted price.

Industry experts also say Ethiopia’s construction sector lacks an independent professional council to regulate engineers and architects in a way that strengthens accountability and competence. They point to models in neighboring countries such as Kenya and South Sudan, where professional councils oversee licensing and enforce continuous professional development.

At present, licensing is handled by a government office, but there are growing calls for an autonomous body that would require ongoing training before license renewal. Dawit said a degree alone does not make someone a professional and argued that the industry needs updated knowledge to keep pace with modern construction standards.

The comments come as Ethiopia seeks to reform one of its most important but troubled sectors. The first Ethiopian Construction Week, held in April 2026, formed part of a broader 25-year Ethiopian Construction Industry Transformation Initiative launched in August 2025. The initiative aims to shift the sector away from blame-shifting and toward collective problem-solving, with quality, efficiency and professionalism at the center.

As part of the reform effort, the industry’s strongest performers were ranked and recognized. More than 1,000 Grade 1 contractors and consultants were invited to complete a 17-page assessment covering institutional strength, quality control, performance, customer satisfaction, health and safety, social responsibility and financial and tax compliance. Only 103 responded on time, and 40 firms were ultimately recognized: 20 contractors and 20 consultants.

To avoid conflicts of interest, association leaders who own companies recused themselves from the process. The evaluation was carried out by more than 20 independent experts appointed by the government.

Dawit said the recognized firms now carry the responsibility of serving as benchmarks for the rest of the industry, while others are expected to modernize their practices to remain competitive. He added that the association’s growing membership in the International Federation of Consulting Engineers and FIDIC Africa should help Ethiopian professionals protect their interests and adopt international contract management standards more widely.

The association says the sector’s reform drive is only beginning, but insists that unless procurement changes, the country will continue paying far more than it should for infrastructure that should last longer and perform better.

The Ethiopian Capital Market Authority has finalized a long-awaited directive on Collective Investment Schemes, a move expected to open new investment channels for ordinary Ethiopians and deepen the country’s still-early capital market.

The directive, which has been submitted to the Ministry of Justice for final legal review and registration, will provide the regulatory basis for mutual funds, unit trusts, money market funds and real estate investment funds. Officials say it marks an important shift from the capital market’s foundation phase toward full operation.

For decades, access to higher-return investment opportunities such as real estate, corporate debt and large-scale projects was largely limited to wealthy individuals and major institutions. Under the new framework, licensed fund managers will be able to pool small contributions from many investors and channel that money into diversified assets.

“This directive is about being all-inclusive,” Hana Tehelku, director general of the authority, told Capital. “It allows a teacher, a farmer, or a small business owner to entrust their savings to a licensed professional manager.”

The authority says the new rules will make it possible for Ethiopians to invest collectively in assets that are usually out of reach for individuals, including government bonds, corporate debt securities, money market instruments and large real estate developments.

One of the key features of the directive is the inclusion of Real Estate Investment Funds, a structure similar to REITs used in other markets. Officials say this will allow investors to buy units in major property projects while giving developers access to broader pools of capital. They say the model could also offer investors a way to hedge against inflation through asset-backed exposure.

The directive is also expected to pave the way for money market funds, which invest in short-term, low-risk instruments and could offer savers a more flexible alternative to ordinary bank deposits.

According to the authority, the draft now under review by the Ministry of Justice is the final stage in the legislative process. The ministry is expected to check that the directive aligns with existing law and confirm that public consultations were properly conducted before registration.

“We have had extensive preliminary discussions with the Ministry of Justice,” Hana said, adding that the authority expects the approval process to move quickly because the two institutions worked closely during drafting.

Once approved, the authority will begin licensing collective investment scheme operators. It said several domestic and foreign institutions have already expressed interest in becoming licensed fund managers.

The finalization of the directive comes as the authority steps up enforcement against unregistered investment activity. It has recently launched investigations into entities accused of selling shares or investment units to the public without legal registration, and has taken administrative action including freezing bank accounts in some cases.

Officials say the new directive will help create a lawful and transparent route for investment while making it easier to identify fraudulent schemes operating outside the regulatory system.

The authority also said the Ethiopian capital market is drawing growing interest from foreign investors, with one large international institution reportedly close to entering the market after completing the required procedures with the Investment Commission and the authority.

In a further sign of Ethiopia’s growing regional engagement, the authority said the country will co-host the East African Regulators Roundtable in early June. It added that Ethiopia is currently an observer member in a regional association of regulatory bodies and has established working ties with regulators in Kenya, Uganda, Tanzania and Nigeria.

Officials say those relationships could eventually support cross-listings and allow Ethiopian firms to access regional markets, while also creating a path for foreign companies to list in Ethiopia.

Climate change is making life more difficult for urban businesses in Ethiopia, where floods, heat waves and erratic weather are increasingly disrupting the livelihoods of women entrepreneurs and micro and small enterprises, according to a new report by the Center for Financial Inclusion, an independent think-tank housed at Accion. The study says extreme weather is becoming more frequent and more severe in cities such as Addis Ababa and Dire Dawa, exposing the limits of existing infrastructure and financial protection.

The April 2026 report, Early Warnings, Faster Recovery: How Climate Information and Finance Shape Women’s Resilience in Urban Ethiopia, says more than one-third of micro and small enterprise owners in Addis Ababa report being affected by climate shocks, while fewer than 20 percent can access emergency funds. It adds that many women-led businesses are operating informally, with limited savings and weak access to digital tools, leaving them highly exposed when disaster strikes.

The study, based on survey data and focus group discussions with more than 800 women microentrepreneurs in Addis Ababa and Dire Dawa, found that timely climate warnings can significantly improve recovery. Access to early alerts was associated with a 37 percent increase in rapid business recovery after a shock, especially when combined with savings or other financial tools.

Researchers said the findings are especially important because urban Ethiopia is already under pressure from rapid migration, poor drainage, informal settlement growth and uneven infrastructure. The report notes that 67 percent of Addis Ababa residents live in flood-prone areas, while Dire Dawa has long been vulnerable to flash floods and extreme heat.

The report also warns of an “adaptation trap,” in which the entrepreneurs hit hardest by climate shocks are the least able to invest in future protection because they have already depleted their resources. That makes the poorest and most vulnerable women entrepreneurs the least likely to recover quickly or build resilience for the next disaster.

The authors argue that climate resilience is no longer only a development issue but a business survival issue. They say cities need stronger early-warning systems, better access to emergency finance and more practical climate information delivered through trusted channels if urban enterprises are to withstand repeated shocks.

The report also highlights the role of information access in driving resilience, saying women with both financial services and climate alerts were better able to take preventive steps such as reinforcing roofs or elevating shelves. But it cautions that the most vulnerable still face barriers to using such tools, even when alerts are available.

Ethiopia is emerging as one of Africa’s main renewable energy markets, helping drive the continent’s highest annual capacity increase in 2025, according to the International Renewable Energy Agency’s latest Renewable Capacity Statistics 2026. The report says Africa’s renewable power capacity rose sharply last year, with Ethiopia among the countries leading that expansion alongside South Africa and Egypt.

The IRENA report says renewable energy continued to dominate new global power additions in 2025, with Africa recording its strongest annual increase to date. It notes that while solar and wind power accounted for most new capacity worldwide, Africa’s overall growth was still far below the pace seen in China, the United States and the European Union.

For Ethiopia, the finding reinforces the country’s growing role in the clean energy transition. The report does not break out Ethiopia’s exact capacity in the summary, but it identifies the country as one of the main contributors to Africa’s record renewable energy expansion in 2025.

IRENA said renewables accounted for 46 percent of global installed power capacity at the end of 2025 and 74 percent of new global power additions during the year. The agency said the trend reflects the economic competitiveness of renewable power, but warned that much faster growth is still needed to make clean electricity the world’s dominant source.

The report also said Africa’s renewable capacity reached a new high in 2025, driven by Ethiopia, South Africa and Egypt, while the Middle East also saw strong growth led by Saudi Arabia. It said the growth shows the widening spread of renewable investment outside traditional markets, even though global deployment remains uneven.

For Ethiopia, the momentum could support broader energy security goals, including grid expansion, industrial power supply and rural electrification. The country has long relied on hydropower, but the IRENA data suggests it is increasingly part of a wider renewable energy mix that also includes solar and wind.

IRENA said the global transition still faces major planning and grid-flexibility challenges, particularly as renewable energy approaches a larger share of total generation capacity. The agency added that the next phase will require stronger policies, better infrastructure and more distributed generation if the world is to move toward a just and sustainable energy future.