The Ministry of Finance gives a green light to some public institutes to apply price adjustments on building projects despite project contracts not having room for price escalation terms.
The high price volatility in the market has become a tough nut to crack for public projects to which expects explain that it is becoming something of a thorn since it not only delays projects but leads to a high degree of overhead costs.
Experts lament that a significant price in the construction industry has forced contractors to be in embattlements with some being forced to halt activities that they have already commenced.
The delicate issue has similarly grabbed the government’s attention, which is also weary of the delay and the cascading implications to the economy.
According to the information that Capital obtained, the Ministry of Urban and Infrastructure, Construction Authority and Construction Contractors Association of Ethiopia have both expressed their concern to the Ministry of Finance (MoF) to come up with a viable solution, since lots of projects may face interruption because of the extraordinary price hike on building materials like cement, rebar and ceramics.
The concern is also that the country procurement proclamation does not allow price adjustment for projects that do not have a life span of less than one and half years and also for those that started at least about 12 months ago.
“However, at the ground price escalation is raining havoc with spikes occurring within months and sometimes in weeks on some major inputs,” experts explained, adding, “It has become very challenging for contractors to run projects as per their contract.”
To solve the problem, MoF has resorted to forming a technical committee that comprises of relevant government bodies including; Ethiopia Construction Authority and Public Procurement and Property Authority to assess the situation and come up with a viable solution.
According to experts, several projects have been halted because of the price escalation and cognizant of this, MoF has provided some rapid solutions to combat this.
As per the decision, those who do not have the term of price adjustments on their contract are now eligible to reconsider the price adjustment.
Projects that would have less than 18 months in accomplished period but face delays due to different reasons excluding the cause from the contract are now able to be included on the price revision.
“Meanwhile there are claims that projects that have less than 18 months life span should be revised,” Gebeyaw Yitayew, Procurement and Property Reform and Capacity Building Lead Executive at Public Procurement and Property Authority reveals, adding, “But it would not be manageable by MoF.”
According to Gebeyaw the circular that was signed by Eyob Tekalegn, does not by pass the proclamation or its directive but it has taken major changes from the experience in the past.
Gebeyaw told Capital that the government has taken a big decision for contracts which do not have a price escalation term to consider the adjustment.
There is a clam that the current procurement proclamation that was issued in 2009 and the directive are not aligned with the reality that affects public procurements.
The proclamation has been under a revision process for the past several years and early this week the Council of Ministers had approved the amendment of the proclamation which was sent to parliament for ratification. Experts said that the new proclamation would have several changes and a conducive environment to smoothen public procurement unlike the current experience.
Despite MoF allowing for the price adjustment for all public building projects, the decision is so far applied to public higher education institutions, which have several building projects currently on going.
Article 16.14.2 of public procurement directive that was issued in 2010 read that the public body may, under the following circumstances, indicate in the bidding document that price adjustments are allowed in respect of works contracts, after 12 months from the effective date of such contracts. Sub article A of this article further stated that where it is verified, in respect of works contracts, the performance of the contract requires more than 18 months.
The directive article 29.4 has also given room for the amendment of the contract. It reads, “Where it is called for, the contract may be amended in the course of its performance; it being understood that such amendment shall not be detrimental to the interest of the public body and not favor one supplier or certain suppliers to the prejudice of the other suppliers.”

Pan Afric Energy, a company formed by a conglomerate of East Africa Holding (EAH), sets its eyes to embark on a multimillion dollar project on the way to process and provide prosopis juliflora, a thorny shrub, as a carbon-neutral alternative fuel source for cement industries that operate with the EAH and beyond.
The company which was established a few months back has already started the use of the dangerous tree that entered Ethiopia about a half a century ago for its pilot cement production at its National Cement plant in Dire Dawa, 510km east of Addis Ababa.
According to Batuel Bizuayehu, Senior Executive Director of EAH, the initiative comes with multiple benefits including; the replacement of coal use which is sourced both from local and imports, ensuring the use of green energy and ensuring corporate social responsibility at the lowland areas of Afar and Somali regions.
The thorny shrub bears aggressive invasive characters such as invading pastureland, irrigated cultivated land and irrigation canals causing an irreversible displacement of natural pasture grasses as well as native tree species.
Batuel told Capital that the project is expected to consume about USD 50 million that shall be backed by different financers.
“The main target of the company is using alternative energy for the cement industry, which typically consumes huge amount of energy, by using the tree. It shall replace up to 60 percent of the coal energy,” he said, adding, “It is a clear energy initiative and at the same time we shall clear the land for pastoralists and farmers in the two regions to use the land that is cleaned from the prosopis juliflora, which highly affects the livelihood of the communities.”
When the Ethiopian conglomerate designed the initiative, the European Union through the Ministry of Industry provided a three million euro funding to kick start the pilot project which already has commenced.
The EU fund has already contributed to buying spading machines and currently the machines have started spading the tree that is being transported to the processing facility at the cement factory in Dire Dawa.
“We have invested on the processing facility inside the cement factory and now we are using the tree as an alternative source of energy under the pilot level and so far we are covering five percent of the energy source from the green energy,” Batuel explained.
He said that the trees cover about two million hectares of land in the two regions which will go a long way as an energy alternative for the cement industry for a projected estimate of 50 years.
Officials at the company said that the proof of concept of the project is looking steady and that the transfer to full implementation will not only take place for the cement factory at Dire Dawa but also in the upcoming facility that is being constructed at Lemi town, North Shoa zone of Amhara region, 130km north of Addis Ababa.
According to the plan, besides the resource from Pan Afric for the full implementation, the company has started to mobilize funds including from the International Finance Corporation, the private sector financer wing of the World Bank, and finance from China.
The company has already accomplished its feasibility plan to enter to full scale operation in the near future.
The project to utilize prosopis juliflora charcoal as a carbon-neutral alternative fuel for cement factories will be also be included for other cement producers in the country.
National Cement, part of EAH, is one of the big players in the sector. With the partnership of West China International Holding it is undertaking aggressive expansion on cement production at Lemi, and Melka Jebdu, western outskirt of Dire Dawa.
Using prosopis juliflora as an alternative energy source has already been rolled out in some African countries.
According to a report by Invasive Species Specialist Group (ISSG), prosopis is one of the top 100 invasive plant species and it also characterized by vigorous growth which helps them to outcompete indigenous plant species to cover huge areas of land in a relatively short period of time.The tree is however not an indigenous plant for Ethiopia.
Different studies indicated that in Ethiopia, documentation is lacking regarding when, where, how, and by whom the alien invasive prosopis, which is popularly known as Woyane Zaf, was first introduced, but speculation do exists. The earliest time of notice is believed to be in the late 1970s in the eastern part of the country where India is cited as a probable source.
Before the start of using locally sourced coal, Ethiopia used to allocate up to USD 750 million to import the energy source. The figures have now fizzled to USD 300 million since some local coal suppliers joined the business.

National WIH Building Materials Holding Company, an Ethiopian and Chinese joint venture (JV) company and the Chinese state owned construction giant Sinoma (Suzhou) Construction, pen an engineering procurement construction (EPC) contract for a cement plant that will be part of over half billion dollars in investment at the Melka Jebdu Industrial Park investment.
During the signing ceremony held on Tuesday April 11, 2023, at Skylight Hotel, Bizuayehu Tadele, Chairperson of the National WIH Building Materials Holding Company, said that the cement plant that will be erected in Melka Jebdu Industrial Park, 19km west of Dire Dawa, which is 510 km of Addis Ababa, will consume USD 243 million.
Currently, the Melka Jebdu Industry Park which houses a total of 106 hectares of space is expected to add steel and lime industries to its portfolio besides the cement factory.

In total, the National WIH Building Materials Holding Company will inject an investment of USD 540 million at the park, which is close to the sea ports.
“We selected the area due to its competitive advantage for the export market and it also has enormous quality resources for cement production. Melka Jebdu is connected with the Ethio Djibouti railway line and it is close for ports in Djibouti and Berbera,” the Chairperson, who also leads the conglomerate, East Africa Holding (EAH), said.
According to the statement of the company, the park will have a capacity to produce three million metric tons of cement per annum, 1,000 metric tons of lime per day and 700, metric tons of rebar. The facility will also accommodate a prefabricated concrete factory that is expected to play an instrumental role in alleviating the housing challenges that the country faces.
Chaltu Sani, Minister of Urban and Infrastructure, said that in the ten year development plan the government targets to construct 4.4 million residential houses in urban areas.
She said that the coming of these kinds of huge input suppliers is crucial to elevate the government’s goal and stabilize the market, “We will provide full support for the project.”
On their recent JV partnership, West International Holding, a subsidiary of China West Cement Limited, a Hong Kong Stock Exchange listed company, and National Cement, a subsidiary of EAH, have been investing in several industries.
Currently under the JV Company, they are developments in the Lemi Industrial Park that is located 130 km north of the capital in Amhara region.
The Lemi project is said to consume USD 600 million. Currently, the construction of the cement plant at Lemi has attained 75 percent completion with the civil works to be fully accomplished within the next two months.
Bizuayehu signaled that the cement factory at Lemi will be fully commissioned for work by the beginning of 2024.
He said that currently the prefabricated houses and concrete factories that are installed at Lemi have reached the test stages, while the gypsum factory will start production by the end of this year.
Sinoma (Suzhou) Construction, which entered the Ethiopian market about a decade ago under EPC project for Dangote Cement, is popular in the development of similar facilities in other parts of the world.

The company has also worked with WIH on huge investments in the Africa and Asia cement industries, for the past over two decades.
WIH is also known for its investments on cement, glass, logistics, prefabricated, and other construction input production. It is also one of the pioneers to be involved on dry processing cement production and has similar plants in five African countries.
The Ethiopian cement facilities is also said to be one of the biggest in the continent when production is kick started.
The JV company has targeted to invest USD 2.2 billion in the manufacturing sectorin the coming few years.