People working in the construction industry say the government should open up the financial sector and find better skilled administrators so as to deal with the existing severe shortage of hard currency in the country. At a workshop organized by the Ethiopian Civil Engineers Association (ECEA) under the theme:‘The role of banks and insurance companies in the sustainable development of the construction industry in Ethiopia,’ participants said the government is not prioritizing construction when it comes to accessing finance.
Even though the construction sector is Ethiopia’s largest employer after agriculture it does not receive priority access to loans.
“Industry makes up 23 percent of the GDP and from that amount 75 percent comes from construction,” noted a participant.
Construction in Ethiopia has deteriorated over the past couple of years, according to Tsedeke Yihune (Eng), head and owner of Flintstone Construction, one of the workshop’s speakers.
According to him revenue from construction decreased 60 percent this year and 40 percent the year before.
He told Capital that it is obvious construction has declined as seen in the amount the sector has paid in taxes that has been consistently decreasing over the years.
Tsedeke told journalists that this year the construction sector has not been able to access any significant amount of finance because exports and manufacturing have been prioritized and the hard currency shortage has deeply hindered construction.
He claims there is enough liquidity and hard currency in the national reserve and cash in banks.
“My colleagues and me believe that the problem is lack of administrational capacity or interest in the political economy,” he explained.
He thinks that there is not really a shortage of hard currency because up to 20 percent of the GDP is hard currency reserve and the remittance in 2016/17 was USD 6.5 billion, “So how has the hard currency shortage occurred?” he asked.
He said the root challenge of Ethiopia’s financial system is administration.
Aisha Mohammed (Eng), Minister of Construction, told Capital that it needs further study before declaring where the problem lies.
“The government states that there is a hard currency shortage in the country,” she said.
“As the title of the workshop states, we have seen the role the financial industry plays in the construction sector development and the growth of the country,” Tesfaye Workineh (Eng), President of EACE and Managing Director of United Consulting Engineers Plc (UNICONE) said.
He added that the main goals of the association are trainings and increasing the skills, professionalism, achievement, ethics and loyaltyof those working in the construction sector.
Zafu Eyessuswork, United Bank, Board of Directors Chairperson and eminent expert on the financial and insurance sector and the other presenter at the workshop, said that financial sector’s regulatory body needs to improve its capacity.
“The regulation is extremely high and sometimes its looks like it is applied with a lack of expertise,” he said. He elaborated it may reflect the infancy of the financial industry which opened up around 25 years ago.
“In relation to the formation of new private banks one should not forget that their leaders came from government banks and their role model is a monopoly,” Zafu said.
Some also claimed that there is fraud in both the financial and construction sectors. “We have to clean our own house and at the same time solve the problem in the financial industry,” one of the participants said.
“Our banks need more time to provide project finance in the country,” the financial expert said. He thinks private banks have too little capital and not enough grasp about competition.
“This workshop is targeted to create awareness about the current challenges in the finance and construction sectors and specific ways to solve problems,” he added.
He told journalists that the civil engineering sector also needs to improve its expertise in the finance world.
The Ethiopian Civil Engineers and Architects Association was formed 55 years ago. About 20 years ago it separated into two and the Ethiopian Civil Engineers Association came into being.
The association is engaged in training and awareness creation workshops for its members and works with relevant government bodies to alleviate challenges faced in the construction sector. For instance it has signed a memorandum of understanding with the Ministry of Construction, whereby the association will provide input about new and existing rules and regulations after conducting research and reviewing scientific journals.
According to Tesfaye (Eng) the Association will have at least two additional events before the end of the current Ethiopian year. “And they will help new graduates and professionals enhance their skills,” the president added.
The workshop was opened by Aisha Mohammed (Eng), Minister of Construction, and held at ECA.