Friday, April 12, 2024

Power? What Power?


Investing in Ethiopia is encouraged by the Government; there are tax holidays to help overcome the initial period of development and duty-free privileges for the import of certain materials. Acquiring the necessary investment and business licenses is relatively easy, once you know the procedures and fulfil the requirements. So far, so good. Building the business can now begin. It is from here onwards though that things are getting rougher and it is at this point in discussions with business owners, that most of them begin to show some of their frustrations and disappointments. Below follows a particular example of an investor, in relation to power supply.
For the business under construction, a three-phase power supply was required, which was not available yet at the site. After a long process ELPA agreed to deliver the three-phase power supply. However, a transformer was required and the business owner was informed that he was to buy and pay for the new transformer, which cost around ETB 300,000 at the time, otherwise the waiting for ELPA to provide the transformer would be some three years. However, ELPA did not have the transformer in stock and in fact did not have the capacity to produce any. As a result, the production and supply of transformers was outsourced to POWER ENGINEERING CORPORATION, which belongs to METEC. Again, after a lengthy process, the transformer was paid for but not yet available. Finally, the transformer was produced and supplied and now ELPA was to install and connect the transformer to the grid. However, it took another six months for ELPA to bring and set up the Eucalyptus and concrete polls. The construction of the business was now almost complete, with the purchase and installation of a large generator as back up, should normal power be interrupted, which as we all know happens more often than not. The business was now ready for operation.
Two weeks ago, eleven months after taking the transformer into use, there was a power interruption, which is nothing unusual. Workers were instructed how to switch power to the generator and they did so. After a while a big bang was heard. A high current spiked through the lines and the transformer burned. Not alone did the transformer burn, the spike found its way into electrical equipment, leaving many things  damaged.
Luckily, the generator could take over and supply the building and undamaged equipment with sufficient power to continue the business.
Now it is becoming complicated as it is not clear at all who is to blame or who is to take responsibility for the damage. ELPA denies any responsibility and refers to the provider of the transformer. The provider refers to the date of payment, not the date of connection some seven months later, and so avoids a warranty claim. In comparison, when buying a car, the warranty begins from the moment the first kilometre is driven by the buyer, not from the moment of payment, which is usually long before the car is shipped and cleared at its destination. Meanwhile a letter had to be written between ELPA and POWER ENGINEERING CORPORATION, in order to get the transformer disconnected by ELPA and transported to METEC, at the investor’s expense, for an assessment of the damage and estimation of repairs. No assessment or repairs have been carried yet, which means that the business has been running on the generator 24/7 for the past two weeks and will continue to do so until the necessary repairs have been made. This is costing the business owner a minimum of ETB 2000 per day on diesel alone, while keeping fingers crossed for the generator not to give up, lest the whole business will come to a stand-still. Meanwhile much time and energy is spent on following up with METEC and ELPA, losing time and energy to focus on the business. The investor is not happy, to say the least. It is like trying to take meat out of the mouth of a lion. The question remains, how the consumer can be held responsible and made to pay all damages for a problem caused by the power supply or a defective transformer, connected to the grid. At the time of purchase of the transformer, the investor was made to understand that the transformer complies with the required standard and that maintenance was to be supplied in case of problems. Not so. In fact both suppliers should ask themselves why they don’t keep their promises and provide decent services.
The problem is not yet solved and I could go on citing other examples. The point however is, that there seems to be a false perception amongst service providers about what it takes for investors to set up a business. As the setting up of a company is underway, the idea may be enforced that the business owners must be very rich indeed, which must be taken advantage of. Quite often, investors and business owners are still seen as quick money makers in the first place, not as potential employment providers and contributors to the fast-growing economy we are so proud of. Meanwhile time and resources are wasted unnecessarily, while payment of fixed costs and loans continue and production is interrupted. A lot of money is being lost.
In conclusion, I want to make a case for business owners and investors and we must realize that indeed the private sector is the backbone of any economy, initiating development and employment. For them to be able to play their role, it is essential to create a conductive environment and provide services that can be relied upon.

Ton Haverkort

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