Ninety percent of the 50 currently operating grade one contractors are not paying salaries to their employees on time according to the information that Capital obtained from contractors.
The recent devaluation of the birr, the small number of new projects commissioned by the government, delays on receiving Letters of Credit from banks, and a slowing down economy are the reasons contractors have contributing for the difficulties of paying salaries.
A source from the Construction Contractors Association of Ethiopia (CCAE) told Capital that majority of the contractors are functioning below 50 percent performance. Some of them have not been able to pay salaries for the last two months.
“Except for the Ethiopian Roads Authority, other government bodies are not making payments appropriately. There are projects in universities, hospitals, federal and regional government offices but sadly, contractors are struggling to get payments from the clients.
“We have observed some contactors closing their businesses or renting out their machines to survive while others are declaring bankruptcy. If this continues many construction companies will close and unemployment will rise. In addition high operating costs in the construction industry which result in low profit margins has also created tax challenges for the companies as they have been unable to fully utilize opportunities for relief available under the provisions of the tax law,” the source observed.
The source added that their company’s performance in 2018 and the first half of 2019 has been trending downward.
“The construction industry should be a major contributor to the GDP and national development, but the reverse is the case in Ethiopia as the sector contributes less than 11 percent to the GDP.
The Ministry of Urban Development and Construction (MUDC) said that it has restructured its staff and re-written its policies to improve construction production.
Ethiopia has been allocating more than 60 percent of its federal budget to construction. Most of the imported construction input is finishing material. In 2016 the Ethiopian construction industry imported 82 percent of its ceramic worth 113.5 million USD, 95 percent of clear and tinted glass worth USD 95.4 million, metal work such as Aluminum profile, reinforcement bar wire and nails and related products worth USD 750.5 million, 10 percent of marble stone worth USD 7 million. Seventy percent of elevators and escalators are imported and 30 percent are supplied by the sole manufacturer DAN Lift Technology.
Moreover, the modular building construction in Ethiopia consumes 80 percent on site and 20 percent of factory products.