- East Africa
- Development - Finance
Ethiopia: Financial crisis hit major roads development
Company unable to pay workers due to gov’t default
China Road and Bridge Corporation (CRBC) Addis Engineering Plc, a subsidiary of the Chinese government construction company based in Ethiopia, has halted construction on three main roads. The suspension of road works has been blamed on the non payment of accumulated arrears by its client, the Addis Ababa Road Authority (AACRA).
In a recent letter, the manager of the construction firm was reported to have urged the Addis Ababa city council to take immediate action to ensure that the road authority settles their due payments in accordance with set contractual obligations. The letter was also copied to the road authority demanding a settlement by March 20.
The firm warned that it would halt construction on three main roads unless the employer cleared its arrears within the stipulated deadline, further indicating that the dire financial situation had affected the company’s ability to honour its salary obligations among other things. “We are unable to cover our fuel expenses for construction machineries (...) even to the extent of paying employees...” the letter read. “We are pushed to the edge and forced to halt construction on the three roads as elucidated earlier to the authority” indicated the deputy general manager of CRBC, Fiker Alebachew.
Besides the payment defaults, the construction firm has also been faced with hikes in the cost of construction materials, combined with the incapability of the authority to free the project sites from ownership claims and settlers causing great delays on projects and putting further strain on the company’s already stretched finances, the letter sent to the city government indicated.
In line with the agreement made between the two parties, AACRA is expected to make payments of nearly 150 million birr for projects, among which are some finished construction works as well as seven other projects currently undergoing servicing. CRBC claims it is owed 83.7 million birr for phases already completed and the balance for ongoing projects. The company also claims to have borrowed some US$17 million from its head office to offset some of its expenses, however, more is needed to settle the financial situation.
The three road projects affected are; a 40 meter wide road that stretches nine kilometers from Meskel Square to the Kaliti roundabout, under a construction cost of 283.6 million Birr; a 2.5 kilometer road stretching from a junction close to the Coca Cola plant through Abinet and up to Teklehaimanot, under a construction cost of 93 million birr; and phase three of the Ring Road project, from Wingate Interchange to Gojam. CRBC Addis has accomplished nine major road projects in the capital city since its establishment as a local firm in 2004.