Ethiopia: Gov’t to fire German company in favour of local contractors

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A series of government construction projects in Ethiopia has until recently proved lucrative for the Germen Development Corporation International Services (GTZ IS), a self-funding wing of GTZ. However, a recent strategic shift from the Ethiopia Government suggests it will no longer be a favoured development partner.

The shift prohibits the involvement of GTZ IS in any new government construction projects, with delays and high expenses being cited as the reason for the firm falling out of favor, a senior government official very close to the issue said.

Since 2003, GTZ IS has been responsible for the management and implementation of various construction projects of the federal government and the Addis Ababa City Administration. The projects include; low cost housing construction of the city administration; 13 new universities for the Ministry of Education (MoE); 500 health centres for Ministry of Health (MoH) and providing energy and electrification access to rural areas.

Government sources have indicated that among the reasons for hiring GTZ IS were cost efficient design methods associated with Germany productivity, efficient management, as well as the ability to work within schedule.

The university project which began in May 2005 was expected to be completed by September this year is still ongoing. Similarly, the 500 health centre project which began in February 2007 and was expected to be concluded in October 2008, is still not finished.

The city administration also awarded GTZ IS the contract to construct 8,000 condominiums. According to the agreement, GTZ IS is required to complete the condominiums within one year, but they were only completed this year after almost three years on the job, the official said.

We don’t make profits says GTZ IS

GTZ IS is responsible for providing on the job training for local contractors, together with managing and overseeing implementation of the projects, according to the agreement between the governments of Ethiopia and Germany. The government is responsible for the disbursment of 3, 000 birr per square metre for the management and implementation contract as well as covering 20 per cent of the administrative cost of GTZ IS, i.e; ‘10 percent for building capacities of local contractors and another 10 percent for its services,” the source said.

Disappointed by the poor performances, the government says the fees paid in foreign currency to the German development corporation do not match the achievements it has made. Furthermore, local contractors are now more competent than they were when GTZ IS was first hired. “All these situations prompted the government to revise its former strategy, which allied it with GTZIS”, the official said.

Arguments from GTZ IS contravene the assertions of the official. According to them, the payments to GTZ IS do not contribute to a profit, but are only to recover its costs; hire experts from Germany; and for the monthly salaries of its employees.

Local contractors to take over

The new emphasis on local contractors means they will be heavily involved in new plans to build 10 extra universities and 1,000 extra health centers. As well as the MoE and MoH, the Ministry of Works and Urban Development (MOWU) is also assisting the programs.

“GTZIS doesn’t have stake in these projects, but it has been negotiating with the Addis Ababa Housing Project to own additional condominium projects around CMC — Summit area in the Bole District– however, that negotiation also failed,” the official said.

Access to Modern Energy Services, a project owned by the Ministry of Mines and Energy is the only project currently in the hands of GTZ IS. The project, funded by the Dutch and Germen government, intends to provide electric power and alternative energy to rural areas of the country.

Sources from the public relations department said that the company’s work in Ethiopia will be phased-out after finishing the ongoing projects.

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