Where will huge state investments lead Ethiopia?
Ethiopia plans to build 960,000 houses in the next 10 years, besides thousands of kilometres of roads and railways.
Everywhere you turn in Ethiopia, construction is ongoing — roads, railways, and thousands of houses — all led by the government with local or external funding. What are the short and long-term implications for the private sector
From thousands of kilometres of railways and highways to mega dams to tens of thousands of partially government-sponsored houses to cobblestone roads, Ethiopia is a nation under-construction.
About a fifth of the 10.3 per cent growth registered in the 2013/14 budget year was attributable to construction activity, according to the World Bank. Over the same period, the total investment rate rose from 32.1 per cent of GDP to 40.3 per cent.
Some $1.5 billion from the $8.5 billion budget of the country this year is earmarked for construction of roads. In addition to the government, there is huge investment by the private sector in real estate.
For the 13th most populous country in the world, with 90 million plus people, of which the majority are young, the huge investments by the government in infrastructure and construction by private sector are the major source of jobs.
Today tens of millions of Ethiopians are working on various construction sites.
“Ethiopia is indeed a nation ‘under construction,’ the construction boom is increasingly supporting economic growth,” said Lars Christian Moller, lead economist and programme leader at the World Bank Ethiopia office, which is currently involved in 25 projects in Ethiopia with $6 billion in commitments, making it the largest country programme in Africa.
Out of the total 4,744km of railway line the country planned to construct, about 2,000km was built during the first Growth and Transformation Plan period 2010/11-2014/15.
Currently, 50 per cent of the 800km Addis Ababa-Djibouti railway is complete while the 700km Mekele-Awash line is set to be launched this year.
While 70 per cent of the cost of the $3 billion Addis Ababa-Djibouti railway is secured from the Chinese government, the remaining is financed by the government. The construction and consulting is being undertaken by Chinese companies CREC and CCECC.
“A $1.7-billion soft loan has been secured from Swiss Bank by Turkish company Yapi Merkez for the construction of the 389km Awash-Weldiya railway,” according to Dereje Tefera, head of communications at the Ethiopian Railway Corporations.
“The electric railway will save Ethiopia hard currency that would have been spent on fuel imports,” Mr Dereje said, adding that 254 professionals including the rail master have already trained in China.
About 80 per cent of the 34km Addis Ababa light railway is completed. A $470 million loan was secured from China’s Eximbank for the project. CREC of China is carrying out the construction while SweRoad of Sweden handled the consulting.
One of the major construction areas is the government housing project started 10 years ago. Annually, an average 25,000 houses are built and distributed to the public. In Addis Ababa, over one million people have registered for these low-cost houses.
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