Ethiopia: Construction Sector to be Governed by New Bill
Posted on :Wednesday , 14th December 2016
Upon the approval of the bill, the ministry will conduct a quality audit inspections on construction projects
In a bid to reduce waste in publicly funded construction projects, the government is preparing a legal framework to monitor the rapidly growing sector.
The directive is meant to establish a system of controlling and auditing construction projects at every stage, from inception to completion. It will provide a way to audit design quality, tender processes, payment systems, and supervisions.
"The directive will give a comprehensive framework. The trend has been that there is no consistent and periodic performance audit," said Tsedeke Yehunie, CEO of Flintstone and deputy chairman of the Contractors Association of Ethiopia. "If things are measured and followed up, the probability of mistakes and errors will definitely be minimized."
Recent reports indicate that construction contributed more than half (56.1pc) to the total worth of the industrial sector, 56.9 billion Br and 8.5 pc to overall GDP.
Nearly 10pc of public loan disbursement went to housing and construction as of 2014/15, which is close to seven billion birr.
Previously, such quality audits were conducted as baseline studies by a few non-government organizations such as the Construction Transparency Initiatives (COST).
Two years ago COST released a study on public projects, which were largely proven to fall under cost and over time. At the time, three road projects, two dams and one hospital financed with public money were revealed to have run over the time and price set for them, consuming far more money than originally planned. These were half of the 16 government-financed projects found to be failing to meet their targets.
The lack of transparency, prolonged procurement processes, design modifications, as well as the limited capacities of the contractors, were mentioned as major problems.
More current examples are sugar factory projects that are consuming considerable public funds. During the Growth and Construction Plan, Phase I, period the government planned to open sugar 10 factories. However, most of them are still under construction despite the huge amount of public funds injected.
The bill was prepared by the Ministry of Construction, and was presented to stakeholders last week. The bill stated that the policy will focus on projects done by federal and regional governments, private investors; and those jointly carried out by the public and private sector investors and Addis Abeba and Dire Dawa city administrations. It will also monitor individuals and companies involved in the sector.
Unannounced quality audits can also be carried out on selected projects. Quality audits are done on projects with significant investments and projects that involve the wider public interest. The mandate to conduct quality audits falls under the ministry itself.
Audits and inspections will look into whether companies and individuals are acting as per set standards, manuals and guidelines. It will also examine whether adjustments have been made as per the recommendations from audit inspections.
"I doubt if the ministry can handle both the regulation side, in terms of preparing standards and manuals, and the quality inspections," an industry expert told Fortune. "If it doesn't have qualified and impartial professionals working on the projects, the new directive may not hit its targets."
"It might be helpful to establish an independent institution that has a similar structure to the Auditor General's Office," he argues.
Tsedeke Yihune, manager of Flintstones Engineering.
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