Ethiopian Seeks New Contractor for 1.5b Br Housing Project

Published: Tuesday, 07 July 2015 Written by Fortune Sunday 05 July 2015 Page: 10

Employees expected their houses in 2014 but now they have to wait and pay more too

Ethiopian Airlines has invited nine companies in a bid to take over the employee housing project from Zhejiang Yefeng, a Chinese contractor, which has been at odds with Ethiopian for a two-year delay in its execution.

Six companies responded to the invitation and submitted their technical and financial offers in June 2015. Among these are YOTEK Construction Plc, Flintstone Engineering, Tekleberhan Ambaye Construction Plc (TACON) and Afro–Tsion Construction Plc, according to sources who did not wish to be identified.

It was reported earlier that Zhejiang Yefeng had stopped work on the project following disagreement with the management of the flagship airline and it’s Employees Housing Project Association, when it asked for more payment.

The project, initially estimated to cost 1.5 billion Br, includes the construction of 2,502 housing units in two phases on a 313,000sqm plot in Bole District.

Zhejiang Yefeng was awarded the first phase of the project, the construction of 1,192 units, for 695.2 million Br, in 2009.  It started construction in 2011 and the houses were supposed to be delivered by December 2014.

Two years after the commencement of construction, financial restrictions caused the delay of the project. This caused Ethiopian to secure a loan in the amount of 40 million dollars from Eastern & Southern Africa Trade & Development Bank a.k.a PTA in 2013, of which a little more than half was allocated for the first phase of the project.

Unfortunately, even with the newly secured loan, the Chinese company was unable to work promptly, going as far as halting the project.

Later on, Tewolde Gebremariam chief executive officer (CEO) of Ethiopian, who had been approaching local contractors for the project, met the owner of the Chinese construction company in November, 2014. Earlier press reports indicated he was told that the delay had occurred because the owner had fallen ill.

Homebuyers, who are employees of the airline, have been expressing their grievances over the delay. In 2011, employees had signed a contract that compelled them to stay with the company from five to 10 years.

In the latest development, on June 27, 2015, Ethiopian Airlines gathered its employees who were registered for housing in the first phase of the project, and explained the abrogation of the project as well as its preparation to hand over the project to local companies, sources from within the Airline said.

During the meeting, issues regarding the increment of the cost of the houses and the need to accommodate this were raised and the buyers were given the option of staying or leaving the scheme, according to an anonymous source. If they stayed, they would have to commit to pay more.

A source within one of the contracting firms told Fortune that Ethiopian would announce the winning contractor this week. It is likely that the project could be undertaken by more than one contractor, the same source said.

This content is published on: Fortune Sunday 05 July 2015 Page: 10


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