Thursday, February 22, 2024
BusinessCorporation owes 39 trillion birr to Roads Administration

Corporation owes 39 trillion birr to Roads Administration

It is bigger than Ethiopia’s economy

A new performance audit released by the Office of the Auditor General revealed the Ethiopia Construction Works Corporation (ECWC) owes 39 trillion birr to the Ethiopia Roads Administration (ERA). It is higher than the size of Ethiopia’s economy, which is estimated to be around USD 110 billion (5.8 trillion birr).

The figure makes the institution the most indebted in Ethiopia, taking the number one spot from the Ethiopian Electric Power, which owes over 400 billion birr to the Commercial Bank of Ethiopia.

The accumulated debt of the Corporation is a result of its failure to abide by the deal it entered with ERA, when it agreed to take over the construction and management of the Adama-Awash Expressway Road.

“Unless the deal is amended or annulled, the company will be in danger,” Meseret Damte, Auditor General.

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When the two entities signed a deal six years ago, the Corporation agreed to pay compensation if it fails to deliver the project based on the timeline stated in the contract. The agreement is valid until 2026, endangering the existence of the Corporation as the unpaid compensation is already higher than its current capital that stands at 20.6 billion birr.

“The deal was not practical and it is unfair to request the corporation pay such amount of compensation while it is carrying out the construction of the road for a cost less than one billion birr,” said Yonas Ayalew, CEO of the Corporation. “It is a formula error and need to be adjusted.”

The Corporation in its response to the Auditor General said the management of the Corporation has already opened talks with officials of ERA. An agreement has been reached to sign another deal, as the existing contract is hard to implement in a country like Ethiopia.

“The type of the contract entered with ERA is new to Ethiopia and is performance based. We are agreeing to lower the compensation, as the computation has methodological error,” the Corporation’s officials said, adding the penalty formula for the contract is unclear and needs amendment.

The construction expressway project is nearing completion and has been delayed from its original deadline in 2019. The contract obliges the Corporation to pay for every environmental and economic damages believed to have occurred because of its failure to deliver the project on time.

The Corporation is the biggest construction firm in Ethiopia and is fully owned by the government. It is responsible for the construction of almost all major irrigation dams in Ethiopia.

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Video from Enat Bank Youtube Channel.

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