The government of Ethiopia is considering terminating its contract with the giant Chinese state enterprise, the China State Construction Engineering Corporation (CSCEC), over its huge financial adjustment claim to complete the second phase of the Adey Ababa stadium being built in Addis Ababa.
The Minister of Culture and Tourism, Kejela Merdasa, presenting his office’s quarterly performance report to the House of Peoples’ Representatives’ Health, Social Development, Culture, and Sports Affairs Standing Committee, warned about the possibility of installing another mechanism if an agreement is not reached soon with an agreeable price to finalize the national stadium.
Despite the fact that the second and final phase of the construction has been launched in late 2020, the contractor has increased its cost adjustment by a third from the initial agreed budget of 5.5 billion birr, the minister indicated.
The government has been considering the cost adjustment since the escalation of construction materials and the weakening of the dollar-birr exchange rate. However, “CSCEC has been using the northern Ethiopia conflict and the continued inflation as leverage to request tens of billions of birr,” Kejela added.
If it was as per the initial agreement, according to Kejela, the government is not obliged to make cost adjustments.
“However, the government, in view of the overall price escalation, has tried to adjust the cost,” said the minister, adding the contractor is using every single mechanism, including fuel price increments and buying additional time, as a way of requesting huge additional money to finalize the project.
The contractor has been buying time to delay the project since the price of fuel per litter was 28 birr until the price reached 49 birr to claim more adjustments, which according to Kejela, labels the act of the contractor as “inappropriate.” In this regard, taking the price increments of cement, ceramics, and fuel and related issues into account, the government is trying to bargain with the company.
The minister says that in hopes of resolving the issue amicably, with the involvement of Prime Minister Abiy Ahmed (PhD), a discussion has been held by the Chinese Embassy in Addis Ababa and the Minister of Finance. But there is no final agreement. In this case, if a deal is not reached, the contract will be revoked and they will consider another alternative.
The State Minister of Culture and Sport, Mesfin Cherinet (Amb.) told The Reporter that the contractor has not received its initial payment as planned, and later, when the government decided to pay, the company came with a huge adjustment of money in foreign currency, which amounted to 19 billion birr.
To lead the negotiations with better capacity, a recent Council of Ministers quarterly performance evaluation meeting established a committee comprising the ministers of finance, housing and urban infrastructure, and culture and sports.
The committee conducted discussions with the Chinese embassy in Addis Ababa and the contractor. As a result, the adjustment came down to 14 billion birr.
However, the government still expects the project to be finalized with less than 13 billion birr, according to the state minister.
Kejela, speaking to the standing committee, stated that if the contractor continues in its current position, the ministry will further request the Parliament’s help in forming a committee that would oversee and supervise the potential upcoming contractor that might be contracted to finish the project.
“We appreciate the ministry for the ups and downs it faced all this time; however, terminating the contract might be risky, and we would rather give more confidence to the contractor,” chairwoman of the standing committee, Worksemu Mamo, said.
Worksemu said seeing the natural behavior of terminating and starting another contract to finalize the project is a problem by itself. “It is better to make a good deal and finalize the project.”
The 62,000-seat stadium project was launched in 2015, and the first phase of the project was built at a cost of 2.47 billion birr.