CEO of the new Ethiopian Construction Works Corporation (ECWC), which resulted from the merger of the former WWCE and ERCC, Hailemeskel Tefera explains the importance of infrastructure to the country’s development, how state-owned enterprises (SOEs) have been filling some of the gaps in the market, and where the huge potential for future private-sector partnerships and international collaborations can be found.
The Prime Minister has said that state-owned enterprises were formed as a strategic tool to fill in the failure or market gaps where the private sector was not willing to enter. Why did the government decide to merge the WWCE and ERCC and what are the responsibilities the new company will have?
First, I would like to explain more about the government’s intervention strategy, as there is a misconception about it. The economic development of our nation brought different types of challenges. Our interest and belief in our economic development and growth process correlate with the welfare and the development of our people and citizens. At the end of the day, what we want to achieve is a prosperous nation. That means that people in all parts of the country will benefit from this development.
The private sector is the outcome of the development process. This industry is trying to meet the demands of the development process, but they might have failed to achieve it in certain economic activities. At an early stage of development, there were some difficulties constructing highways and railways. The government quickly intervened because the private sector was not ready yet. Many state-owned enterprises were established to work in this direction. Our government is not interested in the areas where the private sector is succeeding. We have to think strategically which market areas are failing in practical terms.
We have precisely mapped which areas are of interest, such as highway and road construction. There are emerging domestic construction companies, and their capacity is growing. We have to work a lot on building up their ability to bring them to a competitive level. That is the process. My company is mandated to strengthen the capacity of these domestic construction firms by different contracting modalities.
The Ethiopian Road Construction Corporation (ERCC) was a state-owned construction company engaged in road construction works, especially in those remote areas where domestic or even foreign companies were not capable of doing business. My company took the responsibility of filling in the market failure in this field.
The other company, the Ethiopian Water Works Construction Enterprise (WWCE) was mandated to build irrigation and large reservoir dams for irrigation, as well as to provide hydropower. It was responsible for supplying irrigation, hydropower, dam management, road construction and building works.
We decided to merge these two companies when we evaluated them and realized they were sometimes involved in the same activities. Our focus, as the Prime Minister has mentioned regarding government enterprise reformation, is to accumulate, evolve, and restructure this company to engage in a market failure area.
My company, the Ethiopian Construction Works Corporation (ECWC), is a number one state-owned construction company that engages solely in those market failing areas: road construction, water infrastructure, and hydropower. This company is the first state-owned company to be mandated for railway construction. Our company started railroad construction during GTP1. We are preparing this company to be the first domestic company to transfer technology to our national businesses and professionals.
The other mandate is to shift from low-rise to high-rise buildings. Space management in our city is another challenge – we have to utilize our land properly. My company is mandated to build high-rise buildings, such as impressive shopping malls of international standards as well as large factory buildings for industrial park development. My responsibility is to develop plants from start to finish: from product financing to delivering the project.
We have a plan to invest in profitable mega projects by mobilizing funds from both local and international banks. We are an important institution that is linking foreign knowledge with local construction companies. We are helping our domestic construction companies to attract foreign businesses and investors to be part of our development process. To sum it up, our responsibility is to assist the Ethiopian economic development process by filling the gap of construction needs. Once the needs and demand are satisfied, we move on to the next level.
We have more than 40 years of experience working with international consulting and construction companies, such as MWH from the USA, AECOM, THAL, SMEC, and many more. We believe in taking these past experiences to a new level of cooperation to exploit the endless opportunities in Ethiopia and neighboring regions.
How would you describe the collaboration with the private sector and how is the government promoting and encouraging private sector investment?
The Ethiopian Construction Works Corporation is almost two months old. As the CEO of this company and the person who has taken part in the development process of Ethiopia for the past 20 years, my vision is to communicate the available opportunities to international companies. In that regard, channels like your agency can be a great platform to communicate opportunities to the UK audience.
The development process comes with some challenges, such as bringing in new technology and know-how. Facing these is unavoidable. A communications strategy is instrumental to overcoming those challenges. We are in the process of forming an international communications channel in my company to take care of these objectives.
We know WWCE has been involved in different international projects in Sudan, Somali and Djibouti. What are your international expansion plans?
Our vision is to reach the whole African continent in 10 years. We have just entered a joint venture with a company based in Rwanda to develop 600 hectares of land irrigation. We are also in talks with Sudan, South Sudan and Djibouti. We are planning to expand. We were bidding for a Chinese company, and we won – that’s a magnificent indicator for us.
Just to give you an idea, we irrigated 70,000 hectares of land here in Ethiopia. It would take 300km to drive through this area. Without any help from foreign investors our company carried out the Tendaho Kessem project, a large sugarcane plantation mega project. The dam is ready; the irrigation canals are already established and are fully functioning. The sugarcane factory is completed and is now in trial production.
We also did a project along the Omo River, from Omo down to the Kenyan border. That is a very broad area of more than 250,000 hectares of land. My company has been commissioned to manage the irrigation and the dam construction projects. If we work hard and build our capacity, we can influence the regional markets in the field of hydropower and water supply.
Something that now is all over the news is climate change and Ethiopia went ahead and adopted a Climate Resilient Economy Strategy to be carbon neutral back in 2011. What message do you think Ethiopia is sending to the international community?
The CRGE Strategy is a bible for Ethiopians. We have a firm belief in the impact of climate change. To build a sustainable economy and a prosperous nation, CRGE is not an option – it is a must. The underlying strategy of our development process is to follow the green development policy. Construction activities are one of the sources of carbon emissions. Therefore, we are using eco-friendly building materials. Our former Prime Minister was the advocate of this strategy in the development process of Ethiopia.
We have a lot of potential for hydropower generation, such as geothermal and wind power generation. These are our green development process strategies within the power generation schemes. Adopting these schemes will not only affect our sustainability, but rather it will also bring strong collaboration and partnership. Even though we are facing very rapid development, we strictly follow the green development. That is our strategy on a national level.
You have been State Minister for Housing and Urban Development and are now the newly appointed CEO, what would you like to leave behind once you leave office?
That is an excellent question. I joined the Government as soon as I finished my Bachelor’s degree at Addis Ababa University at 24 years old. Later, I moved to the National Regional Government to work as the head of the Construction Bureau. After that, I worked as a State Minister of Housing and Urban Development. During my term, I did a lot of work in mapping the construction industry and its development policies. I had the happiest time in setting strategic directions to lead the entire national construction industry, and I could say that was my successful professional involvement.
In Ethiopia, construction development’s contribution to the economy, to the GDP, ranges from 5-7%. For the past five years, the construction growth of the nation has been 29%. It is very impressive. Most of the public investments went into this sector. This momentum will continue until we achieve our national vision of becoming a middle-income country. We will continue to build – this is our path.
Another aspect I was responsible for is developing guiding principles and standards. We are creating a comprehensive and attractive environment for developers. We have adopted British standards in our most of the industries. It is my belief that adopting the European rules and British standards in the design and construction industry is less costly. We believe that 40% of the global construction industry is influenced by technologies and the know-how of European practices.
My ambition and my vision after I leave this assignment are to see a very sustained economy. Another ambition is to contribute to new strategies and best practices for future generations. My generation took the responsibility to reform Ethiopia after a very dark history. We are building a new vibrant, prosperous and active country for future generations. That is what I aspire to during my term in this company. My practice and my experience will help me realize this. We are very close to seeing the positive outcome of this development process.
Africa is a growing investment destination for both advanced and emerging economies and, as President Obama stated, the continent with the greatest potential. Could you please discuss Africa’s momentum?
For many years, African history has been known for colonization and deep poverty. In the past 50-60 years, due to pan-Africanism, the continent started to transition from a dark history to a brighter future. I think history tells us this initiated a perspective change in Africa. This development began to attract foreign investors. At the same time, globally the impact of technology and information is initiating this momentum in Africa. These two forces are driving interest in great developments in Africa and turning it from a dark continent to a brighter one.
Africa is attracting a lot of foreign investors due to its untapped market opportunities and unexploited natural resources. If we train our population with proper education systems, we create human resources, and so we create the potential for development. Right now Africa is an important global destination that is attracting foreign investors to utilize these resources.
Perceptions are also changing. Africa used to be known for getting aid from donors. Now there are excellent opportunities to attract foreign investors who can be part of Africa’s development and who can gain benefit from it. We believe in this African development process.
The development needs of Africa are not the same as the development needs of other continents. We believe that the African development process and its strategies will bring new solutions for the next generations of our planet. These new philosophies and perceptions drive Ethiopians and Ethiopian leaders. This fast growth is not an option for Africa: it’s a must. We advocate development and growth by good governance.
What are your views on Ethiopia’s regional integration efforts to foster intra-African trade and even peace?
As Ethiopians, we believe that the growth and development of Ethiopia as a nation are not sufficient enough. We are a country with a vast population. We are a country that took the responsibility of guiding neighboring regions as well as pan Africans. Our belief is embedded in bringing a new Africa, a prosperous Africa, a peaceful and secure continent. In this regard, infrastructure development that is focusing on regional integration is a key strategy to sustain our development. Therefore, we have a lot of infrastructure assignments, like power, transport, irrigation, etc., starting from our home. The core mission of my newly merged company is to exploit this opportunity at home, and abroad focus on constructing large-scale infrastructure.
As you know, mega infrastructure projects need modern technology as well as high caliber professionals. We can’t provide these professionals and technology locally. We need to partner with foreign companies for technology and knowledge transfer. We already have available regional platforms like COMESA and IGAD that focus on economic integration. We are setting common objectives in infrastructure integration by constructing highways, water resource sharing, power sharing and other business activities.
We can’t contain all the developments domestically. We have to compete in the global market. We have to produce competitive products and services for both global and regional markets. We believe that COMESA and other local platforms will contribute to our national growth and development, as well as to the development and growth of all African nations. Our belief as a nation is that we have to integrate infrastructure development regarding standards and quality. We need various transport systems, such as highways and ports, as well as efficient services. We are working on this together with our neighbors. I think it is an excellent opportunity for both UK investors and the domestic private sector. Regional integration is part of the development process.