Ethiopia: Political Decisions As Feasibility Study


There was much hype when the much-anticipated Sheger Bakery was inaugurated last year and residents of Addis Ababa hoped it would stabilize the ever-rising price of bread. Earmarked to sell bread for almost half the market price, the bakery was inaugurated by high government officials, including Prime Minister Abiy Ahmed (PhD) and the former mayor of Addis Ababa, Takele Uma. During the inauguration ceremony, the PM remarked that the commencement of the bread factory is a symbolic manifestation of Ethiopia's path to prosperity. Careful analysis of the reality on the ground, however, proves the opposite. Far from substantiating the PM's words, the project has become testament to allegations that the promise of the government is nothing but rhetoric.

Fast forward a few months and the majority of the bus-shops opened in different parts of the city to distribute the breads in cooperation with the city administration were closed or shifted to other lines of business. The main reason behind was Sheger bread's inability to distribute bread according to initial plans. During January 2021, the bakery, which started operation with 150,000 quintals of wheat imported from abroad, declared a 70 million Birr loss in its first five months of operation. The bakery explained back then that it is facing a critical shortage of inputs, including wheat, even reaching at a point where it cannot undertake its usual activities.

"When the previous administration of the capital city built the bakery, public officials had more political aims instead of their stated goals of reducing the economic burden of the inflationary pressure on residents," says Alemayehu Geda, Professor of Economics at Addis Ababa University. "The ongoing troubles of the bakery, including shortage of wheat, should have been identified even before the construction of the bakery began. It is another proof that the current administration is replicating what its predecessor did," the seasoned economist argued.

Constructing projects, whether it requires small or large amount of budget, without undertaking a feasibility study is not new to Ethiopia. In its report covering between 2015/16 and 2018/19, Office of the Auditor General found out that 98 federal government institutions implemented 1,962 public projects without undertaking a feasibility study, leading to mismanagement of 44 billion Birr. The Office even discovered that the Ministry of Finance allocated additional budget to the projects, although concrete evidence had not been presented to make such a decision.

Despite the attempts made by the new administration led by Prime Minister Abiy to take different corrective measures in a bid to improve the delivery of public projects based on the original schedule, little has been done to undertake pre-feasibility study to assess the cost and benefits of any endeavor. Even the Office of the Auditor General, in a session held to assess the performance of National Planning Commission, explained that budget is still being allocated to public projects without proper monitoring and undertaking a proper feasibility study, which it said is tantamount to misappropriation of hard-earned taxpayers' money.

"Regrettably, the current administration failed to learn from the previous one. Projects are still implemented as long as they serve the political interests of government officials. Contractors are being awarded without a proper tender process, which undermines efforts to curb fraudulent practices by the Auditor General," a senior auditor working at the Office of the Attorney General told The Reporter. "Especially the tendency to implement some projects just because they are being built with finance secured from external sources is making it hard to prevent such wrongdoings by government officials," the senior auditor further stated.

A research undertaken by Biruk Terefe in 2019, which was released just few months after the government launched Gulf-emulated luxury real estate projects and major riverside renewal schemes, also found out that both were initiated in a top-down manner, side-lining city administration officials, excluding urban planners, and partially ignoring Addis Ababa's Structural Plan (2017-2027).

"LaGare and Beautifying Sheger represent a new era of urban development in Ethiopia and raise fundamental questions about spatial justice. These projects cater to a growing urban elite that includes international tourists and the country's vast diaspora in the US and Europe. Such elite enclaves lie in stark contrast to the pro-poor focus of the previous administration," Biruk remarked in his study.

Of course, the process of project appraisal in public sector is different from the private one. While private projects are usually seen from the vantage point of interests of shareholders, they are profit oriented. For public projects, assessments of projects go beyond their return on investment as they involve different stakeholders, making the project appraisal process complex. In such cases, outcomes are measured in different forms, including more affordable delivery of services and increased range of services, adding other non-financial reasons that go in line with the political objectives of the government.

Such realities, however, have opened a window of opportunity for corrupt officials to implement projects without taking its return into consideration. Experts also say the complexity of public projects does not mean they should be implemented without proper assessment.

"It is imperative to conduct both economic and financial feasibility studies before embarking on any public projects. The economic part would help know the positive and negative impacts of the projects on the livelihood of the people living in target areas, while the financial component would help understand the return on investment of any public endeavor," said the seasoned Economist Alemayehu,. "Of course, monetary aspect of the project is secondary to the economic impact, in case of public projects, but this does not mean the opportunity cost should outweigh the benefit," the economist emphasized.

On another note, senior government officials are also criticized for ignoring the importance of project management especially prior to realizing what they have planned to build. During project implementation, political agenda of officials is given higher importance than the benefit it could bring to society. That is why many projects now seem luxury to most Ethiopians who are not being consulted prior to the inception of the project," says Getachew Asfaw, an Economist and Planning Expert. "And unfortunately, when the election approaches, it is normal to witness laying cornerstone for public projects that do not seem feasible at all," he further indicated.

Amin Abdella (PhD), an Economist, also blames officials for not taking uncertainty into consideration. "Project implementation requires analyzing what is happening now and predicting the future, which is key to cope up with any uncertainty. Overlooking such factors is one of the major reasons leading to failure of public projects in Ethiopia," Amin analyzed.

Planning Commission, for its part, has been defending the government and saying it has successfully reformed the governance of public projects in Ethiopia. In its consultative meeting with federal agencies last week, the Commission announced it has identified projects that seem feasible and those that could use revision. "Projects that get an approval are now directed to undertake a detailed feasibility study, which is key to make sure that the projects are ready for implementation," said Nemera Gebeyehu (PhD), Deputy Commissioner of the Commission.

Despite standing guard for the ongoing reform of public governance, the Commission admitted to facing challenges. For instance, the commission explained, some projects are still being presented for its approval without concrete evidence that substantiate the importance of the project to the wider public. Furthermore, the Commission is being challenged by the failure of some institutions to present the scope of their projects.

Yet for Alemayehu, having a separate body that undertakes feasibility study at the inception of any project is critical. "There was an institution called Development Project Studies Authority during the period of the military government. Therefore, it should be re-established as it can play a big role in proper implementation of public projects," Alemayehu advised.

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