Logistical Hurdles

Logistical Hurdles, Lack of Oversight Leave Empty Plots Throughout Addis

Addis Ababa, while well know for its numerous construction projects, is also home to many plots that remain undeveloped, despite their intended use for construction. This comes at a time when there’s a massive land grab in the city, due to its scarcity and importance for commercial purposes, especially in prime locations. To help mitigate the problem, the city’s government is working to regulate the management of these plots to ensure they’re being developed in a timely manner. However, as EBR’s Fasika Tadesse reports, that task has proven to be difficult in the face of the logistical and legal hurdles that confront investors.

It has been more than 10 years since the 2,835-square metre plot of land located next to Mesqel Square on African Avenue, has been vacant and undeveloped. That is, until it was recently fenced with yellow- and green-striped metal sheets, signifying that construction should soon take place. The lot belonged to the Confederation of Ethiopian Trade Unions (CETU) since 1982, until it was given to another investor through a lease agreement by the Addis Ababa City Administration in 2005.
Before the land was given to private investors, the CETU could not undertake construction because it was in a dispute with the former Government Housing Agency, which was administering a villa on the plot that was being rented by a tenant. Yet, after the plot was given to the investor, a new dispute began in 2005: this time involving the City Administration and the investor, according to the President of the Confederation, Kassahun Follo.
The case passed through different legal and administrative offices, beginning in court and eventually ending up in the Prime Minister’s Office. The dispute was finally concluded when the Prime Minister decided that the plot should be returned to the former owner, CETU, in 2013.
“Because the court and the administrative measurement took a long time we could not utilise the land,” Kassahun told EBR.
Even though a development plan for the plot was delivered in 2014, it’s taken more than a year for it to come to fruition. “We have been working to obtain a construction permit and are conducting technical studies, such as soil tests, to decide what kind of building we are going to construct on it,” said Berhanu Deriba, Secretary General of the Confederation, explaining the delay for staring construction on the plot.
The difficulties that befell those involved with that particular plot of land are common in Ethiopia, especially in cities with high economic activity – Addis Ababa being chief among them. Empty plots that remain without any construction are becoming increasingly prevalent in the capital, a city where the price of land is skyrocketing, especially for those situated in prime locations. These days, land in the city is fetching large sums of money from companies hoping to acquire a lease contract agreement from the City Administration.
To encourage investors, the City Administration has been providing land through negotiation and allocation and many investors were obtaining large plots of land through those systems. Recently, however, the Administration started transferring land through auctions, avoiding the negotiation and allocation processes, as land is becoming a scare resource in the capital. Addis Ababa has a total area coverage of 54,000 hectares that is administrated under 10 districts.
The City Administration started transferring land through auctions three years ago and so far it announced auctions for 17 rounds. Plots located in prime locations have been generating record offers. This was the case in August 2015, where a record offer of ETB355,555 per square metre was offered for a 242-square metre plot of land in Merkato by a company named Siket International.
Along with auctions, the City Administration has provided a total of nearly 9,000 hectares of land for industries, condominiums, relocated residents, social and governmental institutions, and manufacturers of construction input materials. However, the amount of land provided by the City Administration has decreased in recent years. During the 2013/14 fiscal year the Administration provided 2,531 hectares of land, of which 387 hectares were for industries; but that figure declined to 1,767 hectares during the 2014/15 fiscal year, of which 139 hectares were reserved for industries.
These lands are provided to industrialists through three mechanisms: by the decision of the City Administration cabinet, for the development of industrial parks, and through allocations for Small and Micro Enterprises.
The increase of urbanisation and the scarcity of land drive the demand for it, which has escalated its price in Addis Ababa and created a difficult scenario for some investors in obtaining property.
Despite the increasing scarcity, there are several plots, such as CETU’s near Mesqel Square, that have remained bare without any construction or use for several years. Many plots in the city are seen fenced with metal sheets or bricks and remain empty for an extended period and some had their construction halted years ago.
Some plots have even gained notoriety because they’ve remained empty for years. MIDROC Ethiopia Investment Group is well known for reserving several plots of land in the centre of the capital and in key suburban areas without utilising them. For instance, plots located in front of the United Nations Economic Commission for Africa, in the Summit area near the Hikma Cure Pharmaceutical Manufacturing Company, and a wide plot in Piassa next to the City Administration’s Municipal Office are among the few plots that have been under the ownership of MIDROC for several years without any use.
The Group obtained 42 hectares of land after the relocation of residents from more than 3,000 houses from the land designated for the expansion of the Sheraton Addis Hotel. The land was granted during the provisional administration of Addis Ababa’s former mayor Arkebe Oqubay. The land lies in two separate sub-cities: 27 hectares in Arada and 15 hectares in Kirkos. It covers areas behind the Ministry of Foreign Affairs all the way to Arogew Kera (the old abattoir).
Since then, the plot has remained undeveloped and is fenced off with a metal sheet. Mekonnen Teshome, Communication and PR Director for the Group did not respond to EBR’s request for an interview, but sources close to the issue explain that the delayed constriction is due to the relocation of the residents and a dispute between the City Administration and the Group over a police garage that is located inside the plot.
The Land Development Bank and Transfer Office is in charge of handling auctions and arranging plots for development under its land bank system. It is also tasked with the transfer process, as well as collecting lease payments and the controlling of the launch of construction activities after providing the plots.
City officials understand that there is a problem with delayed construction projects on empty lots. The Addis Ababa Industry Development and Investment Agency follows-up on the projects that are delayed and have not begun construction on the plots that it endorsed to the City Administration to give to investors. It can cancel the investment licenses and recommend the City Administration annul the leases if they do not start construction within two years.
“We know that many of the investors do not start construction mainly because of problems that are beyond their capacity,” says Getachew Mengiste, head of Inspection, Follow-Up and Assistances of Investment Projects at the Agency.
He says projects cannot be implemented because investors are facing several problems, such as access to finance, the sluggish process of obtaining letters of credit (LC) to purchase machineries and raw materials for their company, and poor infrastructure. “The government should interfere and assist them in solving these problems, so for now, without [mitigating] all these [problems], it is very difficult to step into enforcement,” according to Getachew.
Marqos Alemayehu, head of Communication Affairs at the Land Development and City Renewal Agency, shares Getachew’s view, saying investors are delaying their construction projects due to problems beyond their control. “Most of the problems emanate from the government side, such as the revision of the Master Plan, which revised the heights of buildings, blocking them [from] proceeding in [their construction projects],” he told EBR.
But not all investors have stalled construction because of government-related problems. Rather, some have legal and managerial issues, such as disagreements among the company owners and pending court cases, according to Marqos.
The fact that there are a myriad of reasons that contribute to plots of land remaining undeveloped is not lost on the Agency. “We recognise that and decided to investigate the size of the plots and reasons for the delay of the construction, which is underway by the district land management offices,” says Marqos. “After identifying the real reasons we will take actions for those who are not using the lands [due to] their own problems and we will solve the problems for those investors that are blocked because of problems from the government side.”
Still, even the investigations are not perfect and have proven to be cumbersome. Marqos admits the investigations have been lingering for an extended period of time because of employee reshuffling at the Agency. “A newly appointed official will be removed [from a particular post] before he owns the case well and proceed its case to the next level,” he says.
On its behalf the investment agency is working on establishing one-window service and studying a new structure that will ease things for the investors. According to Getachew, they’ve established Industry Development Bureaus under the Agency, whose main task is assisting investors.
The one-window service at the Agency will assist in some procedures on behalf of the investor, including bank issues such as processing requests to receive finances; land issues; environmental protection matters; and infrastructure concerns like water, electricity and roads.
“We hired workers for the service and we are waiting to sign agreements with the specified government offices to legally represent them,” says Getachew.
Despite the ubiquity of empty plots in Addis Ababa, some companies have demonstrated that they may not always remain that way, even after years of emptiness. Ethiopian Airlines recently began construction of a hotel on its 40,000-square metre plot located opposite Millennium Hall. The national carrier reserved the plot for more than 7 years without any use.
Despite the company’s large size and status in Ethiopia’s business community, it still wasn’t immune from some logistical hurdles in its desire to develop the land. The construction of the hotel had been lingering for years after the company reached an agreement with the China-Africa Development Fund and HNA Hotels and Resorts Group in November 2009. Hanna Atnafu, Manager of Corporate Communications at Ethiopian Airlines, did not respond to questions we posed via telephone and e-mail, but according to sources the construction was delayed because the Airlines had been in dispute with the Kuwaiti Embassy regarding the ownership of the plot. EBR

4th Year • January 16 2016 – February 15 2016 • No. 35

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