“The Task Requires Nonexistent Capacity, We Must Look Elsewhere.”

Lensa Mekonnen is assigned to lead the Land Bank and Development Corporation (LBDC), the latest SOE established just eight months ago. The corporation audited 3,700 hectares of landholdings under federal institutions and enterprises—constituting 5.2Pct of Addis Ababa’s 54,000 hectares.
The corporation has embarked on a state-led property development endeavor and is already attracting world-class developers and financers towards developing housing projects, convention centers, seven-star hotels, tertiary hospitals, and specialized education centers on 30 prime locations identified in Addis Ababa, including the redevelopment of Ghion Hotel. The LBDC will indulge in a minimum 20Pct equity share in the projects, to be developed under a build, operate, and transfer PPP modality. The corporation has also identified government districts where public institutions will be relocated to in a clustered fashion.
Given the land scarcity in Addis Ababa, LBDC’s efforts are a relief for investors with cash looking for prime locations, although Lensa says international developers are given priority. Yet, her agility in availing public holdings to private developers is showing results faster than previous governmental processes towards land provisioning, where land is owned by the public and government and is very scarce as hens teeth in the market.

What are the main objectives of the Land Bank and Development Corporation (LBDC)?
LBDC was established to utilize one of the biggest resources we have—land. Doing this requires auditing landholdings, preparing business plans for the development of projects on the lands, and building the projects. After auditing the land stock, we invited private investors to jointly plan and develop the identified projects on the allocated plots. We started our operations by auditing land owned by government entities in the capital. There are over 270 federal institutions in Addis Ababa.

How many plots have you audited and identified thus far?
The corporation has audited 3,700 hectares of land under federal institutions and identified 30 plots ready for development in Addis Ababa.

Is your mandate limited to land owned by public institutions? And in Addis Ababa only?
For now, our jurisdiction is limited to federal institutions. Our plan is not only constrained to Addis Ababa. Once we finish developing unutilized lands in Addis Ababa, we will continue onwards to other cities.

Is LBDC a public entity or a profit-oriented organization?
The corporation is a profit-driven public enterprise. But we do not engage in the day-to-day operations of the projects. Once the projects are developed and operational for some time, LBDC will gradually transfer the business to the private sector. After the Public Private Partnership’s (PPP) term is over, LBDC fully owns the business. But the corporation will remain hands-off as the business will be privatized immediately after the developer exits.

How will the partnership between the private actor and LBDC work?
LBDC contributes the land as an equity contribution in the projects. The private investors provide finance for the projects to be developed on the land. Our equity share and profit will be determined by the types of projects.

What are the main criteria for selecting developers?
Private developers should have strong financial, technological, and project management capacities. These developers must have extra qualities that don’t exist in Ethiopia.

Does this mean only foreign investors are allowed to develop the projects?
Foreign investors and international developers are our targets. Since the task requires capacity nonexistent in the country, we must look elsewhere. These developers should be immensely capable in the given criteria. We then link them with local companies. By creating forward and backward linkages, the domestic private sector will be able to emulate and implement new technologies. We have already identified which projects will be developed by local investors and which ones by foreign actors.
When such big projects are tendered, private developers and financers ask whether the projects have governmental backing or not. That is what LBDC is doing—backing projects on behalf of the government.

Have you made any contact with developers?
Few developers have already contacted us and are trying to secure financers. But it is too soon to disclose their identities. For instance, four developers have shown interest in partaking in housing projects.

Can developers borrow capital from local banks?
The government does not want to create additional loan burdens on local banks and the economy. The corporation’s partners are expected to bring financial resources from abroad.

How will you determine government’s ownership and returns?
Our earnings will be determined by our share in equity and by the type of business. The land LBDC avails for the development will be our equity contribution with the exact amount to be determined by each individual feasibility study. The minimum percentage of shares LBDC will have in the projects is 20Pct, according to our assessments.

What is the reason for the corporation’s focus on Addis Ababa?
Although Addis Ababa seems saturated, it is still underdeveloped. The corporation envisions changing that. There are many undeveloped state landholdings in Addis Ababa. For instance, there are many properties built on public land with historical discourses such as heritage values. But there are many challenges to develop those properties. The properties were developed as best seen during past times. But they might not fit in today’s modern development contexts. So, most properties on public holdings need revamping.

Is there any city you emulated as a model?
We extracted experiences from Egypt. Egypt is relocating its capital city because it is impossible to develop and redevelop Cairo anymore. We also reviewed the experiences of many European and American cities, such as Washington DC, London, and Paris, amongst others. But we will not follow a copy and paste approach. After picking different features from these cities, we will develop our own strategy fitting the type of development we want with the kind of resources at hand.

Redevelopment initiatives were introduced in Addis Ababa 15 years ago. Other SOEs and initiatives are also engaged in similar tasks. Won’t LBDC’s efforts be a repetition or overlapping of tasks in addition to a wastage of time and resources?
Though redevelopment initiatives have been implemented in Addis Ababa, they were not well-planned and integrated from the start. Some parts of the city are developed while others have deteriorated. So, an integrated land development program is essential in Addis.

How does integrated land development work in the case of Addis Ababa?
For instance, one of the projects we are currently studying is the Ghion Hotel. Ghion is located in a prime area but is undervalued. So, scaling up its value is needed by redeveloping the hotel itself and surrounding areas. This requires adopting an integrated approach. For instance, the Meskel Square renovation project will have a positive impact on upgrading Ghion’s value.

What are you planning to achieve?
We have selected five mega projects to be developed in Addis Ababa. These are affordable housing, international convention centers, seven-star hotels, specialized education institutions, and tertiary hospitals. Our plan is to realize these projects.

What about in the next five years?
Our plan for the next five years is to develop a maximum of five tertiary hospitals, five convention centers with adjoining hotels, and two specialized educational institutions.

What are the specific projects planned in prime locations?
For instance, around Lagar, there will be housing projects. Around Wollo Sefer, we anticipate a convention center and multicomplex buildings. Multicomplex buildings will also be developed around Arat Kilo for the high-end community. Since Kazanchis is a business district, commercial business centers, hotels, and convention centers will be built there.

Recently, LBDC launched a publicly-open design competition on the open land spaces. What is the purpose of the competition?
The public design concept competition is intended to collect information regarding what the general public wants to be built on public landholdings. Individuals and companies can participate in the design competition. We decided not to develop the designs by LBDC alone. Ech design should reflect the society’s desires. Many residents of Addis Ababa [and other stakeholders] have various ideas about projects that should be built in their neighborhoods. So, we gave them the opportunity to reflect what they want for their city. The designs will be judged by the public and a panel of professional judges. After selecting winning designs, we will accordingly invite private developers.

Earlier you said that the Ghion Hotel will be one of your projects. What is your plan for Ghion?
The government has decided to attract investment and revamp the hotel first and privatize it later after some years. Our preliminary feasibility study indicates that if we add value to the Ghion and boost its status first, it will fetch a higher price when privatized.

When you revamp Ghion, the private developer will become a joint owner of the hotel. Under such circumstances, how can you privatize it?
We adopt a build, operate, and transfer modality. In this modality, the developer runs the project until it recovers its investment and gains a certain amount of profit. It then returns the project to the government, after which it can be privatized. The private developer builds and operates, but the project is owned by LBDC until it is finally privatized.

How do you plan to relocate government institutions operating in the capital?
We are considering different options to determine which institutions should be relocated and to where. We will transfer disparately located public institutions to specific government districts based on their functionality. We have already started the formation of these integrated-development government districts.

Which areas are identified for this purpose?
We are in the process of identifying locations to develop government districts. Currently, we are considering secondary city circles. In prime locations, there already is high saturation and congestion. By locating government districts in secondary city circles, it is possible to scale up these areas. EBR

9th Year • Mar 16 – Apr 15 2021 • No. 96