Ethiopia: Tendaho Sugar to be inaugurated, Indians blamed for delay

Shiferaw Jarso, director general of Ethiopia’s Sugar Corporation, under a ministerial portfolio lamented the performance of the Indian companies involved in the construction of Tendaho Sugar Factory that is due to be inaugurated in two weeks, far behind its schedule. Minister Sheferaw Jarso

The Ethiopian government signed an Engineering Procurement Construction (EPC) contract with an Indian company Overseas Infrastructure Alliance (OIA) for the construction of the Tendaho Sugar Factory and the expansion of Fincha and Wonji Sugar factories on January 10, 2007. The project was enabled by a loan of 640 million dollars from Exim Bank of India; of which 400 million dollars was for the construction of the factory while the remaining was to be used for the expansion of the Fincha and Wonji sugar factories.

“We fell in their hands due to our need for finance”, Shiferaw said with an obvious frustration, adding that “this is the result of poverty.”

His made the remark at a press conference with local journalists who visited the 10 sugar factories under construction.

Answering questions as to why the Tendaho project delayed, Shiferaw gave an extended account of the whole process in which he handed the biggest share of the blame to the Indian companies involved.
[The quotes here is a translation as the original comment was made in Amharic]

We had no capital to finance the project by ourselves at the time. Hence we searched for foreign finance and the Ex-Im bank of India agreed to provide it. However the government of India has demanded for an Engineering Procurement Contract (E.P.C) as a precondition for releasing the loan. We did that since we had to get the loan. There is a lot that can be said about the Indian [financing] system but cannot be said in official venue. Any way the company was chosen thanks to the precondition and started selecting its own vendors instead of those we chose already. Secondly, there was disagreement and an extended legal battle between the companies. The main problem is their desire to get the export incentive given for Indian companies with overseas contracts. Their internal conflict was a reason for more delay.

In an E.P.C contract, the contractor delivers a final output completing the tasks. There is no role for us. But we were forced to intervene between them, mediating payment quarrels and supervision. They say they received the materials and hide it from us when we go to check due to their own problem. We could have cancelled the contract based on the agreement but to cancel the contract at that stage is a problem. It’s their fund hence it will only delay the project more. There is no gain for the nation from that. The government has considered that option at one point. There was a consensus on canceling and on our ability to finance it ourselves but was dropped after consideration of the relationship between our nations.

They are very difficult, in my experience. We can’t say all Indian companies are difficult but we found a lot of problems from our E.P.C. Anyhow we now finishing. Therefore, the answer to your question is Yes it will be completed at the end of this month (June 8). …Most of it is completed. I was there last week. There can be a 2-3 day delay in testing but it will definitely be completed up to Ginbot 30 (June 8). That’s our estimate. I talked a lot about Tendaho because it is a frequent question.

I hope it will be completed, i think it will. We will see what happens together. If my word fails…better to see it together.

He, however, admitted there was a lack of capacity with the government to manage these “difficult” companies even though that was “not their duty” in the framework of an Engineering Procurement Contract (E.P.C), in which the contractor is responsible for the project up to delivery. We are also responsible for the year and half delay caused due to flooding at the beginning of the project, he said.

Replying to a question about the Indian contractor failing to pay the wage of Ethiopian employees:

“They (Indians) are difficult on issues of payment. We had to fight and even make them pay on the spot. We fell in their hands due to our need for finance; this is the result of poverty. We would have done it ourselves If we had the money at the time” [Translation mine]

The first phase of the project is now complete and expected to be operational in two weeks, according to the corporation. The factory will be able to produce 619,000 tons of sugar and 63,000 cubic meter of Ethanol per year at full capacity after completion of the second phase making it the biggest in the continent.


You can listen to the audio recording (Amharic) below.


Fetsum Berhane is an Ethiopian resident, economist researcher and a blogger on HornAffairs.

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