City Issues New Bond Intended for Housing
By Wudineh Zenebe
Special to Fortune
4 October 2009
The Addis Ababa City Administration issued a bond for 1.5 billion Birr to the Commercial Bank of Ethiopia (CBE) for its housing project; the Administration has issued three bonds to-date, all of them happening since 2007.
The first bond, for one billion dollars, was issued during the caretaker administration of Brehane Deressa in November 2007, when Abi Sano was the president of the CBE. Months later Kuma followed that up with a bond for one billion Birr, and now for 1.5 billion Birr.
The new bond is different from the earlier ones because it has been based on a study conducted by the Ministry of Works and Urban Development (MoWUD). The Ministry studied the demand for housing and the budget requirement, and set the budget range for Addis Ababa between 1.2 billion and 1.5 billion Birr.
The Ethiopian government has set a housing budget of 16 billion Birr for 55 towns across the country, including Addis Ababa an official at MoWUD told Fortune.
The city started using the bond option when it failed to carry out the condominium construction using its own revenues. During both the caretaker administration of Brehane Deressa and the current administration of Mayor Kuma, the city has been targeting to collect in excess of seven billion Birr from tax, but the maximum it attained was 4.5 billion.
Construction of condos was launched in 2003 during Mayor Arkebe Ukubay’s administration when about 150,000 housing units were planned to be constructed in three years to alleviate the housing problem and to create more jobs.
About 453,000 city residents had been registered to get houses, although only 50,000 have so far benefitted.
Part of its financial shortage for condominium construction emanates from the failure of the residents to make timely initial payments for the houses says the city administration. The shortage and high cost of construction materials has also affected the speed of delivery of the houses.
Only those residents who have deposited 15 to 20pc of the total payment in a blocked account will be considered for further distributions of housing units, a senior official at MoWUD anonymously told Fortune.
New registrations for housing will also be conducted in 2010/11, marking the end of the first five years when registration had first started. All registered residents who have not been able to get housing units until the next registration begins will be required to register anew.
The Administration has so far been paying only the interest on the loans it has so far taken from the CBE. An economist at the Finance and Economic Development Bureau of the city expressed his concern that the Administration may end up being debt-burdened beyond its capacity. However, the city has allocated a three billion Birr budget for 2009/10 for housing projects, including the 1.5 billion Birr it will get from the bond it issued to CBE.