It has become abundantly clear that the supply constraint on cement crisis is the headache that refuses to go away. For months now, government officials (including no less than the Prime Minister himself) have promised that the solution is just around the corner. Like a bad cold that refuses to get cured, the cement shortage plaguing Ethiopia continues to lumber on.
 

For once the reason for a problem seriously affecting the country is almost conspiracy proof. Anyone who has stepped out of their house knows that Addis Abeba and all the country’s big towns are going through an unabated construction boom. Not a district in the city is spared from the building spree, scaffolding has mushroomed everywhere.
 

This boom can also be called exploding cement demand. The nation’s long running cement factories are simply overburdened. Factories like Mugher and Messebo, a subsidiary of the politically all powerful EFFORT, are running at full steam. They are giving all they have, yet that simply is not enough. Their combined output of nearly 1.6 million tonnes – Kenya has a production capacity of 2.4 million tonnes a year - is too small to satisfy an estimated demand of 15 million tonnes.
 

It is not peculiar to Ethiopia; global demand for cement is projected to grow by 4.7pc by 2010, from the current 1.8 billion tonnes.
 

What is rather particular to Ethiopia is the inarguable and blatant lack of foresight on behalf of those inside the government in charge of managing the economy. They were neither prepared nor able to forecast what the market would demand when they launched hydroelectric dam projects with the potential to power East Africa, hundreds of thousands of condominium constructions, lay down roads as highways to the future, and finally irrigate a nation that desperately needs it.
 

Failing to keep an even glancing eye on the supply required to achieve all these is an egregious error, poor planning of the worst kind.
 

Moreover, private enterprises have declared today the right historical moment to commence their own construction boom; in conjunction with the government’s. Word around town is that 138 construction projects of 10-storeys or more are currently being planned or executed in Addis alone, cement guzzlers all. Add onto that the 250 million dollars of remittance money coming from the Diaspora every year, much going to housing upgrades, and you have an impossible cement shortage that any secondary school math student could have predicted quite easily on paper.
 

Indeed, at its most basic, the lack of simple industry-wide arithmetic by government planners is obvious; it would be interesting - and just - to see those responsible held accountable for the scramble the country is in, and for their failure to do their job right.
 

This failure has dire consequences on the nation’s pace of development and the expansion of the economy, as it is evident from the suspended projects almost everywhere.
 

Just look at what happened to St Peter’s Hospital, the only medical facility that specializes in TB cases. In a country where 125,000 people were believed to have perished last year due to TB related deaths, it takes an average of eight months (and 2,000 Br) to get treated at this centre. The Hospital’s two centres in Addis Ketema (out-patients) and Entoto (in-patients) districts are too limited to handle the increasing influx of patients. It is thus unquestionably crucial for the hospital to expand. Assisted with a generous fund from the World Bank, the hospital embarked on a new project at a cost of 10 million Br, to build an additional structure inside its facility located at Entoto. When completed, it will have three storeys that will comprise additional 50 beds.
 

When will the Chinese construction firm contracted to do the job complete the project is something no one could tell with full certainty. Work was delayed for two months due to lack of cement supply.
 

Critics are not in short supply of such examples to make their point. But dealing with the lack of foresight only deals with the mistakes made in the past.
 

Amazingly, it seems other kinds of mistakes are still being made in the present, ones that are a little more insidious than lack of supply during skyrocketing demand. The policy decision government has chosen to take does not address the problem either.
 

The federal government decided that it will let private companies import cement into the country. But, they have to qualify before being granted permits to allow them to import duty free and exempted from value added tax (VAT). One of the 11 requirements they should meet is to find their own source of foreign currency, thus ease the pressure on the country’s balance of payment.
 

Not surprisingly, Derba-MIDROC has taken the lead after its major owner, Sheik Mohammed Al-Amoudi, signed an agreement with Minister of Trade and Industry Girma Birru, on June 29, 2006. It has yet to deliver on its promise of beginning to import part of the 1.5 million tonnes cement it said it would.
 

The greatest concern of the government, it appears, is the country’s foreign currency reserve stash. In all the policies promised and even delivered in the past few months to address the cement shortage, spending any of the country’s foreign currency remains completely out of the question. This makes no sense.

Not only is the refusal to avail foreign reserve towards something as crucial as cement importation a poor prioritization choice, but it  also does not even achieve the end the policy intends to achieve: keeping pressure off the foreign currency reserve.
 

No matter which way federal authorities look at it, cement importation is only going to encourage more development, which is obviously a good thing. More development by definition means more needs to import and that means more demand for foreign cash.
 

Take for instance Derba-MIDROC’s case, hoping that it actually does import the 1.5 million tonnes of cement that always seems to be just around the corner. By the time the company completes all its imports, there will be cement circulating inside the country worth not anything lower than 60 million dollars; over half a billion Birr in local currency.
 

What will the Sheik do with all this money in Birr? Will the government let him repatriate his profit in foreign currency? Very unlikely!

One would suppose that he will be investing it on other projects; whether he will erect another crawling edifice in Addis or chose to enter the flower sector in the regions, further developments will obviously require foreign currency to import goods and services.

So unless the government is innovating a home-grown way to cool the economy, then it is clear that any attempt to address the cement shortage will have to break that taboo; the policy of not touching the foreign cash reserve.
 

In fact, the National Bank of Ethiopia should open its coffers and let importers loose on the world market to bring in exactly what all the development-minded are so desperate to get their hands on. And if all goes right (and why should it not) those importers will spur growth that will have the foreign cash reserve back in good shape in no time at all.

Did the exports of the country not reach one billion dollars this last fiscal year, after all?
 

Derba-MIDROC’s missing millions itself goes a long way to argue for the complete loosening of the cement market. Why should the cement market not be as free? Is it not a commodity after all, like sugar or cereal or cooking oil?
 

If the government lets local companies import cement based on their ability to raise the funds and find the market to sell it to them, it would be hard to think that cement would not be rolling down the Ethio-Djibouti highway in no time at all, thereby bringing down the speculative retail price of 240 Br per quintal of Mugher cement (233 Br for Messobo). It is only where competition is lacking and free access for goods and service is limited that artificial prices prevail, as is the case with cement.

However, the current shortage is a blessing in disguise in the long run. The silver lining to all this is that a minimum of 10 companies or joint ventures have begun developing their own cement factory projects, many of them taking up plots. Indeed, the high prices of cement have spurred businessmen here and abroad to invest in long term cement production; to be fair, the government for the most part has welcomed these new, hopeful players into the business.
 

This augurs well for the cement business in the long term. Even if half of these new projects actually come to full fruition, Ethiopia will not find itself in the mad scramble for cement it finds itself in today. And this is a good thing.
 

Even if the current situation seems so paralysing, the future promises to be a wiser more stable place when it comes to cement.
 

As a matter of fact, a prominent local engineer recently said that both the beer and cement business share one glaring component. If either of their distribution networks are over 100Km wide, it becomes virtually impossible to maintain the business profitably. If this is true - and just thinking about what is involved in the transportation of each seems to lend the theory credibility - then the country’s current situation becomes even more head spinning.

Companies being dissuaded from importing cement are being talked out of getting into a business the country desperately needs, but one that even they, the businessmen, may be foolish for entering.