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The recent diesel price increase has seen the prices of sand, an essential material in construction work, spike. Coupled with increased demand, the sand price has given rise to an increase in the prices of other construction materials, posing a dilemma for contractors, writes EDEN SAHLE, FORTUNE STAFF WRITER.

Sand Price Hike Leaves Builders Behind

Daily labourers, Mohammed Omer (left) and Tegegne Degefe (right), shovel sand onto the back of a truck at a distributer located in Kirkos District around Meshualekia on Aba Sebsib Avenue (Debre Zeit Road). Once loaded, this truck stood parked at the same location for lack of paying customers.

The trucks that had carried sand from Debre Zeit lined up without work for days in the parking lots on Yima Dernisse Street close to the Ethio-Djibouti Railway Station in Kirkos District.

The place has been losing the hectic business atmosphere that used to dominate it, due to a lack of demand from clients who cannot keep up with the spiralling sand price. On April 17, 2011, it increased from 5,300 Br per 16 cubic metre truckload to 7,000 Br after the price of diesel increased to 17.73 Br per litre earlier last month.

Sellers and truck drivers who used to compete for customers, rushing up to any person looking to buy sand, were sitting with their faces in their hands on the cloudy and windy afternoon of Wednesday, April 27, 2011. Close to 500 trucks had been parked there for at least 10 days due to the unprecedented lull in business.

Fisseha Gebre, 47, a married father of two who drives one of the trucks transporting sand, mostly from Adama (Nazareth), has been in the business for the past decade. However, for the 10 days prior to Wednesday, he had not travelled anywhere to transport sand. This is making a dent in his income, which used to comprise a net salary of close to 2,500 Br and per diem which could be as high as 300 Br per day.

“I have been sitting idle for a while,” Fisseha told Fortune. “As a result, I have reverted to my old habit of smoking and chewing Khat to forget the realities of my job, which I might lose because I am not doing any business.”

Similar complaints were echoed by some of his colleagues whose words were muffled due to mouths full of Khat.

One of these, Kassay Birru, a single father of seven in his late sixties, owns a Nissan truck that had also been standing idle on the parking lot since April 17.

The number of trucks that used to work everyday has been reduced from at least 300 to only three, claimed.

Prior to the price increment and slump in business, Kassay earned a minimum daily profit of 200 Br. Now he pays 60 Br for parking during the day, but takes the truck home, saving 40 Br he would otherwise be charged for parking.

The price hike is attributed by traders to the price of diesel, which has shown a significant increment since August 2006 when it increased from 2.27 Br per litre to 5.44 Br per litre.

Aside from Debre Zeit, most of the sand transported to the capital is from places such as Meti, Modjo, Alemtena, Mermersa, Sodere, Adama, and Southern Regional State. The price depends on the distance of the delivery site from the source of the sand; the price for nearby deliveries can be as low as 5,700 Br.

The price is also affected by the bargaining power of the brokers who earn commission from buyers and sellers, most of the sellers who spoke to Fortune agreed. The quality of the sand also impacts on the price; sand containing less mud is worth more, they said.

A crucial element in construction, the sand price increment has also given rise to a hike in the prices of other materials, such as cement, bricks, and metal reinforcement bars.

The price increment that construction materials have seen over the past few years has never before been observed by Biessa Geleta, a contractor who has worked in the sector for the past 19 years.

 

From left: Ajeb Teyeb, Omer Ali, Said Hussein, and Kebede Zemerga, at Tekele Haimanot, Tesema Aba Kamaw street heave with all their might to bend reinforcement steel bars and load them onto the back of a truck to be delivered to a construction site.

 

Biessa typically constructs private four-room houses for between 12,000 Br and 14,000 Br.

However, the price increment in materials has left him with only 1,500 Br net profit, down from 3,000 Br, he claimed.

Biessa used to have no problem finding work, but since the increment on construction materials he has been faced with difficulties in obtaining contracts. This has made business difficult and, to save costs, he has employed his 17-year old son.

The increase in the prices of construction materials is attributed by sand suppliers to an increased demand from government projects for the construction of condominium housing units and roads as well as big construction work by private firms.

Following the increment, Biessa was ordered to halt construction of a three-room house on a 150sqm plot by his latest employer, even after receiving a down payment of 3,200 Br out of the total 7,500 Br. Construction is to resume when prices come back down, which is likely to occur eventually.

“When the price of sand increases, the demand decreases along with that of cement, metal bars, and bricks falls because sand,” is integral to construction work. said an instructor who has taught construction management at Addis Abeba University (AAU) for the past seven years.

As a result, the demand will not decrease in the short-term, he claimed. However, the price of construction materials will eventually decrease because the demand will decrease in the long-term, he explained.

However, the construction sector, which is growing annually by 12pc, has been affected as the increment poses a dilemma to those trying to complete construction work, such as Fikru Tadesse, 56.

A father of three, he earns 2,800 Br before tax from his job as a civil servant. Fikru recently purchased a 500sqm plot from a farmer at a place called Taffo for 50,000 Br with the aim of constructing a five-room house. He began procuring construction materials four weeks ago and started construction two weeks ago.

On Monday, April 25, he paid 7,000 Br for a truckload of sand, which he claims was of low quality with more mud than usual, while it cost 5,300 Br two weeks before.

Along with the sand, he bought bricks at 8.50 Br apiece, a one Birr increase from two weeks before. Cement cost 500 Br per quintal, while Mugher PPC had been sold at 410 Br per quintal prior to the sand price increment, and 12mm metal bars cost 230 Br apiece, up from 210 Br.

In addition to paying skilled daily labourers up to 120 Br per day, constructing the foundation cost him 10,000 Br per day, Fikru claimed.

“While my house is not far beyond the foundation stage, I have already spent more than my total budget, making it impossible to finish my house,” he told Fortune.

Fikru, who had constructed a five-room house in Kotebe, claimed it cost him 65,000 Br 11 years ago. He regrets starting the construction in bricks as using mud and covering it with cement would have significantly cut his expenses, he claimed.

Unlike Fikru, who has been forced to stop construction, Yohannes Besahw chose to significantly alter his building plans.

Yohannes, who returned to Ethiopia three years ago after working as a taxi driver in the United States (US) for 10 years, initially planned to construct a two-storey building on a 200sqm plot he leased in Sululta Town, located 25km from Addis Abeba in Oromia Regional State.

He has since given up on the idea out of fear that the construction would consume most of his savings. Yohannes plans to construct a small structure instead, in order not to lose the plot he must start developing within two months of leasing it.     

At the same time, Fikru plans to sell his old house to afford finishing his dream house, which remains under construction. 

 

By  EDEN SAHLE,
FORTUNE STAFF WRITER

 
 
   
 
 
 

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