The recently completed Tekeze hydroelectric dam in Ethiopia is said to be the largest public works project in Africa. It also could turn in to the biggest blunder with disastrous environmental impact, as the investigative report below tries to illustrate. There is so much secrecy surrounding the project that it is not even clear who really paid for it, although the ruling Woyanne junta claims that it has provided all the funding.
By Brady Yauch | Probe International
The vastly over-budget and long-delayed Tekeze hydro-electric in Ethiopia is finally finished. The project, which was first proposed seven years ago and was scheduled to be competed in 2008, in the end cost $360-million—$136-million over budget.
At 185 metres, the dam—developed and built by the state-owned Chinese National Water Resources and Hydropower Engineering Corporation, now known as Sinohydro—is the largest of its kind in Africa and is expected to produce 300 MW of electricity.
Who financed the dam, is not entirely clear.
According to the World Bank, in 2002, China’s state-owned Export-Import (Exim) Bank provided $50 million in concessional financing for this US$224 million dam. But a Taiwanese news source said the China National Water Resources and Hydropower Engineering Corporation that built the dam, financed it entirely. Nor is it clear yet, who will pay for the cost overruns, delays, and lost revenue: according to one report, the Ethiopian government is demanding compensation from the consortium for these losses.
The secrecy surrounding the financing of the Tekeze dam is not unusual. World Bank researchers had to comb Chinese language sources to scrape together enough information to conclude that relatively little is known about the value of Chinese finance for African infrastructure projects in general. They did manage to conclude, however, that most of the financing goes through China’s Ex-Im bank on concessional terms which are better than private sector terms, but not as heavily subsidized as official development assistance from old-time aid agencies like the World Bank. China often gives infrastructure financing in return for natural resources, such as oil, to feed its booming domestic economy.
Though it isn’t exactly clear whose taxpayers—Ethiopia’s or China’s—are paying for this dam, it is clear that the problems Chinese dam builders are having with their dams at home are being visited on their Ethiopian customers: plans to raise the reservoir of the massive Three Gorges dam to its maximum height are on hold because of fears of massive landslides caused by rising and falling reservoir levels. Experts are now beginning to question whether the Three Gorges dam will ever be able to reach its maximum power generating capacity.
At the Tekeze dam, dubbed with the unfortunate moniker the “Three Gorges of Africa,” the same problem is occurring: a massive landslide in April 2008 forced developers to spend an additional $42 million on retaining walls to keep the slopes from eroding.
The Tekeze dam is just the first of many more hydro-electric projects that the Chinese want to build in Ethiopia. The state-run Ethiopian Electric Power Corporation (EEPCo) is building, or has plans to build, at least six other hydro electric projects in the country and the Gezhouba Group Company and Sinohydro Corporation have agreed to build two of the six hydro electric projects: the $408-million Genale Dawa 3 hydropower project and the $555-million Chemoga Yeda hydropower project, respectively. Ethiopian officials expect that once all the hydro electric projects are completed, the excess power will be exported to neighboring countries.
Patricia Adams, Executive Director of Probe International, and a long time critic of foreign aid and export credit says Ethiopia should beware of free lunches, whether in the form of heavily subsidized foreign aid from the West or subsidized export credit from China.
“Subsidized project financing is usually given for political reasons, not because an investment is economically viable,” she says. “It usually distorts decisions and locks governments and consumers into ongoing costs. African governments would do better to let the discipline of the market choose projects that will truly generate enough wealth to pay investors back.”
4 thoughts on “Ethiopia’s Tekeze Dam fiasco”
This is non-governmental organization established to expose “the devastating environmental, social, and economic effects of Canada’s aid and trade abroad”.
The commentary states “who financed the dam, is not entirely clear”. It cites some Taiwanese news sources for a possibility that the Chinese might have financed the dam. This is in marked contrast to the claims of Ethiopian government that it alone has covered the costs of the dam, apparently because international financial institutions were not willing to advance loans not because the project is not economically feasible (or not because of adverse environmental impacts) but because the project is done on an international river. Why is PROBEInternational not willing to accept that Ethiopia itself might have financed it?
I am baffled by the last paragraph which states that “subsidized project financing is usually given for political reasons, not because an investment is economically viable…it usually distorts decisions and locks governments and consumers into ongoing costs. African governments would do better to let the discipline of the market choose projects that will truly generate enough wealth to pay investors back”. There is nothing in the content to show that the project is financed at a loan which is in fact subsidized. In fact I just came to understand why in the first place the writer has ignored the fact that the project is financed by Ethiopian government and instead looked for other possible financiers and in the end concluded that it might be the Chinese government who advanced a loan at a sub-optimal rate. The central message is in the last paragraph. If the author admitted the fact that the project is owned and financed by the Ethiopian government, there would not be an opportunity to slide through that final remark about the virtues of the free market. To do that it has to manufacture a fiction—that the Chinese advanced a loan at a subsidized rate for political reasons. It advises African governments to embrace the virtues of the market: let the market decide if Ethiopia needs another hydroelectric dam. What if there is no such market? Does it mean that Ethiopia should remain in the dark until one western multinational corporation decides that it is time for light to come to Ethiopia?
What ever the cost, now Ethiopia can generate free energy for millions of year to come from a river that was flowing in vain for last billion years. To have such a useful dam with half a billion is additional blessing. What else I have to say than saying thank you to those who made this project real.
What is this crap. I do not know, how the government of Ethiopia financed the project. But one thing I am quite sure, there is not project designed by man that won’t affect the environment. The western civilization didn’t at its level without the cost of the environment. Why it is a big deal when a poor country try to quench its thirst for power? I think this is another economic hit man, who is sponserd by a global corporation that is carving for the blood of poor Ethiopia. Who ever financed or how long it is taking is not your damn business. I believe light is better than darkness, whatever the cost.
Where on earth it is exsiting a fair economic play? just look what the western rich did when their economic became sluggish. They were against this approach when it is done by poor african countries… oh God. What is this rubbish of fair market?! idiot!
What is this a big deal for many people as to how the country could finance the cost. Why people can’t give credit for the government of Ethiopia for the effort.And why is environmental impact so important in a country where many people live in poverty. who said what for the USA oil spil in the Gulf region for 46 days!!! please back of….