The Ethiopian market, across various sectors, is often characterized by irregularities, including unexplained price hikes, and shortages. The government often attributes such market distortions to exploitative practices by private sector actors. In response to these challenges, the government has often resorted to interventionist measures, including price controls, in an attempt to address market failures. This approach was previously employed in the cement market.
The Ministry of Trade and Regional Integration (MOTRI) imposed stringent measures to curb prices in December 2022. These included regulating factory gate prices, capping sales quantities, and cutting out middlemen. However, these efforts failed to bring lasting stability to the market.
Unfortunately, this intervention failed to address the underlying issues in the sector and instead exacerbated the problem. Meeting the growing demand for cement became even more challenging, with prices surging amid a complex web of challenges. Rising energy costs, erratic coal supply, and expensive machinery imports have inflated production expenses. Retailers, too, face supply constraints, logistical bottlenecks, and price fluctuations, exacerbating the industry’s woes.
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Ethiopia’s transition to a market-based foreign currency regime has further complicated matters, impacting supply chains and production costs. In response, the government introduced market-based cement pricing in an attempt to stabilize the sector.
In November 2024, the government had to reverse course, lifting restrictions on pricing. Minister of Trade and Regional Integration, Kasahun Gofe (PhD), framed the decision as a necessary step toward addressing pricing issues. He announced that cement manufacturers could now independently set distribution prices and select their own merchants, a move aimed at fostering market stability.
The decision to deregulate the cement market appears to have yielded positive results. Prices have decreased, the role of middlemen has been reduced, and supply has improved significantly according to people in the business the Reporter Magazine talked to.
“We have witnessed a marked improvement in the cement market compared to the previous situation under government control,” a retailer in Merkato told The Reporter Magazine.
A Developer’s Perspective
For private developers like Sinkenesh Haile, the cement crisis has been a constant thorn in the side of their business. Over the past seven years, she has built and sold five medium-sized villas in Addis Ababa, navigating a volatile market where cement shortages and fluctuating prices are the norm.
“Accessing cement was a challenge,” she says, recalling how brokers hoarded supplies to inflate prices during MOTRI’s regulatory era. “The demand was so high that people would pay anything just to finish their projects.”
The government’s recent policy shift has brought some relief. Sinkenesh views the government’s recent decision to allow market-driven pricing as a positive step. Yet, volatility remains. Cement prices, while still fluctuating, have dropped slightly. A quintal of Dangote Cement, for example, now sells for 1,600–1,650 birr, down from 1,800–2,200 birr just a few months ago.
Uncertainty, Financial Woes Add to the Burden
Despite recent government efforts to stabilize cement prices, a deeper issue looms over the construction industry in Addis. For developers like Sinkenesh, declining demand stems not only from fluctuating cement prices but also from the pervasive uncertainty surrounding the city’s ongoing corridor development projects. These large-scale initiatives, which have led to the demolition of numerous homes, have left potential buyers hesitant to invest in new construction.
“People are waiting,” Sinkenesh says, her voice heavy with concern. “They want to see what the government will do next before committing to their own dreams of homeownership.”
Compounding the issue are seasonal liquidity constraints in the financial sector. Customers are finding it increasingly difficult to access funds for construction and other purposes. “The situation has worsened recently,” Sinkenesh notes. “People can’t even withdraw money from their accounts to finance their projects.”
For private developers, this liquidity crunch is another in a series of hurdles. Frequent regulatory changes have made it difficult to plan construction projects. According to a local contractor, who asked to remain anonymous, regulatory uncertainty and restrictive policies have stalled private construction efforts.
“It’s a challenging environment for us,” the contractor says. “The terms are unfavorable, and financial institutions are reluctant to lend. Even when I have projects lined up, I can’t get them off the ground.”
Adding to the frustration are government regulations that prohibit development on plots smaller than 500 square meters and mandate a minimum of six stories for new buildings. These stringent requirements leave many projects in limbo, contributing to a landscape dotted with unfinished structures and abandoned plans.
“The rules seem to change daily,” the contractor adds. “This inconsistency makes it nearly impossible to plan effectively, let alone innovate. It feels like the private sector is being sidelined entirely.”
At the heart of these challenges lies a cement industry, which continues to fall short of demand. While annual consumption is estimated at 36 million tons, the country’s 18 cement factories produce just 7.5 million tons—60 percent below target. Per capita cement usage remains stagnant at 58 kg annually, a figure that has seen little change over the past five years.
The industry’s peak came six years ago when 20 factories produced 12.7 million tons. Since then, production has dwindled, plagued by inefficiencies, rising costs, and supply chain disruptions.
The recent entry of Lemi National Cement Factory, the country’s largest cement manufacturer, has sparked cautious optimism. With a daily production capacity of 10,000 tons of clinker, translating to 15,000 tons of cement, the factory’s impact on supply and pricing is being closely watched.
While the Ministry’s decision to liberalize cement pricing has helped temper costs in recent weeks, Sinkenesh believes declining demand also plays a significant role.
“People are uncertain about the government’s stance on new construction,” she explains. “With so many homes demolished for corridor development projects, confidence is low. People are waiting to see what happens next before making any big decisions.”
As the construction sector grapples with these intersecting challenges, the once-booming private development landscape has come to a near standstill. Whether the city can regain momentum will depend on resolving regulatory inconsistencies, stabilizing the financial sector, and ensuring the cement industry can meet the demands of a rapidly urbanizing population.
