Mega corruptions in mega projects: Debating the dynamics of dam construction in Ethiopia

2.1 Principal-agent theory

Principal-Agent Theory provides a foundational understanding of corruption as a consequence of information asymmetry and misaligned incentives between principals (those who delegate authority) and agents (those who exercise authority on behalf of the principals). In this context, principals could be government authorities, donors, or international financial institutions, while agents are the contractors, project managers, and government officials responsible for executing dam construction projects (Eisenhardt, 1989).

In Ethiopia’s dam construction projects, the Principal-Agent relationship is often characterized by a lack of transparency and accountability, which allows agents to exploit their positions for personal gain. For instance, procurement processes are frequently manipulated, with contracts awarded based on favoritism or bribery rather than merit. This misalignment of incentives is exacerbated by weak monitoring mechanisms, which fail to detect or deter corrupt practices effectively. The agents, motivated by the potential for personal enrichment, may engage in activities that inflate project costs, delay completion, and compromise the quality of construction, all of which have significant economic and social consequences (Rose-Ackerman & Palifka, 2016).

The Principal-Agent Theory also highlights the importance of institutional checks and balances to mitigate corruption. In the Ethiopian context, the absence of robust auditing processes and the lack of an independent judiciary or anti-corruption body to hold agents accountable perpetuate corrupt practices. Moreover, the complexity of dam construction projects, involving multiple stakeholders and layers of bureaucracy, further complicates oversight and creates additional opportunities for corruption (Eisenhardt, 1989; Banfield, 1975).

Recent studies have underscored the need for stronger governance frameworks to align the interests of principals and agents more closely. Implementing transparent bidding processes, enhancing the capacity of oversight institutions, and fostering a culture of accountability are critical steps toward mitigating corruption in mega projects (Transparency International, 2022). These measures can reduce the opportunities for agents to engage in corrupt behavior, ensuring that the principal’s objectives are more effectively achieved.

2.2 Rent-seeking theory

Rent-Seeking Theory offers a critical perspective on how individuals and organizations attempt to gain economic rents—unearned income derived from manipulating the economic or political environment—through non-productive activities. This theory suggests that corruption arises when actors use their influence to secure benefits, such as government contracts or favorable regulatory conditions, without contributing to productive economic activities (Krueger, 1974).

In the Ethiopian dam construction context, rent-seeking behavior is pervasive. The large-scale nature of these projects, combined with their strategic importance to national development, creates significant rent-seeking opportunities. Government officials and politically connected contractors often exploit their positions to extract rents through corrupt practices such as bid rigging, price inflation, and kickbacks. These activities lead to the misallocation of resources, where contracts are awarded not to the most qualified bidders but to those willing to engage in corrupt exchanges (Tanzi & Davoodi, 1997).

The impact of rent-seeking on Ethiopia’s economy is profound. Not only does it result in inflated project costs and substandard construction, but it also diverts resources away from other critical areas of development, such as education and healthcare. Moreover, rent-seeking behavior entrenches inequalities, as those with access to power and influence benefit disproportionately at the expense of the broader population (Khan, 2006).

The theory also explains why anti-corruption efforts in Ethiopia often face significant resistance. Rent-seeking behavior is deeply embedded in the political and economic fabric of the country, with powerful elites benefiting from the status quo. Efforts to reform the system and reduce corruption threaten these entrenched interests, leading to a lack of political will and effective enforcement (Khan, 2006; Rose-Ackerman & Palifka, 2016). Addressing rent-seeking requires not only technical solutions, such as improving procurement processes and increasing transparency but also a broader commitment to altering the underlying power structures that sustain corrupt practices.

2.3 Institutional theory

Institutional Theory provides a broader framework for understanding how the institutional environment shapes behavior, including corruption. It posits that institutions—defined as the formal and informal rules, norms, and practices that guide behavior—play a crucial role in determining the prevalence and nature of corruption (North, 1990).

In the Ethiopian context, Institutional Theory is particularly relevant given the weak governance structures and the blurred lines between formal regulations and informal practices. The formal institutions governing dam construction projects, such as procurement laws and anti-corruption regulations, are often undermined by informal networks and patronage systems that operate behind the scenes. These informal institutions enable corrupt practices by creating a parallel system of rules that prioritize personal relationships and loyalty over legal and ethical standards (Helmke & Levitsky, 2004).

The theory also emphasizes the role of social norms in perpetuating corruption. In environments where corruption is normalized or viewed as a necessary means of navigating the system, individuals are more likely to engage in or tolerate corrupt practices. In Ethiopia, the prevalence of corruption in dam construction projects can be partly attributed to the societal acceptance of such practices, particularly in contexts where public sector salaries are low, and opportunities for legitimate economic advancement are limited (March & Olsen, 2008).

Addressing corruption from an institutional perspective requires more than just strengthening formal laws and regulations; it also necessitates changing the underlying social norms and values that sustain corrupt practices. Efforts to reform Ethiopia’s dam construction sector must therefore include initiatives to promote ethical behavior, enhance public awareness of the costs of corruption, and build a culture of integrity across all levels of society (Ostrom, 2005; Johnston, 2014).

2.4 Neo-Patrimonialism

Neo-Patrimonialism is a concept that describes a system of governance where formal state structures coexist with, and are often undermined by, informal patron-client networks. In such systems, public officials use their official positions to pursue personal interests, blurring the lines between public and private resources. Corruption in neo-patrimonial systems is systemic, pervasive, and deeply embedded in the political culture (Bratton & van de Walle, 1997).

Ethiopia’s dam construction projects are heavily influenced by neo-patrimonial dynamics. The awarding of contracts, the allocation of resources, and the overall management of these projects are often driven by personal relationships, loyalty to political elites, and the need to maintain patronage networks. This system creates a cycle of corruption, where officials prioritize the interests of their patrons over the public good, leading to inefficiencies, inflated costs, and compromised project quality (Chabal & Daloz, 1999).

Neo-Patrimonialism also explains the resilience of corruption in Ethiopia’s dam construction sector. Because the system relies on personal loyalty and the distribution of patronage to maintain political stability, efforts to combat corruption are often undermined by the very actors who benefit from the status quo. Anti-corruption initiatives that threaten to disrupt these networks are likely to face significant resistance, both from within the government and from external stakeholders who benefit from the existing system (Bratton & van de Walle, 1997; Erdmann & Engel, 2007).

Addressing corruption in a neo-patrimonial context requires a multifaceted approach that goes beyond technical fixes. It necessitates a fundamental restructuring of the political and economic systems that sustain patronage networks, as well as efforts to build a more inclusive and accountable governance framework. This includes strengthening civil society, promoting political pluralism, and creating mechanisms for greater public participation and oversight in the management of mega projects (Van de Walle, 2001; Hough, 2013).

Applying these theories to the case of Ethiopia’s dam construction projects provides a comprehensive understanding of the mechanisms and drivers of corruption in this context. The Principal-Agent Theory highlights the misalignment of incentives and the lack of oversight that allows corruption to flourish. Rent-Seeking Theory explains how individuals and groups exploit their access to resources for personal gain, leading to inefficiencies and increased project costs. Institutional Theory underscores the role of weak governance structures and social norms in facilitating corruption, while Neo-Patrimonialism contextualizes the personalized and informal nature of power relations in Ethiopia that perpetuate corrupt practices.

These theoretical insights are crucial for developing strategies to combat corruption in Ethiopia’s dam construction projects. Building robust institutional frameworks, improving transparency and accountability, and fostering a culture of integrity are essential steps in addressing the root causes of corruption. Additionally, understanding the role of informal networks and patronage in perpetuating corruption can help policymakers design interventions that target these specific dynamics.

3.1 Research approach and design

A qualitative research approach was employed to explore the complex dynamics of corruption, mismanagement, and their broader socio-economic impacts within the context of dam construction in Ethiopia. This approach was chosen due to its suitability for examining the underlying processes, behaviors, and experiences of stakeholders involved in these mega projects. By using qualitative methods, the research was able to capture the nuanced perspectives and contextual factors that influence dam construction outcomes, which are often overlooked by quantitative approaches (Denzin & Lincoln, 2018).

The research adopted a case study design, focusing specifically on Ethiopia’s Grand Ethiopian Renaissance Dam (GERD) and other significant dam projects such as the Gilgel Gibe and Genale Dawa dams. This design was selected because it allowed for an in-depth exploration of the phenomenon within its real-life context, where the boundaries between the phenomenon and the context were not clearly defined (Yin, 2018). The case study approach provided a comprehensive analysis of the dynamics of dam construction and corruption, offering detailed insights that could inform both academic and policy discussions.

3.2 Types and sources of data

The study utilized both primary and secondary data sources to ensure a robust analysis. Primary data was collected through in-depth interviews and key informant interviews with individuals who had direct involvement in or knowledge of the dam construction projects. A qualitative research approach was employed, utilizing both primary and secondary data sources. Data collection involved conducting interviews using a structured interview guide. Participants were provided with written consent forms outlining the study’s purpose and their role. Those who agreed to participate were invited to a 60-minute interview, which could be conducted via Zoom, Skype, telephone, or in person, depending on their preference and convenience. With participants’ consent, the interviews were audio-recorded to ensure accurate transcription of their responses. The recordings were securely stored and accessible only to the research. (Interview Guide). This included obtain credible and reliable information, the researcher engaged government officials, project managers, engineers, consultants, construction companies, financial institutions, academics, civil society organizations, opposition political party members, and legal experts (see Table 1). These interviews provided rich, firsthand accounts that were critical for understanding the intricate relationships between governance, project management, and corruption (Patton, 2015).

Secondary data was gathered from a range of existing literature, including academic articles, government reports and project documents. These sources provided essential background information, contextual insights, and additional perspectives that complemented and triangulated the primary data. The inclusion of secondary data was vital for situating the research within the broader political, economic, and social context of dam construction in Ethiopia (Bryman, 2016).

3.3 Data collection tools

Data collection was conducted using in-depth interviews and key informant interviews. In-depth interviews were carried out with a purposively selected sample of stakeholders who were directly involved in the GERD and other dam projects. These interviews facilitated a deep exploration of participants’ experiences and perspectives, allowing the researcher to uncover the complexities and subtleties of the issues under investigation (Rubin & Rubin, 2011).

Key informant interviews were conducted with experts and professionals who possessed specialized knowledge about dam construction and corruption in Ethiopia. These interviews were instrumental in providing critical insights into the technical, managerial, and governance aspects of the projects, as well as the broader socio-political implications (Marshall, 1996). This study did not use any third-party materials or proprietary assessment tools. All data collection and analysis were conducted using original instruments developed specifically for this research.

3.4 Sample size and technique

As shown in Table 1, the study involved a sample size of 36 participants, selected using purposive sampling. This sample size was sufficient to achieve data saturation, where no new information or themes emerged from additional interviews, ensuring that the data collected was comprehensive and reflective of the various stakeholder perspectives (Guest, Bunce, & Johnson, 2006).

The purposive sampling technique was chosen for its ability to identify and select participants who were most likely to provide rich, relevant, and diverse data. This non-probability sampling method was appropriate for the qualitative nature of the research, as it allowed the researcher to focus on individuals with direct experience or specialized knowledge relevant to the research questions (Creswell & Poth, 2018).

3.5 Method of data analysis

The data collected was analyzed using thematic analysis, which involved identifying, analyzing, and reporting patterns (themes) within the data. Thematic analysis was chosen for its flexibility and rigor, allowing the researcher to generate detailed accounts of the data that were grounded in participants’ experiences and perspectives (Braun & Clarke, 2006).

The analysis process began with familiarization, where the researcher thoroughly reviewed the interview transcripts to gain an in-depth understanding of the data. This was followed by the coding phase, where initial codes were generated based on recurring ideas, concepts, and patterns within the data. These codes were then grouped into broader themes that reflected the key issues related to dam construction, corruption, and project management. The themes were reviewed and refined to ensure they accurately represented the data and addressed the research questions. Finally, the analysis was written up, linking the identified themes to the research questions and the broader literature.

3.6 Ethical considerations

The research adhered to stringent ethical standards to protect participants and maintain the integrity of the research process. Written consent was obtained from all participants, who were fully informed about the nature, purpose, and potential risks of the study before agreeing to participate. The study obtained informed consent from all participants prior to their involvement. In this case, written consent was secured to ensure that participants were fully aware of the study’s objectives, procedures, and their rights, including the right to withdraw at any time. The ethical approval committee reviewed and approved this consent procedure. If any participants had been unable to provide written consent, verbal consent would have been considered, provided that the ethical approval committee deemed it appropriate under specific circumstances. However, in this study, all consent was obtained in written form, and there were no waivers granted by the ethical approval committee. This ensured that participants were aware of their rights, including the right to withdraw from the study at any time without consequences (Orb, Eisenhauer, & Wynaden, 2001).

Confidentiality and anonymity were strictly maintained throughout the research process. Identifying information was removed from transcripts, and data was securely stored to prevent unauthorized access. This approach was essential for protecting the privacy of participants and ensuring the ethical conduct of the research (Wiles, 2012). The study received ethical approval from the relevant ethics committee. The approval was granted on 20/11/2023 number for this study is GaDS-102/23. The approval process involved a thorough review of the research protocol to ensure compliance with ethical standards, including considerations for participant consent, data confidentiality, and the overall integrity of the research process. This approval confirms that the study adhered to all necessary ethical guidelines and regulations., ensuring compliance with all ethical guidelines and regulations (Resnik, 2018). Additionally, all efforts were made to minimize potential harm to participants, including psychological distress or social repercussions, by conducting the research in a manner that respected the dignity and rights of all participants.

4.1 Corruption in the making: How management practices enable corruptions in Ethiopia’s dam construction projects

The phenomenon of corruption in large-scale infrastructure projects is a multifaceted issue, deeply rooted in management practices, governance structures, and socio-political dynamics. Ethiopia’s dam construction projects, notably the Grand Ethiopian Renaissance Dam (GERD) and others like Gilgel Gibe and Genale Dawa, offer a compelling case study in understanding how specific management practices can create environments conducive to corruption.

According Sovacool and Walter (2017), the potential link between hydropower projects and corruption focusing on whether countries with significant hydropower activity exhibit higher levels of corruption compared to non-hydro countries. Studies show that hydropower countries tend to have lower scores on the control of corruption index than their non-hydro counterparts. However, these differences are not statistically significant. In comparison, hydropower countries show slightly higher corruption control scores than OPEC and lower-income nations.

According to studies, corruption is a widespread issue affecting all types of infrastructure projects, not just hydropower. According to Haas (2008), corruption in the hydropower sector results in annual losses of $5 to $6 billion. This figure is relatively small when compared to broader global corruption, with Plummer (2008) estimating that corruption could account for 10% to 30% of infrastructure project budgets (Sovacool & Walter, 2017). Given that global infrastructure spending totals around $2.7 trillion annually, corruption in these projects could range from $270 billion to $810 billion. The World Bank (2013) also estimates that global bribery alone constitutes a $1 trillion industry each year (Ibid). Consequently, while there are trends suggesting a possible link between hydropower and increased corruption, the evidence does not robustly support this hypothesis, and the scale of corruption in hydropower projects is minor relative to the global context.

Table 2 shows the Corruption Index (CPI Score) related to mega project constructions in Ethiopia. Corruption Index (CPI Score) typically range from 0 (highly corrupt) to 100 (very clean). This column should reflect the corruption perception score related to the specific projects. If CPI scores are not available for specific projects, you might need to use general CPI scores for the country or regional reports.

The World Bank (WB) report titled “Diagnosing Corruption in Ethiopia” identifies corruption in Ethiopia’s construction sector as being just as pervasive and detrimental as it is in the land, education, and telecommunications sectors (World Bank, 2013). The report highlights several typical indicators of corruption within the construction sector, such as substandard construction quality, inflated costs per unit, and project delays. These issues are often rooted in ambiguous or inequitable contractual agreements, inadequate enforcement of professional standards, significant salary disparities between the public and private sectors, the extensive discretionary power of government officials, a lack of transparency, and widespread perceptions of hidden obstacles to market entry (World Bank, 2013).

Ethiopia’s construction sector can be categorized into four main areas: roads, water supply and irrigation, power, and various public works, including the construction of educational institutions, healthcare facilities, and marketplaces. The annual expenditure on road construction alone is estimated at US$1.2 billion (World Bank, 2013). Unlike many other African nations, Ethiopia’s government retains significant control over the construction sector, which remains largely unprivatized in comparison (World Bank, 2013).

Corruption in Ethiopia’s construction industry is fueled by a variety of interconnected issues. These include deficiencies in accountability—specifically, the lack of transparency due to unclear performance standards—limitations in capacity, such as inadequate material and human resources and failure to follow proper procedures, and issues with trust, which affect the market’s confidence and influence businesses’ willingness to invest in improving their capabilities. In Ethiopia, the absence of capacity enables corruption, the lack of accountability facilitates it, and the deficit in trust allows it to thrive (World Bank, 2013).

The WB report outlines six key dimensions where corruption is particularly prevalent in Ethiopia’s construction sector:

Consistent with the above assertion, interview results confirmed that:

According to Key informants, collusion among bidders and bribery during the tendering process are common practices that distort fair competition. The lack of a truly competitive bidding environment, often due to prearranged agreements or manipulation of bid requirements, results in inflated project costs and compromised quality. For instance, we’ve seen instances where bid requirements are tailored to favor certain companies, which undermine the integrity of the procurement process (KII, representative from a major construction company, 2024).

On the other hand, conflicts of interest and opaque processes in the selection of consultants are major enablers of corruption. We have observed that favoritism in awarding consultancy contracts often stems from personal connections or financial incentives. This lack of transparency in the selection process undermines the credibility of consultancy work and can lead to biased recommendations and compromised project outcomes" (KII, Project Consultant, 2024).

In the Ethiopian construction sector, the government holds a central position as both the leading client and the exclusive authority responsible for policy-making and regulation. This situation effectively turns the government into EthioConstruction Corruption, Inc. Despite the WB report’s cautious language, it is clear that corruption in the Ethiopian construction sector spans policy making, budgetary processes, project selection, tender specifications, procurement outcomes, contract negotiations, and payments (World Bank, 2013).

In June 2013, the Ethiopian Roads Authority signed a contract with two Chinese companies to improve the 133 km Kombolcha-Bati-Mille road to an asphalt-concrete standard. The agreement allocated 2.8 billion Br. to the Chinese firms for this project (Ethiopian Roads Authority, 2013). Questions arise about why Ethiopian companies are not securing such contracts and whether Ethiopia is getting value for money from these foreign contractors (Ethiopian Roads Authority, 2013). There several factors enabling corruption in Ethiopia’s dam construction projects:

4.1.1 Weak institutional frameworks and oversight mechanisms

One of the most significant factors enabling corruption in Ethiopia’s dam construction projects is the weakness of institutional frameworks and oversight mechanisms. The absence of stringent regulatory controls and the lack of transparency in procurement processes have allowed corrupt practices to thrive. For example, the GERD project has been criticized for its opaque tendering processes, where contracts were often awarded without competitive bidding, leading to inflated costs and substandard work (Transparency International, 2021). The lack of independent auditing and monitoring further exacerbates the situation, as it limits accountability and allows corrupt activities to go unchecked. This is related to Principal-Agent Theory in that the Principal-Agent relationship is often characterized by a lack of transparency and accountability, which allows agents to exploit their positions for personal gain. For instance, procurement processes are frequently manipulated, with contracts awarded based on favoritism or bribery rather than merit.

Consistently, interview results confirmed as follow:

Corruption is facilitated by the absence of standardized procedures and rigorous quality checks. In several cases, project specifications have been altered to benefit particular contractors, often leading to subpar construction quality. This lack of adherence to consistent standards not only undermines project integrity but also opens avenues for bribery and kickbacks. For example, changes in material specifications to cheaper alternatives have frequently been linked to corrupt agreements" (Interview, Engineer Involved in the Project, 2024).

This scenario is not unique to Ethiopia; similar patterns have been observed in other African countries. In Nigeria, the management of the Ajaokuta Steel Plant, which was intended to be a cornerstone of the country’s industrialization, was marred by corruption and mismanagement, resulting in the project’s failure despite massive investments (Smith, 2010). The parallels between Ethiopia and Nigeria highlight the critical role of robust institutional frameworks in mitigating corruption in large-scale projects.

4.1.2 Centralization of decision-making

The centralization of decision-making power in the hands of a few individuals or entities is another management practice that fosters corruption. In Ethiopia, the decision-making process for dam construction projects has often been concentrated within the upper echelons of government, with limited input from other stakeholders, including local communities and civil society organizations. This centralization creates opportunities for rent-seeking behavior, where officials can exploit their positions for personal gain.

Research has shown that centralization of power in project management often leads to a lack of checks and balances, increasing the risk of corrupt practices (Rose-Ackerman & Palifka, 2016). In the case of the GERD, the Ethiopian government’s tight control over the project’s planning and execution stages has been linked to allegations of embezzlement and misallocation of funds, further burdening the country’s economy (Alemayehu & Lakew, 2020).

In line with the above, interview results confirmed as follows:

4.1.3 Inefficient project management practices

Inefficient project management practices, characterized by poor planning, lack of coordination, and inadequate risk management, have also contributed to the prevalence of corruption in Ethiopia’s dam construction projects. These inefficiencies often lead to cost overruns and delays, which create fertile ground for corrupt activities. Contractors and government officials may collude to manipulate project timelines and budgets, inflating costs to siphon off funds (Flyvbjerg, 2017).

For instance, the Gilgel Gibe III dam project, initially projected to cost $1.8 billion, ultimately ballooned to over $2 billion due to delays and mismanagement (International Rivers, 2014). Such cost escalations are often symptomatic of underlying corrupt practices, where stakeholders benefit from prolonged project timelines and increased budgets.

Moreover, geopolitical and economic pressures have also played a role in perpetuating corruption within Ethiopia’s dam construction projects. The urgent need to complete these projects to meet domestic energy demands and assert regional influence has led to compromises in governance and management standards. The rush to deliver these mega projects often results in the bypassing of standard procedures, creating opportunities for corrupt practices (Mwangi, 2019a, b). In the context of the GERD, Ethiopia’s ambition to become a regional power in hydroelectricity has led to expedited project timelines and the overlooking of governance protocols. This haste has not only strained the country’s financial resources but has also opened doors for corrupt practices, as oversight mechanisms are weakened in the pursuit of rapid project completion (Elhance, 2020).

The phenomenon of corruption in Ethiopia’s dam construction projects, such as the Grand Ethiopian Renaissance Dam (GERD) and other projects like Gilgel Gibe and Genale Dawa, can be understood through a multi-theoretical framework. By analyzing the findings through the lenses of Principal-Agent Theory, Rent-Seeking Theory, Institutional Theory, and Neo-Patrimonialism, a nuanced understanding of the complex dynamics enabling corruption is achieved. Each theory not only offers unique insights but also intersects with the others to form a comprehensive explanation of corruption.

On the other hand, Principal-Agent Theory and Institutional Theory are closely linked in their explanation of corruption, particularly through the concept of information asymmetry and the weaknesses in institutional frameworks. In the context of Ethiopia’s dam projects, the absence of stringent regulatory controls and the lack of transparency in procurement processes (Institutional Theory) exacerbate the principal-agent problem. The weak institutional environment allows agents (contractors, project managers) to exploit their positions for personal gain without sufficient oversight from the principals (government authorities). This dynamic is evident in the opaque tendering processes of the GERD project, where contracts were often awarded without competitive bidding, leading to inflated costs and substandard work (Transparency International, 2021). The failure of institutions to enforce accountability mechanisms directly contributes to the agency problem, where agents operate with greater autonomy and less accountability, fostering an environment ripe for corruption.

Similarly, Rent-Seeking Theory and Neo-Patrimonialism converge in their explanation of how power and resources are manipulated for personal gain in Ethiopia’s dam construction projects. The centralization of decision-making in the hands of a few government officials creates opportunities for rent-seeking behavior, where these officials exploit their positions to extract economic rents through corrupt means. This centralization is a hallmark of neo-patrimonial systems, where formal state institutions are overshadowed by informal practices, such as patronage and clientelism (Rose-Ackerman & Palifka, 2016). The tight control over the GERD project by the Ethiopian government illustrates this dynamic, where the concentration of power has led to allegations of embezzlement and misallocation of funds (Alemayehu & Lakew, 2020). In this context, rent-seeking and neo-patrimonial practices reinforce each other, with the centralization of power facilitating the extraction of rents through corrupt practices, further entrenching the neo-patrimonial structure.

Moreover, the intersection of Principal-Agent Theory and Neo-Patrimonialism is particularly evident in the way corruption manifests in Ethiopia’s dam construction projects. In a neo-patrimonial context, the principal-agent relationship is characterized by personal loyalties and patronage rather than formal institutional arrangements. This leads to a scenario where agents are less accountable to the principals and more to the patrons who secure their positions. For instance, the manipulation of procurement processes in the GERD project can be seen as a consequence of neo-patrimonial dynamics, where agents act in the interests of their patrons rather than adhering to formal rules and regulations (Smith, 2010). The personalization of authority in neo-patrimonial systems exacerbates the agency problem, as agents operate with greater discretion, often prioritizing personal or factional interests over the public good.

Furthermore, Institutional Theory and Rent-Seeking Theory intersect in explaining how weak institutional frameworks create opportunities for rent-seeking behavior. The absence of robust regulatory controls and oversight mechanisms in Ethiopia’s dam construction projects allows rent-seeking activities to flourish, as there are few checks and balances to prevent the exploitation of power for personal gain (Flyvbjerg, 2017). For example, the inefficient project management practices in the Gilgel Gibe III dam project, where delays and cost overruns were prevalent, can be attributed to weak institutional oversight that failed to curb rent-seeking behavior (International Rivers, 2014). In this way, institutional weaknesses directly contribute to the emergence of rent-seeking activities, as stakeholders exploit these gaps to extract rents at the expense of project efficiency and integrity.

Coming to the synthesis, the interrelations between Principal-Agent Theory, Rent-Seeking Theory, Institutional Theory, and Neo-Patrimonialism provide a comprehensive framework for understanding corruption in Ethiopia’s dam construction projects. These theories do not operate in isolation; rather, they intersect and reinforce each other, creating a complex web of factors that enable corrupt practices. Weak institutional frameworks and oversight mechanisms exacerbate the principal-agent problem, while centralized decision-making power fosters rent-seeking behavior, all within a neo-patrimonial context that prioritizes personal loyalties over formal governance structures. Understanding these interconnections is crucial for developing effective strategies to combat corruption in large-scale infrastructure projects, not only in Ethiopia but also in similar contexts globally.

4.2 The economic impact of corruption on mega construction projects in Ethiopia

Corruption in Ethiopia’s dam construction projects has had far-reaching economic and social consequences, undermining both the potential benefits of these infrastructural developments and the broader developmental goals of the country. The pervasive nature of corruption in these projects manifests through various channels, including mismanagement of funds, embezzlement, and the inflation of project costs, all of which contribute to substantial economic and social costs.

4.2.1 Economic impacts

Corruption in dam construction projects has significant economic repercussions, particularly in the form of cost overruns. These overruns often stem from the deliberate inflation of project budgets by officials and contractors seeking personal gain (Alemayehu, 2019). For example, the Gilgel Gibe III dam, initially projected to cost $1.4 billion, ended up exceeding $1.8 billion, with corruption playing a role in this discrepancy (International Rivers, 2014). These inflated costs strain the national budget, forcing the government to allocate additional resources that could have been used for other critical areas, such as healthcare, education, and rural development.

Moreover, these increased costs contribute to a rise in public debt. Ethiopia, like many developing countries, relies heavily on loans to finance large-scale infrastructure projects, including dams. When corruption leads to cost overruns, the government is often compelled to seek additional financing under unfavorable terms, exacerbating the country’s debt burden and limiting fiscal space for other essential investments (World Bank, 2020).

Corruption also affects the broader economy by reducing the efficiency of public spending. Delays and inefficiencies in project completion hinder economic growth, as seen with the Grand Ethiopian Renaissance Dam (GERD). The delayed operationalization of GERD, partly due to corruption, has postponed expected benefits like electricity generation and export, crucial for Ethiopia’s economic development (Gebre, 2021).

In addition to increasing national debt, corruption in mega construction projects contributes to inflationary pressures. Rising project costs are often passed on to consumers and the government, leading to higher prices for goods and services. This trend diminishes purchasing power, undermines economic stability, and raises the cost of living (World Bank, 2020). Corruption also deters investment, both domestic and foreign. High corruption levels are perceived as significant risks by investors, leading to reduced foreign direct investment (FDI) and slower economic growth. The inflated costs and associated risks of projects like the GERD discourage investment in other sectors, hampering broader economic development (Reda, 2018).

Infrastructure quality is another area adversely affected by corruption. Financial mismanagement and project delays, such as those in the Addis Ababa Light Rail Transit project, often lead to compromised infrastructure. Substandard construction and maintenance not only impede economic development but also reduce the efficiency of transportation and trade, further impacting the country’s overall economic performance (Tsegaye, 2018).

Corruption also exacerbates social and economic inequalities. When funds intended for public welfare and development projects are misappropriated, poverty and income inequality are aggravated. For instance, the mismanagement of funds in sugar and fertilizer factories has negatively affected agricultural productivity and food security, disproportionately impacting poorer segments of the population (National Audit Office, 2021).

Generally, corruption in mega construction projects has profound economic impacts, influencing national debt, inflation, investment climate, infrastructure quality, and social equity. Addressing these issues requires comprehensive anti-corruption measures to promote sustainable economic development. Table 3 summarizes the impact of corruption on construction costs for selected projects in Ethiopia:

Consistent with the above assertions, primary data sources complement that corruption has led to substantial cost overruns and delays in dam construction projects, severely impacting economic efficiency. Inflated costs due to corrupt practices, such as bribery and kickbacks, divert funds away from their intended development purposes. Furthermore, the resulting delays hinder the timely realization of project benefits, thereby affecting the overall economic growth and development objectives of the country,” acknowledged a senior government official (Interview, Government Officials, Addis Ababa 2024).

Similarly, interview results confirmed that corruption has had a detrimental impact on project quality and cost-effectiveness. For example, cost overruns due to substandard construction and the use of inferior materials have resulted in higher long-term maintenance costs and reduced project durability. These issues ultimately affect the economic returns and operational efficiency of the projects,” reported a project manager (Interview, Project Managers, Addis Ababa 2024). In addition, the data asserted that compromises in construction quality, often driven by corrupt practices, have led to increased maintenance and repair costs. Additionally, operational inefficiencies resulting from substandard construction have negatively impacted the economic returns of these projects. For instance, infrastructure that fails to meet performance standards requires costly rectifications and compromises the expected economic benefits (Interview, Engineer, Addis Ababa, 2024).

Consistently with the above assertions, primary data sources further confirmed that corruption increases project costs and reduces the overall value for money. Mismanagement and fraudulent practices often lead to a mismatch between project outcomes and initial objectives. This inefficiency results in a poor return on investment and can undermine the broader economic benefits of the project,” noted a consultant. Moreover, corrupt practices create an uneven playing field, resulting in inefficient resource allocation and inflated project costs. The use of substandard materials and practices due to corruption often leads to additional costs for repairs and maintenance, further exacerbating economic inefficiencies,” said a representative from a construction firm.

4.2.2 Social impacts

The social consequences of corruption in dam construction are equally severe. Corruption erodes public trust in government institutions and undermines the social contract between the state and its citizens. In Ethiopia, communities affected by dam construction projects have often been marginalized and neglected due to the misappropriation of funds meant for compensation and resettlement. For instance, the communities displaced by the construction of the Gilgel Gibe III dam reported inadequate compensation and poor resettlement conditions, which have led to social unrest and conflicts (International Rivers, 2014).

The misallocation of funds intended for community development has also undermined the potential benefits of these projects. Rather than improving the livelihoods of affected populations, corruption has left many communities worse off. The promised development projects, such as schools, health clinics, and infrastructure improvements, often fail to materialize, leaving affected communities to bear the brunt of the negative consequences of dam construction without reaping any of the intended benefits.

Practical examples of corruption in Ethiopia’s dam construction projects are numerous. The Gilgel Gibe II and III dams serve as stark examples of how corruption can lead to economic and social degradation. Reports have highlighted how contracts were awarded without proper bidding processes, leading to inflated costs and substandard construction work (Alemayehu, 2019). These practices not only increased the financial burden on the state but also resulted in technical failures, such as the collapse of a tunnel in the Gilgel Gibe II dam shortly after its completion, which required costly repairs and delayed the project’s benefits.

Another case is the Grand Ethiopian Renaissance Dam (GERD), which has faced numerous challenges, including allegations of corruption related to the procurement process and the management of funds. These challenges have contributed to delays in the project’s completion, which has had significant economic repercussions for the country, including the delayed realization of expected revenue from electricity exports and increased costs due to the prolonged construction period (Gebre, 2021).

4.3 Strategies mitigating the risks of corruption in Ethiopia’s dam projects

Corruption in large infrastructure projects, such as dam construction, poses significant challenges to economic development, governance, and social equity. Ethiopia, with its ambitious dam projects like the Grand Ethiopian Renaissance Dam (GERD) and the Gilgel Gibe series, has faced notable instances of corruption that have undermined the economic and social benefits these projects were intended to deliver. To mitigate the risks of corruption in such projects, a comprehensive set of strategies is required, encompassing legal, institutional, and community-based approaches.

4.3.1 Strengthening legal and regulatory frameworks

A robust legal and regulatory framework is essential for combating corruption in dam construction projects. Ethiopia can strengthen its anti-corruption laws by enhancing the powers and independence of anti-corruption agencies such as the Federal Ethics and Anti-Corruption Commission (FEACC). Ensuring that these agencies have the autonomy to investigate and prosecute corruption cases without political interference is critical. For example, the introduction of the Anti-Corruption Proclamation No. 881/2015 in Ethiopia was a step towards empowering the FEACC, but its effectiveness has been hampered by limited enforcement capacity and political pressures (Yehualashet, 2017).

Additionally, enforcing transparency in procurement processes is vital. The adoption of e-procurement systems can reduce the opportunities for corruption by minimizing direct human intervention and increasing transparency. For instance, countries like Kenya have successfully implemented e-procurement in their public sectors, resulting in reduced incidences of corruption (Mwangi, 2019). Ethiopia could adopt similar systems to ensure that all stages of the procurement process for dam construction projects are transparent and accessible to the public.

4.3.2 Institutional reforms and capacity building

Institutional reforms are necessary to create an environment where corruption is less likely to thrive. This includes improving the governance structures of institutions involved in dam projects, such as the Ethiopian Electric Power Corporation (EEPCo) and the Ministry of Water, Irrigation, and Energy. Strengthening the capacity of these institutions to manage and oversee large-scale projects effectively is crucial. For example, providing training on anti-corruption measures, project management, and financial oversight can enhance the ability of these institutions to detect and prevent corrupt practices.

Moreover, the establishment of independent oversight bodies can play a significant role in monitoring the implementation of dam projects. These bodies should include representatives from civil society, academia, and the private sector to ensure diverse perspectives and impartial oversight. For example, the Ethiopian Construction Project Management Institute (ECPMI) could be expanded to include anti-corruption monitoring in its mandate, providing regular audits and assessments of ongoing projects.

4.3.3 Promoting community participation and transparency

Community involvement in dam projects is another effective strategy for mitigating corruption. When local communities are engaged in the planning, implementation, and monitoring of projects, there is a greater likelihood of accountability and transparency. In Ethiopia, the displacement of communities for dam construction, such as in the case of the Gilgel Gibe III dam, has often led to social unrest due to inadequate consultation and compensation (International Rivers, 2014). Implementing a more inclusive approach, where affected communities are actively involved in decision-making processes, can help ensure that their interests are represented and that corruption is minimized.

Additionally, promoting transparency through public disclosure of project information is critical. Ensuring that contracts, financial reports, and project progress updates are publicly accessible allows for greater scrutiny by the media, civil society, and the general public. For example, the Public Procurement and Property Administration Agency (PPPAA) in Ethiopia could mandate the publication of all procurement-related documents for public infrastructure projects, fostering a culture of transparency and accountability (Transparency International, 2019).

4.3.4 International cooperation and best practices

International cooperation can provide valuable support in mitigating corruption risks. By partnering with international organizations such as the World Bank, the African Development Bank, and Transparency International, Ethiopia can benefit from technical assistance, funding, and best practices in anti-corruption measures. These organizations often have stringent anti-corruption policies that require compliance as a condition for funding, which can help enforce accountability.

Adopting best practices from other countries can also be beneficial. For example, Brazil’s success in reducing corruption in its infrastructure projects through the use of transparency portals and citizen participation initiatives could serve as a model for Ethiopia (Speck, 2011). These practices include real-time monitoring of project expenditures, public access to detailed project data, and the use of technology to enhance oversight.

4.3.5 Strengthening judicial processes and enforcement

Effective judicial processes and enforcement mechanisms are essential to deter corruption in dam projects. Ensuring that corruption cases are prosecuted swiftly and that penalties are severe enough to act as a deterrent is crucial. In Ethiopia, the judiciary has faced challenges in handling corruption cases due to limited resources, lack of expertise, and political influence (Yehualashet, 2017). Enhancing the capacity of the judiciary through specialized training in financial crimes, increasing resources, and ensuring its independence from political interference are critical steps in strengthening the enforcement of anti-corruption laws.

Moreover, establishing special anti-corruption courts or tribunals that focus exclusively on corruption cases can improve the efficiency and effectiveness of the judicial process. These courts can expedite the handling of corruption cases and ensure that they are dealt with by judges who have expertise in this area (Kim, 2019).

Addressing corruption in Ethiopia requires massive involvement of civil society watchdogs and rigorous independent audits. Successful countries in controlling construction sector corruption have implemented rigorous compliance audits, made comprehensive contract information available online, and allowed civil society to observe the tendering process (World Bank, 2013). Ethiopia’s freedom of information law (Proclamation No. 590/2008) is criticized for its extensive exemptions and limitations on disclosure, which perpetuate corruption by keeping information about government activities, financial institutions, and public institutions secret (Proclamation No. 590/2008). Corruption thrives in darkness. The people of Ethiopia need robust transparency measures to combat corruption and ensure that public funds are used effectively. To track corruption, one must follow the money—it often leads straight to the top.

Consistent with the above assertions, interview results confirmed that mitigating corruption in dam construction projects requires several key strategies:

Strengthening oversight mechanisms, implementing stricter anti-corruption regulations, and enhancing transparency in procurement processes are crucial. Establishing robust auditing procedures, improving procurement practices, and ensuring stricter compliance with anti-corruption laws were identified as essential measures.

The importance of clear internal controls, improved staff training on ethical practices, and fostering a culture of accountability within project teams was also emphasized. Regular internal audits and transparent reporting mechanisms were highlighted as necessary for effectively addressing corruption. Standardized procedures and regular quality checks are vital in preventing manipulation and ensuring adherence to project specifications. Enhanced reporting mechanisms for unethical practices and promoting a culture of integrity were noted as critical steps to mitigate corruption risks.

Ensuring a transparent and competitive selection process for consultancy contracts, addressing conflicts of interest, and enforcing ethical standards were seen as essential for maintaining integrity. Strict guidelines and consistent monitoring of compliance were recommended to uphold ethical practices. Transparent bidding processes, strict anti-corruption policies, and independent audits were identified as important measures to enhance accountability. Ensuring fair competition and monitoring contractor performance were seen as vital in preventing corrupt practices.

Improving financial oversight, enhancing auditing procedures, and collaborating with stakeholders to ensure effective financial management were emphasized. Robust financial controls and monitoring mechanisms were deemed necessary to detect and prevent misappropriation of funds. The implementation of robust governance frameworks, the promotion of public involvement in oversight, and the enhancement of institutional capacity were recommended. Strengthening legal and regulatory frameworks and fostering a culture of transparency and accountability were considered essential strategies.

Increasing transparency, fostering public participation in oversight, and strengthening whistleblower protections were highlighted as key strategies to combat corruption. Encouraging community involvement and improving access to information were seen as crucial for enhancing accountability and reducing corruption risks. Supporting investigative reporting and media oversight were recognized as effective means to expose and challenge corrupt practices. Legal protections for journalists and encouragement of independent reporting were recommended for the effective exposure of corruption. Comprehensive legal reforms, including closing loopholes, strengthening anti-corruption laws, and ensuring effective enforcement, were seen as necessary to mitigate corruption risks. Robust and enforceable legal frameworks were emphasized as essential to effectively address and prevent corruption in dam construction projects.

The implementation of these strategies in practice can be observed in various international contexts. For instance, the successful prosecution of corruption cases in South Korea’s Four Major Rivers Restoration Project, where several government officials and contractors were held accountable, demonstrates the effectiveness of strong legal and institutional frameworks (Choi, 2014). Similarly, the use of e-procurement systems in India’s infrastructure projects has significantly reduced opportunities for corruption, as evidenced by the successful implementation of the e-Government Procurement (e-GP) system in the state of Andhra Pradesh (Kumar & Srinivas, 2018).