PHILLIMON MHLANGA
Zimbabwe’s construction industry, which is in a precarious position with most players living on the margins, requires at least $350 million to sustain operations and improve production this year. The Reserve Bank of Zimbabwe last week established a $50 million construction industry finance facility, meant for re-tooling and working capital requirements to be disbursed through banks at 10 percent interest rate.
But, Confederation Industry Federation of Zimbabwe (CIFOZ) president Harold Chinogurei told Business Times this week that the industry was grappling with underlying productivity, profitability, performance and sustainability challenges. The $50 million facility from the central bank, he said, was not enough.
“It’s not enough. It’s a good starting point though. We are going to engage government on more funds to be available. As a start the (construction) industry requires at least $350 million,” Chinogurei said on the sidelines of CIFOZ breakfast meeting held in the capital this week.
There are low barriers of entry in the construction industry due to the absence of industry regulations, a situation which created a saturated market place with heavy competition, especially from the Chinese. Government has been slow in pushing through new legislation to regulate players in the sector.
The proposed law was expected to provide for the establishment of a Construction Industry Council, which would regulate contractors. While this seeks to protect the public from substandard products and workmanship, it will also control the influx of foreign players into the country’s construction sector.
Consequently, this has resulted in shrinking profit margins and has constrained re-investment in new technology and better business practices. Construction companies have found themselves trapped between shrinking profit margins and stagnant production, meaning that companies in the sector are unable to generate necessary profit to invest in critical new technologies and processes.
As such, operating under such razor-thin profit margins means a single production surprise can overnight wipe out profits for companies in the sector. What has been compounding the problem in the sector is labour productivity, which has been stagnant. Direct labour time has been in most cases spent waiting for materials and equipment. This lack of productivity is reflected in the bottom line of construction companies, resulting in a dramatic reduction in workforce.
There is also a crunch in skill trades, due to worsening macro-economic situation in the country, which has driven many skilled craftsmen to leave the industry, never to return.
At its peak in mid 1990s, the country’s construction industry, used to employ more than 50 000 people, but figures have plummeted to less than 10 000.
A combination of increased project complexity and decreasing industry experience has been a risk multiplier, increasing danger of deliverable delays, quality construction problems and employee safety concerns.
Across the country, construction cranes have not been observed in many years, a sign that things have not been going well for the construction sector.
Government provided over 70 percent of construction work in the country, but has been struggling to provide enough funding for the sector.
This means that government still owes local contractors millions of dollars, meaning a lot of contractors are under stress.
The local players, with obsolete plant and equipment, have also been facing major competition from foreign contractors.
But, Transport and Infrastructural Development Deputy Minister Fortune Chasi this week told delegates at the CIFOZ breakfast meeting that government was going to prioritise giving construction work to local industry players, before engaging foreign contractors, as part of efforts to boost productivity in the bleeding sector.
“We now want to work with locals (contractors) before we look for foreigners. We know that as construction industry you have challenges such as lack of capital for retooling among other many problems.
“But, let me assure you that you will find us [Ministry of Transport and Infrastructural Development] open for discussions. We will listen to you and see what we can do to assist you. We expect to get your position paper soon and we will study it and see how we can help you,” Chasi said. Government is under increasing pressure to rehabilitate the country’s dilapidated road network and infrastructure.
According to official data obtained from the Ministry of Transport and Infrastructural Development, the country’s road network has outlived its lifespan by more than 40 years. Most of the country’s major roads were constructed before the country’s independence in 1980.
About a fifth of the national road network, which has been a key artery in the southern African region with traffic from South Africa feeding into Zambia, Malawi, the Democratic Republic of Congo and some parts of Mozambique, is in bad condition.
It is estimated that about $10 billion is needed to rehabilitate the country’s entire road network.
