Since the advent of the multi-currency system in 2009, a considerable increase in activity has been registered in the construction industry of Zimbabwe. The State Procurement Board (SPB) has increased awards of government tenders and more individuals and corporates are embarking on infrastructure development projects. However, not all players in the industry are active as a close inspection reveals mixed fortunes for both contractors and consultants. An influx of foreign firms now highly active within the industry, some of whom have been legally localised, poses a great threat to the well-being of indigenous contractors who lack access to cheap finance and materials for recapitalisation and projects execution. The local industry boasts of highly qualified professionals represented by relevant professional bodies.
Uncompleted government projects
The government of Zimbabwe, one of the major employers in the construction industry, is sitting on a number of high priority infrastructure development programmes. Examples include proposed district registries in Murehwa, Guruve-Cocession, Goromonzi and Wedza as well as a proposed central registry in Bindura.
Government has unfinished construction projects at all state universities in the country. New government projects continue to be churned out while existing projects lie dormant. This results in a “lose-lose” scenario wherein contractors stay unemployed while financing security costs of redundant projects and contractual costs inevitably continue to escalate to the disadvantage not only of government, but the tax- paying public.
National infrastructure management programme
Most government buildings are in need of refurbishment and government has lately been touting the Public-Private Partnership (PPP) initiative which seeks to bring together the public and private sectors in mutually beneficial joint ventures such as infrastructure development, refurbishment and maintenance. This is a potential vehicle for infrastructure development and refurbishment which create much-needed employment for indigenous firms and the general public.
6. Mining companies and other big corporates require constant infrastructure maintenance and government could introduce a deliberate policy for the local construction industry to be given preference to undertake such works. The existence of preferred cartels that superintend and undertake all major and minor construction works for certain corporates is evident in the industry to the detriment of the majority of the industry.
Recapitalisation and project finance
The majority of indigenous contractors are inadequately equipped to effectively compete with established traditional and foreign contractors. This is as a consequence of hyper-inflation experienced before the introduction of the multi-currency system when obsolete and depreciated capital equipment could not be replaced.
Local banks are offering loans at exorbitant interest rates which are restrictive to the industrial players who as a result cannot compete favourably against foreign companies who have access to cheap finance, equipment and materials from their countries of origin. No government incentives exist for the construction industry to reduce the cost of importing capital equipment such as those offered to agriculture and tourism.
On average, contractors are made to pay a US$250 non-refundable bid bond by SPB each time they go to tender, an exorbitant amount in the present economic environment.
Indigenisation and empowerment
While government efforts towards empowerment are highly visible within other sectors of the economy such as agriculture, mining and tourism, none is evident in the construction industry. Indigenous contractors are competing against Chinese companies some of whom are now legally local companies yet continue to enjoy the benefits of cheap finance, capital equipment and materials from their countries of origin.
There is general disgruntlement within the local industry because the Chinese are being allowed to compete for simple projects such as the Willowvale flats which were recently commissioned by President Robert Mugabe. Chinese companies are particularly notorious for flouting local and international labour practices by among other things ill-treating, underpaying and overworking employees.
Group Five from South Africa were recently appointed main contractor for the construction of the Beitbridge-Bulawayo highway without going to tender.
Mining companies such as Zimplats and Unkie are known to prefer South African companies to build their infrastructure. All public tenders advertised by Zimplats since last year have all been a farce in the local contractors’ view because the same South African companies continue to benefit together with a few large local companies of foreign parentage.
Construction activities in the country were boosted by the introduction of the multi-currency system in 2008. However, most players in the construction industry have remained largely inactive in the face of unfair competition brought by foreign companies who have access to cheap finance from their countries of origin.
Preferential treatment of foreign firms and organised cartels largely by mining companies and other large corporate bodies is also contributing to loss of employment by local contractors and consultants. Added to that is government’s practice to abandon incomplete priority projects resulting in an added burden to the tax payer.
Local firms are in dire need of retooling in order to better compete against foreign companies but the finance industry is offering restrictive interest rates while government is not intervening to assist the industry. Government is not demonstrating the same zeal to empower indigenous players within the construction industry as in other sectors of the economy.
The following recommendations are made:
Government should prioritise the completion of unfinished projects ahead of new ones for the benefit of communities.
A deliberate national infrastructure management programme to maintain and refurbish government infrastructure should be drawn up and executed by indigenous firms. The PPP should be used as a vehicle to achieve this.
All major and minor maintenance and refurbishment works at mines and other large corporates should be done by indigenous contractors while avoiding preference for cartels.
Government should intervene and bring sanity in the financial sector in order to ensure that local firms obtain loans at realistic interest rates for recapitalisation and project financing.
Government should waiver duty on capital equipment to enable indigenous companies to recapitalise and resuscitate the construction industry.
The SPB should impose a 25% added value to all foreign construction companies’ bids to improve the competitiveness of local companies in the construction industry.
Government should do more to empower indigenous players in the construction industry. Foreign companies should be excluded from the tender process where local construction companies possess capacity.
Mining firms such as Unki and Zimplats should be made to prioritise the employment of local companies and consultants on their infrastructure development projects and made to show cause in the event that they do not do so.
All foreign construction companies and consultants should subcontract some of their work to local firms and employ local labour. An Act of parliament should be crafted to protect the interests of the construction industry in Zimbabwe.