Construction sector calls for own bank:
PLAYERS in the construction industry are calling for the establishment of an infrastructure bank to offer finance to local construction companies at lower premiums for them to compete with foreign competitors dominating the domestic market.
Foreign owned companies have leverage to win major contracts locally, as a result of a better financial muscle derived from unfettered access to cheaper finance from their countries of origin to undertake huge infrastructure projects. This is relegating most locally owned firms to less lucrative projects.
The sector, has undergone a major lapse since the hyper-inflationary period prior to 2009, and since then, there has been a slow rebound since dollarisation with the current capital constraints seemingly dragging the industry backwards.
Foreign firms have come in to fill in the gap in recent years, particularly the Chinese companies with access to cheap finance presenting unfair competition for indigenous firms.
Experts are calling for an industry-tailor-made bank that will cater for the unique challenges currently bedevilling the sector.
Construction Industry Federation of Zimbabwe president Mr Harold Chinogurei at the recent procurement conference in Harare bemoaned low investment flows into the industry as stifling growth of the sector, at a time infrastructure opportunities in the economy were soaring.
“We have been talking about having an infrastructure bank that would support the industry with cheap finance to undertake projects in the sector. We have a lot of opportunities but we lack funding. We appeal to authorities for an infrastructure bank that will provide finance at low premiums.
“Contracts in the construction industry are unique from retail sector for instance, the profits are long term yet we need to pay for wages and supplies on a regular basis. So if there is a construction bank to support infrastructure , it will be better in bridging the financing gap,” he said.
Zimbabwe needs over $ 5 billion in infrastructure investment to kick start its economy while investment into infrastructure development has averaged less than $ 400 million annually, presenting massive opportunities for the industry with funding currently the missing link.
Industry players say borrowing externally has not been favourable for indigenous firms as external funding usually dictate certain terms that do not bode well with local initiatives that promote local synergies.
For instance, some funders demand their own consultancy teams to take part in the project or certain raw materials be imported from their countries of origin.
Experts have bemoaned lack of a legal framework in the industry to tackle specific issues with regards to foreign owned companies’ participation in the local construction market as their dominance is shoving indigenous firms in the periphery.
Zimbabwe has seen its infrastructure dilapidating over the years, and with the new economic dispensation that has led to investment interests into the country, more opportunities in infrastructure projects are being projected in the short-term, but for indigenous players in the construction industry, a combination of lack of access to capital and shortage of skills remains problematic.
“We have a shortage of skills in the industry because of an exodus of specialised human resources base to foreign countries when the economy hit its lowest point. We need more investment in skills training and upgrading to latest technologies,” said Mr Chinogurei.
At its peak before the turn of the century, the country’s construction industry employed 50 000 people with the sector shrinking over the years to just about 5 000 people currently formally employed in the sector.