Windhoek
The local construction industry is concerned that a government directive not to award any new tenders, and to put on hold any feasibility studies for capital projects, will have a profound impact on the sector and put at risk many direct and indirect jobs.
The Construction Industries Federation (CIF) has warned that unless the government acts swiftly, the directive can have serious consequences for businesses operating in the industry and for the economy at large.
“It is clear that government is in a difficult position for treasury to have taken the step of instructing authorities to freeze new projects until the top priorities and the sources of financing have been established,” said Nico Badenhorst, acting president of the CIF. He added that it is extremely important that government acutely focuses its efforts on supporting Namibian contractors.
“We trust that government will set clear goals and adopt the right strategies to effectively cushion the impact of this drastic step on Namibian enterprises. At times like this, the Namibian family must come first. Any priority projects identified after the budget review must be given to Namibian companies,” said Badenhorst.
The over 450-member CIF expressed its concern about the directive to the Tender Board, made on September 12, that no new tenders be awarded by government authorities until the 2016/2017 budget review and the reprioritisation of capital projects have been finalised, and that feasibility studies for capital projects be put on hold. The directive will affect all procurement by government authorities and state-owned enterprises that would be funded by the nation’s central national budget.
The CIF noted that government is facing budgetary constraints for a number of reasons, which are further aggravated by unforeseeable changes of macro-economic conditions and climatic conditions that increase the burden on government funds. The CIF emphasises that unambiguous support must be given to Namibian contractors.
The federation noted that local contractors have ample capacity to develop the much needed infrastructure in the country, and is adamant that local contractors should not have to continue competing with foreign contractors under current circumstances. The CIF said it intends to continue to engage government to determine how best to resolve the issue, indicating that its efforts will include encouraging government to establish a Namibian construction council for the industry.
“One thing is clear – much greater regulation of the industry, in the interest of maintenance and further sustainable development of Namibian capacity, is vital. We need to have the required legislation to establish a council for the industry as soon as possible,” said Badenhorst.
In addition, he said it is critically important that the question of payment be addressed. Badenhorst emphasised that payment is of immediate concern to Namibian contractors operating in the construction sector. He noted that overdue payments can have significant impact on the cash flow in the industry and that late payment by government has implications for the level of liquidity, affecting large-size contractors and subcontractors alike.
“For effective cash flow management it is critical that government commits itself to a realistic timeframe for paying all outstanding debt, as well as the payment of future invoices of current projects. This will provide a degree of confidence which is very important for the stabilisation of our industry,” said Badenhorst.
Also weighing in on the subject, Bärbel Kirchner, consulting general manager of the CIF, said the announcement that government has put all new tender awards on hold is quite a shock. However, she pointed out that from a different perspective, everyone should try and recognise the current financial situation as an opportunity to seriously reflect on how Namibia will focus on the development of a sustainable construction sector.
“We need to introduce some major changes for the lasting positive impact on our industry. It is not only important that Namibian contractors are able to survive under current circumstances. Instead, once we have steered through current difficult times, we would like to see our local industry thrive in the interest of Namibia, our population at large,” said Kirchner.
The CIF reiterated that all organisations and individuals involved in public procurement should focus on envisioning a very strong local building and construction industry. Kirchner stated that it is therefore critical that correct choices are made by all involved with public procurement to secure a strong commitment towards supporting local contractors.
She added that the CIF will also conduct relevant research amongst its members, as well as enterprises that are not members, to determine the overall impact of the recent directive. The CIF has also committed itself to liaising with authorities at all levels to obtain relevant information regarding priorities, with a view to adopting the right strategies of supporting Namibian contractors.