Staff Reporter
The Construction Industries Federation (CIF) wants the industry to resume immediately after the lockdown ends on 4 May 2020, warning of mass retrenchments and company bankruptcies if this does not happen. The CIF leadership is adamant the immediate resumption of the industry will not only help alleviate the current strain on government in supporting the most vulnerable, through the replacement or supplementation of income, but it will also ensure a valuable contribution to the economy.
The CIF’s consulting general manager, Bärbel Kirchner, noted that since 2016, the sector has made huge losses, which left all the companies extremely vulnerable, many of which are at the brink of collapse. She pointed out that during the last four years, many businesses have closed as a result of reduced spending by government as well as the lack of domestic and foreign investment, particularly by the private sector. Moreover, Kirchner believes the designation of the construction sector as an essential service would contribute immensely through the creation of employment and to the much-needed government revenue.
Since 2015, the average contraction of the construction sector was 12%, with a massive 34.4% contraction in 2016. This had led to extensive business closures in the industry. Four years ago, the industry contributed 7.2% to Namibia’s GDP, which has dropped dramatically to 2.7% in 2019.
“We appreciate the enormous effort taken to contain the spread of the virus and the support extended to individuals and businesses where possible. Nonetheless, we are extremely worried that most of our businesses will not survive the lock-down period. Over the last four years, we have seen the impact of the recessionary environment and less spending on employment and the job losses that were experienced in our industry. We are extremely worried about the impact on our businesses that we can foresee now as a result of measures taken in response to Covid-19. We, therefore, feel that through commencing with work soonest and a carefully deliberately strategic approach we can stop the tide of further increasing unemployment,” said Kirchner.
She continued that the CIF recently conducted member research which suggests that without any income in the near future, many more businesses will close down, irrespective of any financial support by government that will be extended to employees in the sector.
The CIF, therefore, proposes that next to a simultaneous three-month payment holiday from financial service providers, that there should be strategic initiatives to determined now, to open the sector as soon as possible.
Responses by 61 members of the CIF to a survey indicated that 68.33% made a loss in 2019/2020 financial year and year-to-date 72.13% made a loss. Expenditures are being financed by using profits (17.65%); overdrafts (56.88%); loans (5.88%) and personal finance (13.73%).
Kirchner added that the construction sector is vital and can also be a catalyst for growth in other sectors, as is relevant in so many global economies. She further cautioned that whilst the local tourism sector has been a major contributor to GDP in recent years and the prospects of growth had been very positive, the likelihood of a return to a strong position is naturally diminished by the measures taken by countries to contain the spread of Covid-19 and the restrictions in global travel. This further exacerbates the importance of the construction sector.
“The construction sector not only contributes to building the much-needed emergency infrastructure and the roads and facilities needed by those that provide essential services but is also can assist with alleviating the strain on Government’s financial resources. If businesses in our industry are engaged immediately, obviously with strict measures to prevent the spread of Covid-19, we can start to effectively contribute to Namibia’s economy in the interest of us all. For example, we can look at securing that already priced infrastructure-related tenders are finalised as soon as possible and that new infrastructure projects considered for the 2020/21 financial year be sped up and that procurement-related restrictions are lifted with related procurement regulations,” Kirchner proposed.
She noted that government has already committed to speeding up payment of outstanding invoices for work already delivered and to facilitate the VAT refunds.
Said Kirchner: “We need a comprehensive approach. For example, those members that had responded to our survey said they had about N$8.4 million outstanding in terms of VAT refunds; and N$192 million in terms of unpaid invoices. Speeding up payment will help the cash flow position of some companies. But through a careful strategically mustered approach by actively engaging and focusing on the Namibian construction sector, we can make big strides forward in view of saving not only the industry but also securing the survival of parts of our economy.”
“We simply cannot have a scenario that our industry will collapse and Namibians will no longer be able to build their own infrastructure in the future and massive resulting unemployment. This will increase our dependency on resources not available in Namibia, at a much bigger cost, to the detriment not only of ourselves but the detriment of future generations,” Kirchner concluded.
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