Windhoek-The Construction Industries Federation of Namibia (CIF) fears that the country’s national budget for the year 2017/2018, which is expected to be tabled today, will see a drastic reduction in capital expenditure. The federation however stresses that to secure the survival of the construction sector, and to maintain its Namibian capacity, it is critically important that only Namibian-owned companies be contracted for any future construction and building projects, irrespective of the size of the development budget.
In a statement released yesterday the CIF said it recognised that the government is facing budgetary constraints for a number of reasons and that this situation is further aggravated by previously unforeseeable changes of macro-economic conditions.
Therefore, the CIF says it understands that consolidation of the national budget and prioritisation of expenditure are required.
Bärbel Kirchner, consulting general manager of the CIF, said: “We understand that our government, and especially our minister of finance, is faced with an extremely difficult task. We understand that cutting expenditure is necessary for long-term sustainability of our economy. However, we hope that the budget cut for capital projects would be minimised and that instead there will be efforts to significantly cut operational expenditure … It is important that we still remain focused on constructing our key infrastructure, such as the development of infrastructure for the optimal supply of water and energy, as well as the development and further improvement of key roads.”
“There is also much scope for maintenance, renovation and the sanitation of buildings and infrastructure … However, it is critical that there be some work for the construction industry. As most of the industry is dependent on government contracts, it would be impossible for all companies to diversify their markets and find alternative sources of income. Consequently, it will lead to an enormous loss of existing capacity in the industry and many job losses and higher levels of unemployment,” she added.
Kirchner noted that the construction sector has experienced a spectacular boom over the last few years as it grew mostly on the back of an accelerated demand for infrastructure development and the need for employment creation to address the persistently high unemployment rate in the country.
To meet the increased demand for construction services many companies have also invested heavily in plant and machinery, and expanded their capacity accordingly.
Therefore, Kirchner said, an abrupt and extreme reduction of Namibia’s development budget would be the death sentence for many Namibian companies operating in the construction sector, unless there is a lifeline.
She emphasised that the entire scope of businesses across the industry will be affected, not only small-to-medium sized enterprises but also large contractors that are extremely vulnerable due to existing financial commitments as a result of having invested in their businesses.
According to a survey undertaken by the CIF from February 9 to 21, 2017, to which 122 responses were received, 43 respondents (34 percent) will either close down their business or will have to declare bankruptcy, and a further 49 respondents (40 percent) will scale down their business drastically or become dormant.
This would mean that 74 percent of these businesses would no longer be utilised if they were not to benefit from any government contracts.
Unfortunately the demand for construction services has been so high that it also created ample opportunity for foreign companies to operate in the Namibian market. But this can no longer be tolerated while the local industry is suffering.
“At times like these, when the livelihood of many people is being effected, it is truly important that the Namibian-owned companies are given explicit support by the government. It would also be of undisputed benefit to the Namibian economy, due their contribution to government revenue,” said Kirchner.
Nico Badenhorst, president of the CIF, also weighed in on the debate, saying: “It is extremely important that the government acutely focuses its efforts on supporting Namibian contractors. At times like these the Namibian family must come first. We trust government will set clear goals and adopt the right strategies to effectively cushion the impact of budget reductions on Namibian enterprises. Any priority projects must be given to Namibian-owned companies.”
The CIF is adamant that Namibian contractors currently have extensive capacity to develop the much-needed infrastructure in the country. The federation strongly feels that local contractors should not have to continue to compete with foreign contractors under current circumstances, stating that allowing ‘tenderpreneurs’ to operate in the sector does not benefit maintaining and building local construction capacity and the engagement of Namibian resources.
The CIF said that all organisations and individuals involved in public procurement must focus on envisioning a very strong Namibian-owned building and construction industry. It is therefore critical that correct choices are made by all involved in public procurement and that there be a strong commitment to supporting Namibian contractors.
“To further protect and regulate our industry it is also extremely important that a National Construction Council be established as soon as possible. This would ensure that every business operating in the industry would be licensed and that the size of the company is linked to the size of project when awarding contracts,” Kirchner said.
The membership of the CIF includes companies that range from an annual turnover of over N$200 million to SMEs with an annual turnover of less than N$1 million. Together they play a big role in Namibia’s economy, not only in terms of employment but also in terms of their tax contribution. Over 50% of membership are SMEs.