6 February 2013

Zimbabwe: Construction Receives Least Loans'

THE construction industry received the least money from loans advanced to the private sector by financial institutions last year, a situation highlighted by lack of construction projects within the country, the Reserve Bank of Zimbabwe (RBZ) has said.

Presenting his monetary policy on Thursday last week, RBZ governor Gideon Gono said a large chunk of the loans was channelled towards financing agriculture, manufacturing and distribution while the construction industry received the least.

"The lion's share of loans and advances were deployed towards financing agriculture (19 percent), manufacturing (18 percent), distribution (17 percent), households (16 percent) and services (11 percent)," he said.

"Regrettably, the construction sector received the least when it is the barometer that measures economic growth. The mining, transport and communications sub-sectors, accessed relatively smaller proportions of loans and advances extended by banks in 2012," Gono said.

Since the country's economy was formally dollarised, the construction industry's capacity utilisation has been low. According to the Construction Industry Federation of Zimbabwe's immediate past president, Philip Chiyangwa, the industry is operating at about 40 percent capacity.

Chiyangwa said to improve low capacity utilisation, there should be a concerted effort from government to award tenders biased towards local companies.

"The financial sector should also give loans to companies to replace the aging/obsolete equipment with latest technology that will help cut on costs," said Chiyaangwa in a recent interview with this newspaper.

At its peak, the construction sector is said to have employed more than 35 000 people but the figure dropped to just about 10 000 in 2012.

The industry is in need of fresh capital after the economic meltdown of the decade to 2008, coupled with a world recession, left many construction projects in the doldrums.

Virtually all construction projects ground to a halt as both the public and private sectors could not afford construction services, and most government projects contributed about 60 percent. There was very low savings in the economy as people had no disposable income resulting in low demand in building materials and construction services.

Chiyangwa said there were no mortgages to talk about in Zimbabwe, except for once-in-a-while lending when banks open short windows and for schemes offered by one or two property development companies.

Zimbabwe's construction industry has been facing financial constraints since the hyperinflationary period and is on record saying it wants government to introduce protectionist measures.

The local industry believes government, which is a major contractor, was awarding projects to foreign firms, relegating Zimbabweans to manual labourers.

Although the country has Statutory Instrument 171 of 2002 that compels government to contract locals, some players in the construction industry are saying the statutory instrument was not being adhered to by the State Procurement Board.

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