Zimbabwe: Construction Sector in Limbo

The construction sector has performed dismally in the first half of the year with a number of contracts either shelved or cancelled altogether.

As a result of the deepening economic crisis characterised by foreign currency shortages, a debilitating liquidity crunch, runaway inflation, policy inconsistency and massive power cuts, companies in the construction sector are battling to remain viable.

In an interview, Zimbabwe Building Contractors' Association president Francis Mangwendeza said the sector has been hard hit by the economic downturn.

"The construction sector has not fared well at all during the first half of the year. A considerable number of contracts have been cancelled, shelved or are in limbo because contract budgets or monetary provisions have suddenly been eroded and require funding that is now nine times higher than before," Mangwendeza said.

"This lack of contract activity has led to substantially high numbers of company closures. As a result, companies have terminated employee contracts, leading to very high levels of unemployment for construction workers. For those companies still operational, the employee numbers have been reduced drastically."

He pointed out that the situation is even worse for workers in the sector because a large number of them are no longer employed and, for those that are still "lucky" to be employed, their wages have been drastically eroded and they can barely sustain themselves at the current levels.

On Statutory Instrument 142 of 2019 which banned the use of the multi-currency regime and made the Zimbabwe dollar the sole legal tender, Mangwendeza said the policy has brought about further difficulties for the sector.

"SI 142 came at a time when the industry was adjusting to the issue of converting US dollar contracts to ZWL. The issues that were relevant then remain. The industry has a long cycle from tender to completion, thus the biggest problems that the industry faces are to do with economic stability," he said.

"For prior existing contracts transitioning from US dollar contracts into ZWL has remained a thorny issue. For contracts that were completed in US dollar there are outstanding issues involving outstanding claims including retention amounts that remain unresolved.

We are cognisant of our clients' position which is that tenders that were previously, for example, one million dollars, are now valued at nine million dollars, an increase which most clients are struggling to fund."

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