CONTRACTORS across Zimbabwe are sounding the alarm over chronic payment delays from government, warning the sector’s survival is at stake. To delve deeper into the crisis, senior reporter Freeman Makopa (FM) spoke with Zimbabwe Building Contractors Association president Tinashe Manzungu (TM, pictured). Below is how their discussion turned out:
FM: Contractors are concerned about delays in payments. Please update us on the current status of this matter?
TM: We still have some of our members being owed by the government. It is unfortunate that some of these outstanding figures are dating back to 2024.
FM: What has been the impact of delayed payments?
TM: This has a negative effect on some of the contractors. Going forward, we are saying the door is still open for the government to confidently come and sit down and discuss with us on how best we can cover or have these payments done.
FM: How have currency instability, high inflation and exchange rate volatility affected contractors’ ability to plan and complete projects?
TM: We agree, the issue of the Zimbabwe Gold (ZiG) is quite under control at the moment. We should appreciate the Reserve Bank in making sure it has tight control in terms of that. We have seen stability over the months, and that speaks to the usage of ZiG, where national projects are being paid for in ZiG, if any, are showing signs of stability. On the positive trajectory, you also understand that we also have payments in US dollars. You see, more of these big projects are also attracting US dollar payments, which is something that the contractor is happy about. It is something that we have engaged over time with the government, to prioritise or consider marrying the two currencies, ZiG and the US dollar. That has actually happened. However, the payments probably could be 30% in US dollars, 70% in ZiG, in most of the contracts.
FM: Can you say this is a positive trajectory?
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TM: This is something that is positive, that has not been happening. In this case, you will see that in most projects the ZiG component is actually lagging behind as compared to the United States dollar component. There is payment that is happening within the United States dollar environment and we appreciate that.
FM: Tell us about your challenges in securing funding from international financial institutions?
TM: When there is a project of national interest, we usually find investment but investment comes with guarantees. So, when you find an international investor who wants to bring in investment, the first (issue)…is that they are aware of our currency issues; they are aware of the sanctions issues. That is not a deterrent measure for them not to come for investment. But (what) gives them confidence is a guarantee from the government, not an insurance guarantee from these insurance companies we have. That is the only way we can improve our liquidity position, improve our international funding position, and improve on the deliveries in terms of infrastructure values. Right now, we do not have the funding in the country. Investors are not eager to lend to the government directly. But they are eager to lend to the private sector. And most of these local investors or even contractors (want) government guarantees. If that can be made easier, the same way local insurance or local bank guarantees are being processed now, I think we will have a jump in terms of investment.
FM: What current opportunities exist within the construction sector?
TM: We quite have a lot of investment opportunities in the construction sector. Construction is an enabler to economic development. Construction is not an economic development institution, but it is an enabler. Most of these ministries have work to do.
The Ministry of Health wants clinics and hospitals to be built, the Ministry of Lands wants dams to be constructed, the Ministry of Energy wants power stations. All ministries do have an instrument in their capital bank that speaks to investments in infrastructure. But you can see that if you devolve going into provinces, we have local authorities vying for or trying to look around for investment in infrastructure projects. The demand for infrastructure projects is higher than anything else that we have.
FM: What does that mean?
TM: It speaks to affinity to investment in the infrastructure sector as well as to our National Development Strategy (NDS)2 that is beginning next year. Now we are getting to the end of NDS1. But the big question is, have we achieved the expected percentage on delivery of enablers to economic development? For someone to be interested in coming to invest in Zimbabwe, the big question that person wants to ask you is to say, do we have the enablers to establish a mine? We are talking of power, access to power. Do we have dams?
FM: So, failure to have these deliverables means we are not ready for international investment?
TM: The moment we don't have telecoms, water, energy, roads, then it means we are not ready for investment. We are not ready to turn on our economic development chapter. It is very much important that we sit down and have a discussion.
FM: As an association, what is currently your top priority?
TM: We cannot say the government is to give us money…we believe there are supposed to be international funds. There are supposed to be international investments. From the government, it is all about creating an enabling environment that allows us not to depend on the money that they have. We have banks, we have investors who are willing to come on the table and sit directly with us as private individuals.
FM: What do you lack?
TM: What we lack is the working capital. Since our banks cannot afford to assist us in this regard, it is always good for us to be prudent that we open up for international financiers. From the government, we do not only need money. What they have done is what they can afford.
And what they can afford today can be multiplied several times by our participation in the national development journey through engaging foreign investors in the country. The moment foreign investors come into the country, it means more taxes for the government. It means more royalties for the government. It means more income for the government.
It also speaks to the growth of gross domestic product through that. We simply want a level playing field. All these other things will open up for themselves.
FM: How have taxes affected your operations?
TM: The taxes are too high. Remember, we are in a period of national development. And just in December last year, there was a tax incentive that was issued by the Finance minister on anyone who is developing or building a smart city. You see, the government is promoting anyone developing or building or participating in the development of a smart city, meaning to say they are very much aware that they want to see smart cities mushrooming around. What we are saying is, can that also include any other development that is happening in the country, not only restricted to smart cities because we have quite a lot of things to do as a country. So, incentives that are actually welcomed by contractors or investment agencies who are operating in Zimbabwe, are issues to do with taxes. You see that bricks are now attracting taxes, something that was not there previously.
FM: That adds more costs to your operations?
TM: When we come to the government and they quote you for buildings to be built, the cost will go up because we have also added taxes. It is an egg and chicken situation.
