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Construction sector still facing credit challenges - Stanbic

Construction sector still facing credit challenges - Stanbic
By Fridah Zinyama
Friday October 26, 2007 [04:00]

STANBIC BANK has said Zambia's construction industry still faces challenges in obtaining long-term financing although the sector has expanded significantly.
According to a survey on the industry by the bank, the construction industry has grown but players still find the high interest rates by the banks prohibitive. The bank notes that the recent extension of the yield curve by banks to 15 years would facilitate the pricing of long-term infrastructure projects.

"The issuance of longer-term bonds has been well received by domestic and foreign investors. Domestic appetite stems from pension funds and insurers and is expected to drive yields down," the bank states.

Stanbic Bank noted that the scenario would however improve with a lower reserve requirements' ratio, which was expected to increase loanable funds to the sector.

"It is anticipated that the lower reserve requirements ratios will translate into lower lending rates which is further expected to support further easing of the cost of credit," the bank states.

Stanbic Bank states that interest rates are expected to ease over the medium term, thus increasing the accessibility of credit.
"However, the prospective transfer of the government's deposits to the Bank of Zambia may counter the effect of the cut in the reserve requirements ratio, to some extent," the bank observes.

The bank states that to ease the financing constraints, contractors seeking to build infrastructure or other large development projects are pursuing public-private partnerships.

"The authorities, with the assistance of donors, can provide the financing and the private partner can bring in the management expertise," Stanbic Bank states.

According to a member of the National Council for Construction (NCC), the lack of skills is a significant constraint in the development of the construction industry, which could manifest in an imbalance in the relationship between the private and public partners.

Labels: CONSTRUCTION

posted by MrK @ 7:08 AM