Wednesday, February 04, 2009

Construction boby laments ban on advance payments to contractors

Construction boby laments ban on advance payments to contractors
Written by Florence Bupe
Wednesday, February 04, 2009 11:08:57 AM

THE National Construction Council (NCC) has said the banning of advance payments to contractors has increased overall construction costs by about 40 per cent.
And the council has called for massive investments in the construction sector as a guaranteed measure for job creation.

NCC executive director Dr Sylvester Mashamba said the decision by government to discontinue with advance payments had pushed contractors to resort to high rate borrowing to finance their works.

“The government’s decision to ban advance payments to contractors also had the adverse effect of increasing overall construction costs by as much as 30 to 40 per cent as contractors resorted to high rate bank borrowing to finance their projects,” Dr Mashamba said.

He also noted that the ongoing global financial crisis was posing a great challenge to the country’s construction sector.

“The year ended with the global credit crunch, which was like the last nail in Zambia’s construction industry coffin,” he said.

Dr Mashamba added that the decision by the government to cancel the hosting of the 2011 All-Africa games contributed negatively to the woes of the Zambian construction industry.

He said there was need to scale up construction activities if the provision of various social amenities was to be adequately met.

“There is definitely need for increased construction activities if the provision of water and sanitation, railways, roads and other vital facilities are to be realised. The construction industry is very significant to the attainment of development aspirations in any country,” he said.

Dr Mashamba noted that the construction industry outlook for 2009 was bleak under the prevailing global financial challenges.

“From the outset, the prospects for the Zambian construction industry in 2009 and beyond, given the current economic circumstances, are not good especially given the experiences in the past,” he said.

And Dr Mashamba emphasised the importance of the construction industry in curbing the challenge of high unemployment levels in the country.

The construction industry is credited for being one industry which is very labour intensive, thus massive investment in this sector always creates massive job opportunities at a time when most sectors will be laying off workers,” Dr Mashamba said.

“It is important to remember, however, that for this economic theory to succeed, you need to have a very low import content construction industry which also imports very little foreign labour, otherwise you end up importing unemployment.”

He observed that the foreign labour content for Zambia was still high and that pumping money into the industry as a stimulus to address the economic recession would backfire.

“Addressing the current global recession requires planning and understanding the forces at play. The construction industry offers the best instrument for addressing the recession problem. We should further be reminded that heavy investment in infrastructure development during a recession has the added advantage that after the recession is over, the country will stand to benefit from a good infrastructure that can be used to attract foreign direct investment (FDI),” said Dr Mashamba.

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