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Construction remains shaky

- 2022-04-19 00:00:00

Bärbel Kirchner - No significant improvement for the construction sector can be anticipated for 2022, although the predicted contraction of 2% by the Bank of Namibia (BoN) is far less than the drastic contractions since 2016.
Fortunately, there seems to be light at the tunnel as the BoN anticipates a moderate growth of 2.5% in 2023 for the sector. However, this prediction was before the outbreak of the war in Ukraine.
The sector was hard hit due to the Namibian government’s fiscal consolidation and the lack of significant spending on infrastructure projects since 2015; and then was further strained by the two-year pandemic in 2020 and 2021.
Currently, the non-payment by government of infrastructure projects has also led to projects being suspended, which has led to further retrenchments in the industry.
COSTS
The war in the Ukraine is likely to have detrimental effects on the global as well as the Namibian economy.
It can be anticipated that the construction sector will experience severe supply chain problems. The increase of oil and gas prices can impact the cost of production and transportation of equipment and materials. This in turn will lead to delays and an overall increase in building and construction cost.
The resulting increase in fuel and food prices will once again mean that households will have less money to spend. An overall inability or reluctance by the private sector to invest will mean that the demand for building and construction services is unlikely to increase in the short term. It also appears that the government is unlikely to be in the position to increase capital spending.
OPPORTUNITIES
Although there is an enormous demand for low-cost housing in Namibia, which in principle could be an opportunity, the current related cost would make it nearly impossible to build something that that this market segment can afford.
Delays due to bureaucratic inertia also have a big impact building cost and hinder the optimisation of delivery of low-cost housing units.
There may well be an opportunity due the future production of green hydrogen but that is unlikely to be in the short term. However, once development and construction of the plants were to commence, it would lead to the creation of employment.
Ultimately, the biggest opportunity would be if majority Namibian-owned businesses were given explicit preference when awarding government contracts – even though spending has reduced.
Treatment should not only consider supporting the youth, women and previously disadvantaged persons.
On the contrary, all Namibian-owned businesses need to be given preferential treatment. The phenomenon of tenderpreneurs, middlemen or agents, should also no longer be tolerated, as this often leads to joint ventures with foreign companies. This hinders the maintenance and continued development of Namibia’s overall construction capacity.
Every effort should be made to focus on job creation and that the money remains in circulation in Namibia. Foreign companies are less likely to pay corporate and employee taxes. Indeed, there is also an opportunity for Namibian companies to create joint ventures.
COUNCIL
It remains of critical importance that a Namibian Construction Council (NCC) will be established as soon as possible. This would mean that every business in our sector is registered with the council, irrespective of whether it is a SME or a large-size contractor.
Once every business in Namibia is registered with the NCC, there will also be a complete understanding of the actual capacity of the Namibian building and construction sector. Accordingly, the size of projects can be aligned to that. At the same skill development can very targeted.
The biggest opportunity would lie in greater Namibianisation.
At the same time, with limited financial resources in Namibia, it is critical Namibia’s investment climate would be of such a nature that it attracts foreign and domestic investment. For that to happen, it remains important that related government policies are prudently reviewed to ensure investor confidence both in the short and the long term.
Bärbel Kirchner is the consulting general manager of the Construction Industries Federation of Namibia (CIF).