THE Construction Industries Federation (CIF) hosted its first Annual Construction Conference.
The purpose of the conference is to bring together the members of the CIF and key private and public sector stakeholders to discuss the current state of the industry and to highlight the opportunities for the building and construction sector, despite the current economic environment Namibia finds itself in.
Giving a presentation on the current state of the Economy & Macro Economic Environment, Economist from Cirrus Capital, Robert McGregor, stated that from 2016 the mining and construction sector contracted by 2% annually.
He further stated that blaming external factors as the cause of this economic contractions is not completely true as the sub-Saharan region for the last 2 to 3 years has been achieving a 3% GDP growth on average. McGregor stated that Namibia will only actively fight unemployment when the economy can grow to about 4% annum.
He further added that on average, government contributes 23.5% to GDP and has done well in keeping its expenditure low.
McGreggor added that the increase in the development budget will boast the construction sector.
Namibia has increased its development budget to 42%, aiming to stimulate its ailing economy. This translates into an injection of N$7.9 billion from N$5.6 billion the previous year.
The economist, however, stated that during the mid-term budget review, N$1 billion of these funds were moved to operational expenditure which undermines efforts to resuscitate the sector.
“The construction sector faces a multitude of challenges such as a weak macro environment, a property market with low consumer demand and low inflow of FDIs,” McGreggor stated.
Giving a presentation on the state of the construction industry, President of the CIF, Nico Badenhorst, stated that the current economic developments are very destabilising for the construction industry.
He added that employment in the construction sector decreased by 26% in 2018, with an estimated 3,857 retrenchments. He added that these retrenchments were mostly on the back of construction companies making none to little turnover.
Badenhorst stated that government spending has accounted for an average of 81.6% of the construction sector over the past 10 years, therefore being the main driver of the sector.
“Hence, the contraction in the construction sector in2016 as government embarked on fiscal consolidation. Stepping back 3 years, construction contributed close to 7.2% to GDP, that has almost halved to 2.9% in2019,” he stated.
Badenhorst further expressed optimism and stated that government capex budget on construction, renovation and improvement has been increased by 28.7% for the year 2018/19 and by 26.8% in 2019/2020 and that this could provide a temporary upside in construction sector.
He further advised government to simplify and Ring Fence Contracts for Namibian owned and managed businesses in the short term.
“Projects like TIPEEG had very good objectives, but we implemented poorly. These types of projects can be geared to upskill and employ Namibians easily. These can be simplified contracts with relaxed terms and conditions to allow the industry to recover,” Badenhorst advised.
In the Q & A session, members of the construction industry federation mostly bemoaned the current awarding of multi-million-dollar tenders to international companies. Industry members stated that they are required to submit proof of work experience on construction work and externally audited or reviewed financial statements for the last three years to with a certain turnover in order to be awarded big contracts. They added that this practices actively restricts local companies which have been unable to make huge profits due to the current economic situation.
Construction company owners stated that it is imperative that financial resources allocated in the national budget circulate in the domestic economy, as more money spent locally will have a greater impact on economic growth and job creation.
They added that in order to achieve this, companies should be willing to work together on big projects which are usually allocated to Chinese multi-national companies due to their size and complexity.