Covid coming down like ton of bricks
Namibia’s construction industry needs work urgently or there will be mass retrenchments and company bankruptcies in the sector.
Jo-Maré Duddy – More than 72% of construction companies in Namibia have been running at a loss so far this year, a precarious situation worsened by the lockdown and the extension thereof.
Most of them have to rely on bank overdrafts to keep their businesses running.
A total of 61 companies recently survey by the Construction Industries Federation of Namibia (CIF) said the Receiver of Revenue owed them about N$8.4 million in total in refunds of value-added tax (VAT).
In addition, government owed them a total of N$192 million in unpaid invoices.
Launching government’s economic stimulus and relief package on 1 April, finance minister Iipumbu Shiimi pledged to accelerate the repayment of overdue and undisputed VAT refunds. He further said government would “immediately speech up” the payments of overdue and undisputed invoices of goods and services.
The ministry of finance yesterday couldn’t tell Market Watch how much of this money owed to the private sector has been paid yet. However, the ministry’s chief public relations officer, Tonateni Shidhudhu, said these figures would be available today.
“We are extremely worried that most of our businesses will not survive the lockdown period,” the general manager of the CIF, Bärbel Kirchner, yesterday said.
The chances of retrenchment and closure of businesses is huge, Kirchner told Market Watch.
An estimated 15 500 people currently work in the construction sector following massive lay-offs since Namibia first fell into a recession in 2016.
“Considering that one income supports at least eight persons – probably many more now – that would mean that 124 000 individuals would be affected,” she said.
Survey
About 68.3% of construction companies included in the CIF survey said they suffered losses in the 2019/20 financial year. Year-to-date, 72.13% are in the same predicament
About 17.65% of those lucky enough to make profits, have to use it to cover their expenditures. Nearly 57% need overdrafts to pay for expenses, while nearly 5.9% make use of loans and about 13.7% of personal finance.
“If we bear in mind that close to 70% are already operating at a loss, it means that the scope is extremely limited for companies to continue operating if there will not be any scope to generate any income soon.
“Companies are already heavily indebted due to recessionary environment since 2016. They have obligations to meet with their financial service providers,” Kirchner said.
Four tough years
The industry has been suffering huge losses already over the last four years, she said.
“Since 2015, the average contraction of the construction sector was 12%, with a massive 34.4% contraction in 2016. This had led to extensive business closures in the industry. Four years ago the industry contributed 7.2% to Namibia’s GDP [gross domestic product]. This has dropped to 2.7% in 2019,” Kirchner explained.
This has left “all the companies in the sector extremely vulnerable, many of which are at the brink of collapse”, she added.
Many businesses have already closed as a result of reduced spending by government, as well as the lack of domestic investment by the private sector and foreign investment.
The CIF survey suggests that without any income in the near future, many more businesses will close down, irrespective of any financial support by Government that will be extended to the employees in the sector, Kirchner warned.
‘Open the sector’
“We appreciate the enormous effort taken to contain the spread of the virus and the support extended to individuals and businesses, where possible,” Kirchner said.
However, the CIF is “extremely worried about the impact on our businesses that we can foresee now as result of measures taken in response to Covid-19”.
“We therefore feel that through commencing with work soonest and a carefully deliberately strategic approach we can stop the tide of further increasing unemployment,” Kirchner said.
This will not only also help to alleviate the current strain on government in supporting the most vulnerable through the replacement or supplementation of income, but also will ensure that the construction sector is able to immediately start contributing to the economy, she continued.
The construction sector is vital sector and can also be a catalyst for growth in other sectors, the CIF believes.
‘Essential service’
“If the construction sector were to be considered as an essential service and were to be opened up immediately, it can essentially contribute to the creation of employment and contribute to the much needed revenue by government,” Kirchner said.
She added: “The construction sector not only contributes to building the much-needed emergency infrastructure and the roads and facilities needed by those that provide essential services, but is also can assist with alleviating the strain on government’s financial resources.
“If businesses in our industry are engaged immediately, obviously with strict measures to prevent the spread of Covid-19, we can start to effectively contribute to Namibia’s economy in the interest of us all.”
“For example, we can look at securing that already priced infrastructure related tenders are finalised as soon as possible and that new infrastructure project that had been considered for the 2020/21 financial year will be sped up and that procurement-related restrictions are lifted with related procurement regulations,” Kirchner said.
‘Comprehensive approach’
“We need a comprehensive approach,” Kirchner urged.
“Through a careful strategically mustered approach by actively engaging and focusing on the Namibian construction sector, we can make big strides forward in view of saving not only the industry, but also securing the survival of parts of our economy.
“We simply cannot have a scenario that our industry will collapse and Namibians will no longer be able to build their own infrastructure in the future and massive resulting unemployment.
“This will increase our dependency on resources not available in Namibia, at a much bigger cost, to the detriment not only of ourselves but the detriment of future generations,” Kirchner said.
Most of them have to rely on bank overdrafts to keep their businesses running.
A total of 61 companies recently survey by the Construction Industries Federation of Namibia (CIF) said the Receiver of Revenue owed them about N$8.4 million in total in refunds of value-added tax (VAT).
In addition, government owed them a total of N$192 million in unpaid invoices.
Launching government’s economic stimulus and relief package on 1 April, finance minister Iipumbu Shiimi pledged to accelerate the repayment of overdue and undisputed VAT refunds. He further said government would “immediately speech up” the payments of overdue and undisputed invoices of goods and services.
The ministry of finance yesterday couldn’t tell Market Watch how much of this money owed to the private sector has been paid yet. However, the ministry’s chief public relations officer, Tonateni Shidhudhu, said these figures would be available today.
“We are extremely worried that most of our businesses will not survive the lockdown period,” the general manager of the CIF, Bärbel Kirchner, yesterday said.
The chances of retrenchment and closure of businesses is huge, Kirchner told Market Watch.
An estimated 15 500 people currently work in the construction sector following massive lay-offs since Namibia first fell into a recession in 2016.
“Considering that one income supports at least eight persons – probably many more now – that would mean that 124 000 individuals would be affected,” she said.
Survey
About 68.3% of construction companies included in the CIF survey said they suffered losses in the 2019/20 financial year. Year-to-date, 72.13% are in the same predicament
About 17.65% of those lucky enough to make profits, have to use it to cover their expenditures. Nearly 57% need overdrafts to pay for expenses, while nearly 5.9% make use of loans and about 13.7% of personal finance.
“If we bear in mind that close to 70% are already operating at a loss, it means that the scope is extremely limited for companies to continue operating if there will not be any scope to generate any income soon.
“Companies are already heavily indebted due to recessionary environment since 2016. They have obligations to meet with their financial service providers,” Kirchner said.
Four tough years
The industry has been suffering huge losses already over the last four years, she said.
“Since 2015, the average contraction of the construction sector was 12%, with a massive 34.4% contraction in 2016. This had led to extensive business closures in the industry. Four years ago the industry contributed 7.2% to Namibia’s GDP [gross domestic product]. This has dropped to 2.7% in 2019,” Kirchner explained.
This has left “all the companies in the sector extremely vulnerable, many of which are at the brink of collapse”, she added.
Many businesses have already closed as a result of reduced spending by government, as well as the lack of domestic investment by the private sector and foreign investment.
The CIF survey suggests that without any income in the near future, many more businesses will close down, irrespective of any financial support by Government that will be extended to the employees in the sector, Kirchner warned.
‘Open the sector’
“We appreciate the enormous effort taken to contain the spread of the virus and the support extended to individuals and businesses, where possible,” Kirchner said.
However, the CIF is “extremely worried about the impact on our businesses that we can foresee now as result of measures taken in response to Covid-19”.
“We therefore feel that through commencing with work soonest and a carefully deliberately strategic approach we can stop the tide of further increasing unemployment,” Kirchner said.
This will not only also help to alleviate the current strain on government in supporting the most vulnerable through the replacement or supplementation of income, but also will ensure that the construction sector is able to immediately start contributing to the economy, she continued.
The construction sector is vital sector and can also be a catalyst for growth in other sectors, the CIF believes.
‘Essential service’
“If the construction sector were to be considered as an essential service and were to be opened up immediately, it can essentially contribute to the creation of employment and contribute to the much needed revenue by government,” Kirchner said.
She added: “The construction sector not only contributes to building the much-needed emergency infrastructure and the roads and facilities needed by those that provide essential services, but is also can assist with alleviating the strain on government’s financial resources.
“If businesses in our industry are engaged immediately, obviously with strict measures to prevent the spread of Covid-19, we can start to effectively contribute to Namibia’s economy in the interest of us all.”
“For example, we can look at securing that already priced infrastructure related tenders are finalised as soon as possible and that new infrastructure project that had been considered for the 2020/21 financial year will be sped up and that procurement-related restrictions are lifted with related procurement regulations,” Kirchner said.
‘Comprehensive approach’
“We need a comprehensive approach,” Kirchner urged.
“Through a careful strategically mustered approach by actively engaging and focusing on the Namibian construction sector, we can make big strides forward in view of saving not only the industry, but also securing the survival of parts of our economy.
“We simply cannot have a scenario that our industry will collapse and Namibians will no longer be able to build their own infrastructure in the future and massive resulting unemployment.
“This will increase our dependency on resources not available in Namibia, at a much bigger cost, to the detriment not only of ourselves but the detriment of future generations,” Kirchner said.
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