Solid foundation for healthy construction

Government spending has accounted for an average of 81.6% of the construction sector over the past decade, therefore being the main driver of the sector, Nico Badenhorst, president of the Construction Industries Federation (CIF), says.

Speaking at the recent annual construction conference organised by the CIF, Badenhorst said government’s fiscal consolidation stance which started in 2016 has resulted in the contraction in the sector.

“Stepping back three years, construction contributed close to 7.2% to gross domestic product (GDP); that has more than halved to 2.9% in 2019.”

The CIF proposed several measures which could aid in the revival of the sector, one of them the establishment of a national construction industry council.

Such a council will promote and develop the industry in Namibia, require the registration of persons engaged in it and protect of the public from unscrupulous contractors.

It will furthermore coordinate technical training of contractors and capacity-building for contractors, and advise the authorities on all matters relating to construction industry.

Procurement

Procurement preferences for local contractors will level the playing field, Badenhorst said.

It will value and realign the economic benefits of local procurement versus regional and foreign procurement, while taking into account issues of contract size, location, material sourcing, ownership, youth, women, previously dis-advantaged persons, experience and access to finance.

“This would also allow contractors to grow gradually, sieving out the ones who do not perform,” he said.

Ring-fencing contracts

He suggested simplifying and ring-fencing 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 up-skill and employ Namibians easily. These can be simplified contracts with relaxed terms and conditions to allow the industry to recover,” Badenhorst said.

Bond exemption

Local companies should be exempted on bid bond for some of contracts of the African Development Bank (AfDB), he said.

“Some of the large projects financed through the AfDB require bid bonds in excess of N$4 million. This is a major restriction for local companies and only appeals to foreign firms that often employ their own citizens.

“By exempting the demand irrevocable or bank guarantees on these projects, more local firms can participate in some of the projects,” Badenhorst said.

Large contracts

The current N$250 million-dollar upgrade of the Hosea Kutako airport is a good example of closed bids for large contracts, he said.

“Competent contractors are shortlisted and the desired objective can be incorporated into the bidding process – e.g. proof of local employment should be presented at all progress meetings including social security numbers and ID numbers of all labour. The project costs are contained and managed during the negotiation stage.”

Labour-based contracts

According to Badenhorst, the Roads Authority is currently the only state-owned enterprise doing these types of contracts.

“This would typically be a gravel road, but part of the bidding process would require that the main contractor (large plant operator/owner) would be required to submit his bid with several sub-contractors whose work is done in ‘tasks’ (concrete works or de-busing).

“This type of procurement could be done using a normal contract with best practice much quicker and cheaper, but the high employment benefits and economic multiplier effect are the key objectives on these projects,” Badenhorst said.

JVs and consortiums

Local companies have on several occasions created joint ventures (JVs) or consortiums to leverage their financial and technical capacity, he said.

“Over the past few years, SOEs like Roads Contractor Company (RCC) have been granted tender exception, negotiated rates and sold or partnered with foreign firms.

“This robs the SOE of the opportunities to use its resources and deprives the industry of the need work. If the RCC partnered with local consortiums and JVs, good governance, local employment, the economic multiplier effect, and up-skilling of staff are some of the benefits one can expect to see from the initiative,” Badenhorst said.

PPPs

Public-private partnership (PPP) appetite and understanding should be stimulated and accelerated, he said.

“Despite the advantages that PPPs bring, the engagement in PPPs across the Sub-Sahara region remains small and concentrated only in a few countries, such as South Africa, Uganda and Kenya. This may be as a result of bad experiences in the past due to ill-prepared PPPs or even PPPs undertaken with less-than competent PPP project sponsors,” Badenhorst said.

“Namibia has an opportunity to introduce the PPP concept correctly and ensure confidence in the model. The large finance infrastructure gap can be sufficiently filled using PPPs,” he concluded.