By Wakumelo Mataa CTPD Researcher-Public Finance
Over the recent past years, the Government of the Republic of Zambia (GRZ) has continued to implement an ambitious infrastructure development agenda in line with its short, medium, and long-term development plans. However, the Centre for Trade Policy and Development (CTPD) notes that it’s one thing to ‘build Zambia’, and quite another thing to have Zambians significantly participate in ‘building their country’.
The Centre has noted with great concern that Zambian contractors have continued to receive lower-valued projects such as road maintenance as opposed to construction. The 20 percent sub-contracting policy aimed at increasing local participation, in its current form, only seeks to increase the number of sub-contracts awarded to local contractors without any regard to the value of these contracts. Further, it is our considered view that local contractors, to a larger extent, do not have the capacity to compete for contracts with their foreign counterparts on account of some peculiar challenges they face which includes limited access to plant and equipment, limited access to lines of credit, few skilled personnel, limited roadwork experience and poor construction management and organization skills.
In view of the foregoing, CTPD observes that “Zambians are not adequately participating in building Zambia.” Moreover, given that most of these projects are financed through debt, the continued dominance of foreign firms in the sector externalizes a considerable proportion of funds from the Country and thus makes it increasingly difficult for Government to raise enough domestic resources to pay back debt and support other programmes. The government should therefore scale-up efforts to increase the capacity of local contractors through skills development, skills transfer, and increased access to finance. There is need to extend the 20 percent sub-contracting policy beyond road construction and transform it into an enforceable law in order to enhance monitoring and compliance.
Furthermore, the policy should be enhanced by attaching a value measure as opposed to a quantity measure. In its current state, foreign firms will have an incentive to sub-contract low-valued projects to local contractors while retaining high-value rojects.
CTPD learnt through a recent assessment of the construction sector that from 2017 to 2018, the number of contracts awarded to local contractors declined marginally, falling by 1.4 percent to 336 in 2018 from 349 in 2017, relative to the decline in the number of contracts awarded to foreign contractors which contracted by 6 percent to 73 in 2018 from 93 in 2017. However, over the same period, the value of contracts awarded to local contractors dwindled by 47 percent to K15.3 billion in 2018 from K29.1 billion in 2017 where as the value of contracts awarded to foreign contractors rose sharply by a staggering 63 percent to K30 billion in 2018 from K11.6 billion in 2017.