Dire straits in construction with unemployment and bankruptcy

07 December 2016 – More than 1600 employees in the construction sector will be unemployed by the end of December.

This week the Construction Industries Federation (CIF) released the results of a survey of 115 construction companies, showing that the government owes them more than N$1.003 billion.

Of the 115 survey respondents, 85 companies said they are in a cash flow crisis.

Bärbel Kirchner, the consulting general manager of the CIF says: “The situation is critical. 1 Billion Namibia Dollar is a humongous amount of debt – in fact, much more is likely to be outstanding as not all construction companies participated in the survey.

“Many of the businesses in the construction sector are sitting with a serious cash flow crisis, due to late payments. Companies are downsizing and retrenching, and many are staring bankruptcy in the face. This applies to the entire supply chain in the industry and unless the government acts rapidly and immediately and before closing for Christmas, we will have a Tsunami effect and a large chunk of the capacity in our industry will be wiped out” she stated.

“Not only will there be delayed progress or stoppages on projects but contractors will have great difficulty to meet their contractual obligations but more importantly, people’s livelihood is at stake. Between 1 September and 30 November 2016, a total of 1,008 employees of the 115 companies were retrenched, and an additional 604 persons will lose their jobs by the end of December 2016.”

The CIF survey reveals that for every 100 businesses in the construction sector, about 1600 breadwinners will be without an income and 13,000 dependants will be left destitute during the holiday season.

The solution to the crisis is held by the government. For the vast majority of the companies under distress, their financial woes will only become manageable once the government pays its accounts.

“Unless the government will have paid for the services provided by the industry, by the end of November 2016, six companies will be bankrupt; another 11 will have folded by the end of December and a further 11 will have borne the brunt by the end of March 2017” said Kirchner, implying that the process of implosion has already begun. By the end of 31 March 2017, 25% percent of the 115 companies that have participated in the survey will be bankrupt.

“It is possible that some businesses are insolvent and bankrupt already since not all construction companies participated in the survey” she concluded.

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