Construction sector on profitability alert despite TIPEEG

The construction industry is under financial strain despite the government’s expansionary budget that has largely focused on infrastructure development in the past three years, the Construction Industries Federation of Namibia (CIF) has said.
According to Bärbel Kirchner, Consulting General Manager of the CIF, a recent survey targeting 54 respondents showed that profitability of 66.7% of respondents has either remained the same or had deteriorated in the last financial year while 22.9% of respondents were less profitable than the 12 months before. Factors affecting profitability included availability of work; competition from foreign companies; labour costs; costs of material; capital requirements as well as the absence of experienced human resources.
Kirchner said the results of the survey did not appear to give the necessary scope to allow significant investments into the business for most respondents. She said: “It is generally known that government’s expansionary budget and programmes like TIPEEG and other development programmes focused largely on infrastructure development with the aim of rapidly creating employment.
However, irrespective of the government’s growth strategy, real impact can only be secured if government purchasing power is appropriately channeled to ensure an optimal flow of goods and services considering the interests of Namibian business.”
The Construction Industries Federation said it continues to hold several meetings with government to ensure greater involvement of bona fide Namibian businesses in big projects as local companies have significant capacity. She, however, conceded that some projects such as the Neckartal Dam and the proposed Walvis Bay Port expansion would require the involvement of foreign expertise and related financial capacity.
“In that case, bureaucracy cannot become a hindrance. Namibian companies must be able to complement their own capacity by being able to source foreign skilled workforce. The issuing of work permits must be expedited to ensure timely and efficient project implementation. This would also lead to an effective transfer of skills and the gradual but certain building of local capacity,” Kirchner said.
She said she is pleased to note that government is keen to ensure that new tender board regulations will recognise the interests of bona fide Namibian companies, Namibian manufacturers, as well as the greater involvement of SMEs.
She added: “Government appears to support also greater decentralisation of public procurement. Related capacity building of respective authorities will be very important to ensure the swift implementation of projects. It is important that effective controls are in place and that in the future greater transparency exists. There should be little need for exempting government projects from tendering processes.”
Kirchner said the federation is looking forward to working closely with central, regional and local tendering authorities, and state-owned enterprises. “We would like respective authorities and organisations to further acquaint themselves with local Namibian capacities also within the regions of Namibia. Our new marketing and communication tools such as our website www.cifnamibia.com as well as our annual directory (we are currently compiling a 2013/2014 edition) should help raising this awareness,” she said.
The Construction Industries Federation has more than 250 members. During the last financial year alone, membership grew by 60%.