By: Justicia Shipena
Despite existing procurement policies and laws of the African Development Bank (AfDB), efforts need to be made to engage local majority Namibia-owned businesses.
This was the view of the Construction Industries Federation of Namibia (CIF).
CIF recently met with an AfDB delegation in Namibia ahead of a public tender for the upgrade of the railway line between Kranzberg to Tsumeb.
The meeting with AfDB was aimed at raising awareness among international financiers about the absolute necessity and urgency of supporting majority Namibian-owned local contractors.
CIF Chief Executive Officer Bärbel Kirchner stressed that it is vital for tender requirements to meet both the AfDB policy and legal requirements.
“They must also align with the reality of the Namibian economy and construction sector. This could mean that the rehabilitation of the railway line project between Kranzberg and Tsumeb will be divided into smaller lots,” she said.
This, she said, would allow the majority Namibian-owned contractors to meet the financial pre-qualification requirements.
According to her, taking into consideration that the management of the project might become more demanding, the size of the lots should at least be small enough that two majority-Namibian owned contractors can tender together as a local joint venture.
At the same time, she lamented that pre-qualification requirements of previous projects financed by the AfDB had left Namibian-owned contractors excluded.
In this she gave an example of a case in 2018, when the railway line between Walvis Bay and Karibib had been upgraded.
This contract was awarded to China Gezhouba Group Corporation which largely had subcontracted the work to DMRail.
Kirchner said at that time Namibian contractors were not in the position to tender for pre-qualification as financial criteria were too steep.
“The criteria considering the value of previous projects completed, was also unrealistically high. Indeed, the situation was similar with the road project between Windhoek and Hosea Kutako International which had been awarded to a foreign contractor.”
Kirchner explained that it was not possible for local Namibian contractors to meet the turnover and cash flow requirements, despite having had the right technical skills.
In addition, she bemoaned the fact that the requirements of previous tenders were not necessarily project specific.
She also stressed that the award of contracts to foreign contractors needs to be reconsidered.
Kirchner stated that the construction sector has been in a recession since 2016, which has led to many closures and bankruptcies of construction businesses.
Statistics show that in 2015, the contribution of construction was 7.2% to GDP and currently stands at less than 2%.
Last year it was reported that the construction sector performance declined by 43.7% in real added value during the third quarter of 2021.
The massive decline was said to have been reflected in reduced government spending on construction.
Numbers by the Namibia Statistics Agency (NSA) stated that the real value of government expenditure on construction also declined by 46.1% during 2022.
“The consequence is that many employees had to be retrenched and close to 50% of those engaged in the construction sector, had lost their job. This also has meant that workers and professionals were retrenched; and many professionals have left the country with the consequential brain drain and related opportunity cost,” the CIF chief noted.
At present, Kirchner said the private and public demand for building and construction works is very limited, which in her view will lead to more retrenchments in the near future.
She said it is critically important that the local construction sector is stimulated again with consequential positive macroeconomic implications.
“This can be achieved by corporate and individual tax contributions, as well as taxes on trade and taxes on consumption. This is very unlikely to happen optimally if the railway rehabilitation project is again awarded to a foreign contractor,” Kirchner argued.
Still on the foreign contractors, she said an argument was raised that foreign contractors were often able to offer a lower bid.
Kirchner said this is as a result of having access to state-sponsored cheaper finance by the sending state and therefore would make it difficult to compete on price.
However, she added that irrespective of the appointment of foreign contractors there are still macro-economic, social and political implications, considering the current country-wide unemployment, poverty and inequality.
“It is critically important that every opportunity is sought to create employment and fair jobs. Construction is one of the sectors that allows for swift engagement with immediate impact.”
Thus, the CIF has suggested that AfDB look at other African countries where the construction sector had faced similar predicaments and were potentially misplaced by foreign contractors.
Although it was stated by the AfDB procurement specialist in the meeting that it was country specific, it was affirmed that larger projects were divided up into smaller projects.
“This could potentially serve as an example for Namibia,” CIF concluded.