daniel chigunweBusiness Writer
The construction sector, which plays a critical role in infrastructure development and economic growth, is grappling with multiple challenges that threaten its long-term sustainability, this publication can report.
The 3rd Quarter 2024 Business Tendency Survey (BTS) released by the Zimbabwe National Statistics Agency (ZimStat) reveals a concerning outlook for the sector, marked by declining business confidence, rising costs, and stagnant demand.
According to the survey, the sector experienced a significant drop in business confidence during the 3rd quarter of 2024.
The sector’s confidence index fell from -31.3 in the 2nd quarter to -36.8 during the period under review, reflecting growing pessimism among industry players.
This decline is attributed to several factors, including the high cost of materials, limited access to credit and stagnant order books.
One of the most pressing challenges facing the sector is the rising cost of construction materials.
According to the survey, 57.4 percent of respondents in the sector reported that their technical capacity was below normal, largely due to the inability to procure necessary materials at affordable prices.
According to another Zimstat survey, the USD Building Materials Price Index (BMPI) increased by 8,2 percent, indicating a substantial rise in building material costs in between December 2024 and December 2023.
The high cost of materials has not only constrained business expansion, but has also led to delays in ongoing projects, further dampening confidence in the sector.
The survey also highlights stagnation in the sector’s order books and demand with 52,1 percent of respondents reporting that their level of total order books remained normal, while 62,5 percent anticipated that the volume of orders would remain unchanged in the 4th quarter of 2024.
This stagnation suggests a lack of new projects and contracts, which is likely due to reduced government spending on infrastructure and limited private sector investment.
Additionally, 55,6 percent of respondents expected average selling prices to remain unchanged, indicating that businesses are struggling to pass on rising costs to customers. This further squeeze profit margins and limits the sector’s ability to invest in new projects or expand operations.
The Construction Sector also faces challenges in job creation with 56,4 percent of respondents reporting no change in employment levels during the 3rd quarter, while 40 percent anticipated that employment levels would remain unchanged in the fourth quarter.
This stagnation in employment reflects the sector’s inability to grow and create new jobs, which is a significant concern given the sector’s potential to drive economic recovery through labour-intensive projects.
Access to credit remains a challenge
The survey also shows that access to credit continues to be a major hurdle for the sector with 55,1 percent of respondents reporting that accessing bank credit was difficult, making it challenging for businesses to finance new projects or maintain operations. The lack of affordable credit exacerbates the sector’s challenges, as businesses are unable to invest in new equipment, materials, or workforce expansion.
Commenting on the survey results, Walter Mandeya, an analyst with Trigrams Investments, said the findings of the 3rd Quarter 2024 BTS report underscore the urgent need for targeted interventions to revive the sector.
“The Government should consider reducing import duties on essential construction materials and promoting local production to lower costs.
“Public-private partnerships could be explored to secure bulk purchases of materials at discounted rates,” he said.
Property Developer, Simanga Madhlabuta, said there has been a “slow down in activity mainly due to the Government’s slow-down in projects and the downstream effects.”
Online Reporter