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The assurance by Government that local contractors are still the preferred group when it comes to building infrastructure came as a relief to the construction industry at the recent congress of the Confederation of Zimbabwe Industries.
There had been some doubts after the decision to temporarily halt payments while the invoices and prices were checked out to ensure that pricing models were using the official exchange rate, the interbank rate, and that the Government was receiving value for money.
Minister of Finance and Economic Development Mthuli Ncube, however, assured the CZI delegates last week that payments would be resuming very soon and that local contractors were the obvious group to not just continue working on Government-funded infrastructure, but also to be brought into public-private partnerships as investors.
Essentially what the Minister is making clear is that the growing co-operation between Government and the private business sectors in growing the economy is a good idea to speed that growth; that as the largest spender in Zimbabwe, the Government is a crucial customer, but that the Government does not want to be taken for granted, or taken for a ride by businesses overcharging.
This is the correct attitude by Government and the private sector needs to understand this and work with this.
The Government, and in the end the taxpayer, is not some sort of endless source of money and business for people who are neither efficient nor honest.
And this is where the present checks come in, to make sure the businesses the Government contracts are squeaky clean, charging fair prices that cover their costs with a reasonable profit, and giving the rest of Zimbabwe good value for the money provided.
The advantages of using local companies and contractors are many. For a start the money stays in Zimbabwe, instead of being paid into foreign bank accounts. Secondly it helps build up our own business sectors, turning Zimbabwean companies into major businesses.
Thirdly it increases the skills and ability of local companies to handle ever more complex work. Foreign contractors, to give them their due, often buy a range of supplies locally, quite often sub-contract local companies where this is sensible, and hire local labour.
But the total project management and the like is with the contractor, and if this company is local then it is increasing the skills of its workforce to the maximum.
The fourth reason is not often ventilated, but it does go to the heart of what is expected.
The local contractor should be able to calculate costs far more precisely than an external company, since the owners and managers of the business actually live in Zimbabwe and have a very good idea from work they have already done exactly what everything costs and where the problems are likely to arise.
So when they bid they should be able to figure out just how much they will spend and then add in a rational and reasonable profit margin.
The result should be the best bid, and if it is way out of kilter then either the contractor is hopeless and is just guessing, or someone is trying to skin the taxpayer with an outrageous profit margin. Either way that local firm is likely to be sunk as the work gets around.
The final reason is already working. The local company has to continue working in Zimbabwe and people can easily go and look at what it has done.
So if it is a road making company it can tell some private developer to go and look at the road in such and such a place, and you will see how good I am.
On the other hand, the private developer can find out where some dud road was made and quietly cross one construction company off the list.
The Government is now also using this system. It has been made clear that dud work needs to be fixed by the contractor who made the mess, and Ministers have made it clear that they will be exceptionally unwilling to give that same dud company another contract, ever.
Now Minister Ncube has been musing about bringing in local companies for the special investments, such as rebuilding the Beitbridge-Bulawayo-Victoria Falls Highway in a 25-year build-own-operate deal before the highway is transferred back to the Government.
This is a new development for local business and it would probably require a consortium to finance, build and operate.
That consortium will need long-term finance concerns, the sort of insurance and pension fund administration companies that develop large building operations.
It should include construction contractors, having at least their profit margin in shareholding even if the actual basic costs have to be borne by the financier.
That particular sort of involvement on the investment side by the contractors has some hidden advantages.
The income for the investors will be the toll fees, or a percentage of the toll fees, on that stretch of highway.
Besides the return on the investment, which might well need 25 years, there will also be the continual maintenance, the “operate” part of the contract.
If the original work has been done really well, then the annual maintenance bill will be tolerable, without any major work having to be redone because it was done badly the first time.
Basically on a road this is drain clearance and occasional re-tarring and sorting out the odd pothole rather than rebuilding.
Again using local investment makes sense, for the same reasons as using local contractors. And since a lot of people, including people in Government, will be driving on that road there is extra pressure on the contractors to do a first class job so they are not forced to forgo all profit over the years by huge maintenance bills on shoddy work.
The local contractors have been building up their businesses and capital equipment and workforce skills while they do the pure Government contracts, and perhaps the time has come that they need to explore the sort of consortium that might be needed and how to bring in the finance leader and the other necessary parts of the team.
Online Reporter