News Analysis: Namibia's construction industry feels the pinch amid budget cuts

The budget cuts in Namibia are already showing its adverse effects as a state-owned construction company announced that it would auction some of its assets.

Finance minister Calle Schlettwein in a mid-year budget review delivered and of Oct. cut the developmental budget with billions of dollars.

Schlettwein said development budget expenditure cuts were made on projects with no implementation or lower implementation rates to date.

The announcement by the Road Contractor Company comes a few days after a Chinese company, the China Railway Seventh Group, also said they were stopping work on the Windhoek-Hosea Kutako International Airport road due to non-payment by the Roads Authority.

The contractor company was formed in 2000 with the objective of undertaking work relating to the construction or maintenance of roads or any other construction works in accordance with sound and generally accepted business principles.

Construction work includes, but is not limited to, buildings, bridges, waterworks, dams, reservoirs, tunnels, canals, aqua ducts, irrigation works, harbors, aerodromes and railway infrastructure.

According to the advertisements, the construction company will auction the equipment Thursday in Windhoek.

Among the equipment listed are 11 smooth drum rollers, 48 road graders, five tractors, 13 front-end loaders, five diesel tanker trucks, a forklift, a tipper truck and a crane truck.

The company said the equipment was being sold on a non-suspensive basis and does not require the prospective buyers to do feasibility checks.

Although the company's chief executive officer Tino !Hanabeb said they were cleaning up their old stock, some of which dates back to the 60s and 70s, he admitted that the cash crunch has also spurred them on to dispose of the equipment.

!Hanabeb also said some of the equipment were not being used and the company cannot sit with assets that are not benefiting them.

The China Railway Seventh Group that is in a joint venture with the Namibian company Onamagongwa announced that there would be a delay in construction on Oct. 20.

A project manager surnamed Wang at the China Railway Seventh Group, notified the Roads Authority that the delay in settling a 20 million Namibia dollar (1.4 million U.S. dollars) balance would affect progress.

In his letter, Wang said it is imperative that a positive cash flow is maintained on the project to allow the contractor to maintain a planned level of production and resource procurement for the successful completion of the project.

He also said that some of the company's was impounded by customs and that material were not being delivered on time or are never delivered at all because suppliers were unwilling to do without payment.

Namibia has put on hold 50 capital projects that were supposed to be implemented during the 2016/17 financial year due to lack of funds.

All the projects that have been suspended would have cost the government more than 300 million Namibian dollars (22 million U.S. dollars).

The suspension of work on the projects comes after finance minister Calle Schlettwein announced more budget cuts that saw him suspending 4.4 billion Namibian dollars (326 million U.S. dollars) out of the 5.5 billion Namibian dollars (408 million U.S. dollars) he appropriated from various ministries.

The cuts announced Thursday last week saw Schlettwein reducing the three-year rolling budget of 66 billion Namibian dollars (4.9 billion U.S. dollars) to about 53 billion Namibian dollars (about 4 billion U.S. dollars).

Apart from suspending some projects completely, Schlettwein also cut the budget for some projects that are already underway.

Already, some tenders were frozen in Sept. "to prevent over-committing the current budget and in order to remain with some fiscal (budget) space allowing for the realigning of resources with development and socio-economic priorities, we have sent out this directive."

"No tender awards should be made until such time that the financial year 2016/2017's budget review and the re-appropriation of capital projects is finalized," Schlettwein said in a letter sent out on Sept. 12 this year.

Schlettwein said the "measures are aimed at placing public finances on a sustainable path as government adjusts to a changing micro fiscal environment. The measures are to be implemented with immediate effect".

The Construction Industries Federation that is worried by the cuts said they trust that government will set clear goals and adopt the right strategies to effectively cushion the impact of this drastic step on Namibian enterprises.

"At times like this, the Namibian family must come first. Any priority projects identified after the budget review must be given to Namibian companies," said Nico Badenhorst, the federation's president said. Endit