Contractors threaten to pull out of roads

... as hefty US$150M debt chokes govt projects

GOVERNMENT developmental projects are under threat as contractors are contemplating pulling out due to unpaid moneys amounting to a mouth-watering “US$150 million”, the Zimbabwe Independent can exclusively reveal.

This could have far-reaching consequences on the “Second Republic’s” developmental agenda under the mantra “Nyika inovakwa nevene vayo” (nation building is done by its own people).

Authorities rolled out the programme to rehabilitate the country’s deteriorating roads after President Emmerson Mnangagwa assumed power in November 2017.

The Emergence Road Rehabilitation Programme (ERRP), which saw government resurface the 582 kilometre Harare–masvingo–beitbridge Road, was among flagships of the poorly-funded but vital programme.

With global markets cautious about Harare due to a high country risk profile, authorities were allegedly forced to print high volumes of money to bankroll the operation, with dire implications on the exchange rate and inflation.

Globally, governments raise bonds or borrow from banks to fund the construction of roads, dams, power facilities and other infrastructure projects.

Transport ministry permanent secretary Theodius Chinyanga confirmed that debts had piled up as authorities struggle to raise funding. But he maintained that government had only delayed paying contractors, and that it would release payments in batches until the ministry expunges the debt.

Chinyanga, one of key government officials driving the revamp of Zimbabwe’s roads, said a value-formoney audit carried out earlier by the Ministry of Finance had forced authorities to renegotiate contracts, leading to payment delays.

“The point is not that the government has failed to pay contractors,” Chinyanga told the Independent. “The government has fallen behind contractually with payments to contractors. There are two things that

interfered with the process of payment. “Contractually, we must pay within 30 days of a contractor raising a claim. We have fallen behind because, firstly, we had to go through all our contracts when the Treasury issued the circular on value-for-money.

“We had to provide a template to negotiate or renegotiate contracts with contractors as per that instruction. That took time. But during that process our contractors did not stop work.

“What it meant was that they were still issuing interim payment certificates, but we were not honouring them until sign-offs by both the client and ministry and Treasury. That interfered with payments.”

He said the other thing that affected payment processes was liquidity control, both by fiscal and monetary policy authorities.

“You will recall that even some of our contractors were caught on the wrong side of the law where it was said that they were buying foreign currency on the black market,” Chinyanga said.

“The liquidity control issued by the Treasury also affected the rate at which the same Treasury was providing for us to pay our contractors.”

The Reserve Bank of Zimbabwe tightened its monetary policy to stem the battering of the domestic currency.

Contractors told the Independent that unless government made payments quickly, most projects were in danger of being aborted.

The Independent understands that some contractors had already approached the Ministry of Transport to register their displeasure over the non-payments. They said authorities had been unsettled by threats to withdraw service.

“Contractors are owed close to US$150 million, with projects such as the Marondera (road) dualisation and the Victoria Falls road rehabilitation under threat,” one contractor said.

“Most ERP projects are in quandary. Some contractors have appealed to the Ministry of Transport over non-payments,” the source added, noting that there had also been ructions over the way payments were being made to contractors. “Some contractors have been getting their payments religiously. Most road projects are up in smoke. Various construction projects including dams are also facing payment delays from the Treasury.”

Chinyanga said they had discussed the situation with the contractors, who, he said, had accepted the proposal for staggering payments.

“Works have not stopped per se, but what the contractors have done is to slow down on their programmes because they need funding for them to work at the rate at which they had planned,” he said.

“Remember they require fuel every day, every month or every fortnight. They also have to pay their workers. So, they have slowed down so that they don’t build back what we are trying to expunge. The quantum (US$150 million) that you have mentioned is nowhere near what we owe contractors, it’s far less.

“What I have on my books is different from what you are flagging and certainly because these are contractual matters, I am not at liberty to divulge how much we owe contractors because your next question will be, individually how much do I owe contractors,” Chinyanga added.

In August last year, the government directed ministries, departments and agencies (MDAS) to suspend payments to service providers to halt a depreciation of the local currency against the United States dollar.

Finance ministry permanent secretary George Guvamatanga said some of the contractors were submitting invoices of cash for goods and services using parallel market rates.