…..but calls for deliberate policy for construction sector
The Association of Ghana Industries (AGI) Construction Sector has commended government for the bold initiatives in the 2018 Budget Statement and Economic Policy that seek to support industrial development generally and particularly manufacturing.
That, the AGI Construction Sector which is supported by the BUSAC Fund and its development partners DANIDA, EU and USAID said the industrial support programmes earmarked in the budget would help create the needed employment and prosperity for all Ghanaians.
The AGI Construction Sector, Chaired by Mr Rockson K. Dogbegah said in a report on the Sector’s views on the budget said the 2018 budget sets the tone for building Ghana as the most business-friendly and industrialized economy in Africa and was a clear departure from previous one which focused on generating additional tax revenue.”
It said the budget placed emphasis on developing the productive sectors (Industry and Agriculture) of the economy which had experienced consistent decline in their contribution to the Gross Domestic Product in the past five years, saying the potential impact of these sectors and their impact for job creation could not be over emphasised.
“We welcome government’s proposed policy initiative of a three-pronged economic development programme that will focus on, integrating and accelerating investments in infrastructure development, and industrialisation as the primary vehicles to fundamentally transform our economy under the Akufo-Addo Programme for Economic Transformation (AAPET)
The report entreated government to develop deliberate strategy to develop and grow the construction sector, which the AGI Construction Sector said “serves as a life blood to all economies due to its linkages to all industries.”
It however, said the construction was not receiving the necessary attention to help the sector thrive and grow.
“Government must expedite action on the passage of the bill that will enable the establishment of the proposed Construction Industry Development Authority (CIDA),” saying the draft bill on the CIDA was currently under review by the Ministry of Works and Housing and Ministry of Roads and Highways.
It also said the government should adopt the local content policy for the construction sector to create “a globalised competitive indigenized construction industry.”
It called on government to promptly pay contractors to ensure the survival of construction companies, saying the delay in paying contractors by the government remained a big challenge to the Construction Industry.
To this end, the report stressed the need for “interest payment on all delayed payments to contractors to guarantee their sustenance,” and a law to make it mandatory for government to pay interest on all delayed construction payments
…calls for formulation and passage of delayed payment law
The Association of Ghana Industries (AGI) Construction Sector has called for the formulation and passage of a Delayed Payment Law (DPL) to ensure that local construction firms are paid promptly for government contracts executed.
The DPL, it said, would ensure that funds for construction projects are well budgeted for and available before the commencement of projects, and make provision for compensation to be paid contractors in the event of delayed payments.
The AGI Construction Sector said the DPL had become necessary to address the late payment of contractors for construction work they have executed for government.
This was contained in a baseline study proposal by the Association of Ghana Industries (AGI) Construction Sector to make a case for the passage of a DPL.
It said delayed payment has been identified as a major problem to the Ghanaian construction industry, and this makes it difficult for the players in the sector to compete with their foreign counterparts.
The study proposal is being supported by the BUSAC Fund and its development partners – DANIDA, the EU and USAID.
The proposal said local contractors often borrow working capital from banks in order to finance their construction operations, and invariably have to pay interest on those borrowings, yet government delays in paying contractors – stressing that government projects have become “notoriously popular in delayed payments”.
It found out that delayed payments increase credit defaults by the local construction companies, and make it difficult for players in the sector to raise credit from banks to finance their operations.
“Indeed, most banks consider government projects as risky because of the common issues of delayed payment associated with them. They have therefore become increasingly disinterested in lending to the construction sector,” the proposal said.
Among other effects of delayed payment on the construction industry, the study revealed: “It renders local construction firms less competitive to their foreign counterparts, and also unable to raise the needed finance to execute projects; and where they are able to raise funds, they are often at a high cost of capital.
“Another effect of delayed payment on construction firms is inadequate equipment holding. This contributes to late completion of projects, poor quality work, and unemployment: and increased total cost of project, disputes, liquidation of construction firms, and loss of productivity.”
The study therefore stressed the need to identify ways of improving contractors’ cash flow in the Ghanaian construction industry.
Among the study’s objectives was to establish the nature and cause of delayed payments and the periods involved, and examine the effect of delayed payments on the construction industry’s performance and sustainability.
