GOVERNMENT is contemplating banning foreign contractors from undertaking local construction projects, as Chinese firms are accused of flooding the parallel market with cash paid to them by the government, thus destabilising the local currency.
The government has been awarding lucrative tenders to foreign companies especially the Chinese, who also stand accused of bringing in labour for menial work from their country.
In a move meant to capacitate the local industry as well as deal with rampant externalisation, the Business Times reports that discussions on the matter are currently underway and all construction projects will soon be given to local firms.
Foreign contractors, especially the Chinese, have been accused of externalising cash. They are said to be flooding the parallel market, with local cash, partly paid to them by the government, to source foreign currency.
This has been one of the reasons why the parallel market has been thriving despite the existence of the foreign currency auction system, sources at the Reserve Bank of Zimbabwe (RBZ) told the publication.
“If you check some of these foreign contractors receive part of their payments in local currency and that money is then channelled through the parallel market to get foreign currency. This has been a headache for the central bank and there are ongoing discussions around restricting participation of foreign companies in national projects,” an official at the RBZ.
The Zimbabwe dollar continues to lose value on the parallel market. This week the dollar was trading at ZWL$150 on the parallel market from about ZWL$130 last week.
The government is now seized with the matter and wants to correct the situation.
The local players are also vigorously pushing for protection from foreign contractors. Government provides over 70% of construction work in Zimbabwe
Zimbabwe’s construction industry is in a precarious position, with most players living on the margins. The sector requires at least US$350m to sustain their operations this year. This situation has led to retrenchments, downsizing of operations, and closure of a number of local construction firms.
The push to restrict foreign contractors comes as local companies have successfully undertaken government projects, especially in the rehabilitation of road infrastructure triggering calls within government corridors to protect local contractors.
A number of local contractors including Fossil Contracting, Masimba Construction, Exodus and Company and Tensor Systems, Bitumen, are rehabilitating the Beitbridge -Harare highway.