Pandemic lockdown to severely impact construction sector

road construction by Dimpho SametsiThe construction sector has suffered huge losses between 2015 and 2019

The contribution of the industry to Namibia’s GDP has fallen from 7.2 per cent to 2.7 per cent in 2019. 

As reported in the Namibia Economist, the lack of government investment, domestic investment as well as foreign investment has led to the closure of many businesses in the last few years. Companies already on the brink of collapse will be hit further by the economic effects of the lockdown, leading to more business closures. 

“We are extremely worried about the impact of the lockdown on our businesses. We feel that by commencing work at the earliest, with a careful strategic approach, we can stop the increase in unemployment,” said Barbel Kirchner, General Manager of the Construction Industries Federation of Namibia (CIF) in her quote to Namibia Economist. 

Kirchner suggests that the entire construction sector should be classified as an essential service, so that contractors can start the work immediately. “The sector can also be a catalyst for growth in other sectors,” she added. 

According to a recent survey among the 60 CIF members present, 68 per cent suffered losses in the previous financial year (2019-2020), and 72 per cent are still incurring losses in the present year. All their expenditure is covered by profits (17.65 per cent); overdrafts (56.88 per cent); loans (5.88 per cent) and owners’ reserves (13.73 per cent). 

If this continues, many in the construction sector will be forced to close down business, whether or not government has made any provisions for the employees working for them. 

“VAT refunds and expedited payment for completed work will make a huge difference. Members who participated in the survey said they had US$564,120 outstanding in VAT refunds, and US$12.8mn in unpaid invoices. If we speed up the payment, the cash flow in some companies will help continue the work, and the Namibian construction sector will thrive,” informed Kirchner.

 

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