- Lack of technical expertise
- Lack of specialized equipment
- Inability to mobilize funding to execute large projects
PRIVATE SECTOR AS AN ENGINE OF GROWTH AND DEVELOPMENT; …is the local construction industry sector ready?
The government has indicated its commitment to transform the country into an industrialized nation in the sub-region by making the private sector the engine of the growth and development agenda within its tenure of office.
Arguably, the construction industry is one of the most strategic sector that can contribute significantly to the achievement of this objective. At the center of the country’s socio-economic development is the need for houses, offices, shops, factories, roads, railways, airports hotels etc. and other physical infrastructure to enable us transact business in civility as pertaining to all the other sectors of the economy.
Government has indicated commitment to its role of providing the enabling environment to facilitate initiatives and programs that will streamline the operation of public administration to pave way for the private sector to operate.
Of significantly interest is the preparedness of the local construction industry players, are we ready to lead this agenda for growth?
Amongst the major infrastructural developments across the length and breadth of the country, it is instructive to note that less than 10% are being executed by Local Contractors. Most of the large projects are being executed by foreign contractors. The reasons given would not be far from the following:
Lack of Managerial Capacity for Large Projects
For how long would our indigenous contractors be made to sit on the fence, whilst their counterpart contractors from overseas be made to do all the work? How will our capacities be built? These are lingering questions that industry captains have been contemplating.
Mr. Rockson Dogbegah, a Chartered Construction Manager by Profession and currently the sector chair of the Association of Ghana Industries (AGI) Construction Sector and Vice-chair of the Chartered Institute of Building, Africa (CIOB-Africa), has offered some solutions to this conundrum of the Construction Industry of Ghana, saying amongst others that, there should be a deliberate attempt to develop the capacity of our local construction industry for a sustainable infrastructural growth and development of the country.
Mr. Dogbegah explains that enacting some comprehensive transformational policies would be the panacea to the reformation of the construction sector
Key among these policies will be the need to have a strong regulatory body such as a Construction Industry Development Authority (CIDA) to regulate and supervise construction players’ activities and industry development, conduct and commission research to drive technology and innovation, training to advance enterprise, quality and excellent human resource development and provide an effective monitoring framework to enhance the institutional and operational environment of the construction industry.
The CIDA will also see to issues relating to maintaining the commercial sanctity and competitiveness of the construction industry, such as the effect of price inflation on construction inputs and compensation formulas etc.
Ferreting out solutions to deal with the challenges with Finance faced by local contractors, Mr. Dogbegah affirms that, in these economically challenging times, local contractors need all the financial might they can harness in order to thrive and grow their businesses. It’s no secret that the bane of local contractors in Ghana is delayed payment. As a result of delayed payment, contractors are unable to pay back loans from banks in due time. Meanwhile, government who is the biggest client, is also the biggest culprit.
Over time, the financial sector has also rated the construction industry as a very high-risk industry largely due to this phenomenon. Therefore, getting banks to extend loan facilities to the construction sector particularly to contractors working on government contracts is a big challenge.
An industry specific bank that understands the nature of the construction industry could provide more appropriate financial services to meet the needs of local contractors.
These same foreign contractors given stiff competition to the local ones are usually funded by banks from their home countries at very low interest rates, hence, their ability to provide financing for large projects in Ghana to the detriment of the local industry contractor who do not have access to such low interest rate avenues to borrow from.
The solution therefore is not farfetched, an industry specific bank is needed to support the local construction industry. The Ministry of Works and Housing in recent times, has been commended for initiating moves to revamp the Bank for Housing and Construction.
In one breath, Mr. Dogbegah says that this could be a relief to the situation if the Bank for Housing and Construction could guarantee and arrange funds for contractors executing government projects. The Bank for Housing and Construction could also help obtain realistic mortgage arrangements with relatively lower interest rates as compared to the commercial banks to create opportunities for both public and private sector workers and institutions to access finances.
Regarding solutions to deal with the challenges with Equipment Financing faced by local contractors, the idea is to establish State Owned Equipment Leasing Finance Companies. Thus another solution to building the capacity of local contractors is for the government to establish owned equipment plant pool that will provide lease financing services to contractors that require highly specialized but expensive equipment.
Other solutions to the myriad of issues are the need for Contractor Mentorship scheme and knowledge transfer programs, review of the issues of standardization, review of laws relating to the Health, Safety and Environment of the construction industry etc.
Mr. Dogbegah believes that ultimately, having an effective regulator, such as the Construction Industry Development Authority (CIDA) will be a step in the right direction to lead the agenda for readiness of the local contractor towards a sustainable growth and development of the construction sector.Back to all News Items