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‘Defaulting govt risks isolation by contractors’

Several roads in Harare have either been repaired or reconstructed under the Emergency Road Rehabilitation Programme.

COUNTRYWIDE public infrastructural development projects being undertaken by the State might flop unless government begins to honour contractual agreements signed with firms driving the works, leading economists warned this week.

They said with rains set to fall soon, contractors required funding to beat deadlines, which is vital for making sure sensitive parts of the projects are not affected.

Under a new initiative, Zimbabwe’s government has turned to domestic contractors to carry out important assignments after encountering problems internationally due to a high country risk.

But experts said even on the domestic front, ‘patriotism’ may not work as future engagements will be informed by how government is behaving now.

They spoke after the Zimbabwe Independent reported last week that government had accumulated US$150 million in debts to firms undertaking the revamp of vital infrastructure including roads and dams.

Among flagship projects being undertaken by the government is a complete revamp of the 582-kilometre Harare-Masvingo-Beitbridge Road, which is nearing completion.

The funding model for the projects, which are worth millions of United States dollars, has exerted pressure on government to print money.

Results of this strategy, which almost grounded the economy in 2008, have been dire as inflation has rioted, while volatilities have rattled the exchange rate.

Overstretched contractors have confronted government, telling it they are on the brink, and they cannot continue working.

Theodius Chinyanga, permanent secretary in Ministry of Transport and Infrastructural Development, said delays had been caused by important reviews that have been underway since the completion of a value for money (VfM) audit last year.

He said contractors would start receiving payments soon.

In an interview with the Independent, Gift Mugano, executive director at Africa Economic Development Strategies, said by delaying to pay contractors, government was shooting itself in the foot.

“It is wrong to disown contractual agreements,” Mugano said this week.

“This can kill future relations. The government should have paid the contractors so that future investments in the rehabilitation sector can be maintained.

“With this pace, there is no guarantee of future collaborations with the government because they do not want to pay,” he noted.

Prosper Chitambara, chief economist at the Labour and Economic Policy Research Analysis of Zimbabwe, said VfM audits should be expedited to make sure contractors were paid and projects continued.

He said delaying payments to contractors in a high inflation environment would throw firms into bankruptcy.

“It is important for the government to be mindful of the need to expedite this value for money audit processes and be able to pay contractors timeously, especially given the fact that contractors are paid in local currency, which has been ravaged by the chronic high inflation,” Chitambara said.

“So there is a need for balance between those objectives of ensuring value for money audit and enhancing efficiencies, and on the other hand making sure these contractors remain viable and continue being involved in these projects as they are playing a critical role.”

VfM refers to a utility derived from every purchase or every sum of money spent.

It is based not only on the minimum purchase price, but also on the maximum efficiency and effectiveness of a purchase.

The concept, in everyday life, is easily understood as “not paying more for a good or service than its quality or availability justifies”.

In relation to public spending, it implies a concern with the economy, efficiency and effectiveness. VfM was enforced by government last year, following reports of rampant sleaze in government contracts.

 Chinyanga said last week they fell behind on payment because they had to go through some contracts and renegotiate  following Treasury’s enforcement of  the VFM concept.

“The point is not that the government has failed to pay contractors, the government has fallen behind contractually with payments to contractors,” he said.

“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 some contracts with their contractors as per instruction, that took time but during that time our contractors did not stop work.”

More than 55 roads in Harare have been repaired or reconstructed by the government under the Emergency Road Rehabilitation Programme (ERRP) after the city council failed to do the required work.

Major roads that are almost complete in Harare include Chinhanda Road in Glen Norah and Lytton Road, which links the city centre with suburbs such as Rugare, Kambuzuma and Mufakose among other surrounding areas.

Despite the success registered so far, analysts opined that the ambitious infrastructure projects were at risk of failing due to measures being implemented by the Treasury, together with delays in payments.

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