Business News of Monday, 5 February 2018
The Association of Ghana Industries (AGI) Construction Sector has called on government to, as a matter of urgency, pass a law on interest payment for delayed payment of public construction works.
A delayed payment law, according to the association, would among other things ensure funds for construction projects are well-budgeted for and available before commencement of the project.
It would further make provisions for compensation to be paid contractors in the event of delayed payments, and ensure they are not overburdened with interest on loans acquired for public or government projects.
The delayed payment law is one of proposals from the AGI construction sector to government to help in building a sustainable construction industry in the country.
Chair of the AGI Construction Sector Rockson Dogbegah, who led discussions on the proposals at the strategic meeting and sensitisation for Contractors and Construction Service Providers held in Accra yesterday, said delayed payments of public projects is gradually weakening the ability of local contractors to compete with foreign firms.
“It is well-known that contractors often borrow working capital from banks to finance their construction operations, and invariably have to pay interest on these borrowings. Delayed payments increase credit default tendencies and actual defaults, which makes it difficult for firms to access credit from the banks. This is a threat to the already low-capitalised local contractors,” he explained.
The group further recommended that government replace bid securities with bid declarations to help reduce cost of projects and business operations, improve contractor liquidity, and reduce delays in procurement procedures.
Mr. Dogbegah argued that financing cost – including high insurance cost, high bank charges, and cash flow problems – associated with bid security requirements threaten the sustainability of local contractors, which are constrained in competing for bid opportunities.
The Chairman reiterated the need for a local content policy to increase local construction firms’ share in public construction procurement, as well as improvement in construction jobs for Ghanaians.
A local content policy, he said, would also increase opportunities and incentives for local construction firms to develop their capacity, spur technology transfer and ensure sustainable management of public infrastructure.
In order to keep local construction firms operating in the face of challenges with delayed payments for public projects and cash flow, Mr. Dogbegah urged government to accept its own payment certificate in order to defray contractor’s statutory obligations including taxes.
This, he said, would effectively put under control the numerous constraints contractors are exposed to due to delayed payments.
The AGI Construction Sector Chair called on government to expedite processes leading to the establishment of a Construction Industry Development Authority, which is strategic in strengthening the sector’s performance and contribution to the country’s development.