Local contractors’ capacity building: A call for government intervention

Wednesday September 4 2019

 

By Elizabeth Muhebwa

Local contractors continue to face the challenge of inadequate financial and technical capacities in their attempt to compete in the current infrastructural development in the country.
Uganda National Association of Building and Civil Engineering Contractors (UNABCEC) strongly believes and advocates change of the status quo to pave way for growth and development of the local construction industry.
There is a trace of light at the end of the tunnel as government pledges to help local contractors handle big projects as reflected in an article by Gen Katumba Wamala, State Minister for Works, that featured in the Observer of August 21. Gen Wamala was the chief guest at the recently concluded stakeholders’ engagement forum that took place on July 4 in Kampala. We are glad to see that the government is starting to realise the need to support domestic contractors.
Construction companies can only survive when they have work. Any construction firm that is not assured of having business for tomorrow cannot sustain itself because it cannot retain its skilled staff, nor pay its day –to-day costs, including repayment of loans secured for initial investment, which is very expensive. There is need for the government to support the construction industry through building sustainable capacity of national contractors and cooperation between national and the international contractors, which will in turn reduce repatriation of resources meant for transforming the country.
We wish to re-affirm the seven interventions as indicated below, which the Association requests from government that would assist local contractors to build their financial and technical capacities and enable them compete favourably in the country’s infrastructure development.
- To entrench the national reservation scheme with a threshold for exclusive preference to 100 per cent owned company by citizen of Uganda or East Africa (provided similar benefit is accorded to Uganda citizen) in procurement of works- Shs45b for all civil works, including roads and bridges, and other works Shs10b. Procurement of works Shs50b for all civil works, including roads and bridges, and other works Shs20b for both national and resident providers.
- To entrench subcontracting up to 30 per cent of actual works on all development projects. To ensure that “Foreign Service Providers” ought to partner with “Domestic Service Providers” through “Sub-contracting, or joint-venture on all infrastructure projects whose values are above national reservation threshold.
- To entrench mandatory placement of graduate interns. This is aimed to transfer skills to Ugandan youth by all construction companies operating in Uganda.
- Facilitate the acquisition of the revolving equipment lease fund of Shs104b onto Uganda Development Bank that offers good financing terms not exceeding 5 per cent per annum. The cost of construction equipment is very high for domestic contractors in Uganda, which has continued to push the local construction firms out of business.
- Initiate a10-year strategic programme with total of 1,000km as Affirmative Road Development Pilot Projects to deliberate, train prime domestic (citizen-owned) contractors for execution of real paved works thus reduce the unit cost of paved roads.
This would address critical need for domestic paved roads construction providers, and impact to stimulate further investment in equipment and human resource assets for domestic contractors. Every year, you would engage eight firms each contracted for 5km in Level I, then graduated to 10km in level II and finally 20km in Level III. Promotion from Level I to III is based on good performance that include equipment owned and graduates and youth trained and employed.
- To classify and register all works contractors in Uganda and adapt an enterprise development programme where you incubate and promote small and medium local contractors from grade one to seven based on performance. This further promotes transparency and fair competition in procurement of works, goods and services in the construction industry. A Similar system in Ethiopia enforced 12 years ago has led the Ethiopian domestic contractors winning contractors all over the region. Currently, there is no specific registration of construction contractors in Uganda.
- To establish a specialised training centre for training of plant operators and mechanics. With a streamlined construction services industry and effective implementation of the proposed interventions, the following outcomes are expected;

- A strengthened local construction industry will contribute to the economic development of the country.
- A strong and sustainable local construction industry will prevent capital flight/outflows, on top of high skill, knowledge (brain drain) and technological transfer.
- Creation of employment for the citizens and more particularly, the many unemployed youths. A minimum of 6,400 jobs will be created every year.
- Increased revenue by increased tax base.

Ms Muhebwa is the executive director, Uganda National Association of Building and Civil Engineering Contractors.

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