Recently, I had the honour of meeting and interacting with local contractors under their umbrella body, Uganda National Association of Building and Civil Engineering Contractors (UNABCEC), during the mid-year stakeholders’ forum at Kingdom Hotel Kampala.
Their body, I was told, has 256 members and directly employs approximately 20,000 Ugandans. Local contractors used this meeting to make a number of requests to government on how it could assist them in building their financial and technical capacities to enable them compete favourably in the present infrastructural development in the country.
They seek to see an entrenched subcontracting of up to 30 per cent of actual works in all development projects to ensure that foreign service providers (contractors) partner domestic service providers through subcontracting or joint venture on all infrastructure projects whose values are above the national reservation threshold.
The other request is the facilitation of the acquisition of the revolving equipment lease fund and to this end, they proposed Shs 104bn for a start.
First of all, I totally agree with them because their liquidity is lower compared to the external contractors’. Much as the Public Procurement and Disposal of Public Assets Act (PPDA) provides that any project above Shs 50bn should involve 30 per cent for local contractors, this does not give them a lot of opportunity to develop their capacity because in most cases, this caters for earthworks only and does not involve the tarmacking level.
Even with the proposal of more contracts going to local players, there is the challenge of weak financial muscle, and this is where they would benefit from the government intervention with the revolving fund.
I see no difficulties in government taking a step to establish a seed capital scheme to be deposited in a suitable bank, from which local contractors can borrow at low-interest rates like the model in the agricultural sector. Otherwise, it becomes very difficult for internal contractors to compete with external contractors who can possibly obtain loans on lower interest rates from their countries.
This will make strides in supporting local contractors with procurement or leasing expensive machinery. Private financial institutions can also be encouraged to come in the field in a way of assisting local contractors to acquire the necessary materials/equipment to enable them accomplish their tasks - especially where there is evidence that a contractor has secured a contract worth financing at an affordable rate.
Additionally, private players who trade in or have the construction equipment like MANTACK (U) Ltd, Achilles (U) Ltd, CGCOC group, Victoria Machinery, etc, could also lease out the equipment to the contractors who, after executing their contracted jobs, would return the machinery as per the conditions set.
This will help the local contractors to do more work in less time yet handling larger and more complex government contracts. Another way to help local contractors grow their capacity is by ring-fencing some projects for upgrading from gravel to tarmac by the ministry of Works and Transport and Uganda National Roads Authority (UNRA), especially those directly funded by the Ugandan government.
In order to promote growth in this industry, the ministry, working with UNABCEC, should move towards classifying contractors according to their capacities/capabilities. Such classification would then promote competition among equals and then select the best to implement the project either singularly or in partnership.
Those are the ideas we, as a ministry, are considering to put up to see that our local contractors get their fair share of the national cake.
Whereas foreign contractors do a good job especially in importing technical expertise and promoting technical transfer, it is also true that some of them take advantage of the Double Taxation Agreements [DTAs] our government has signed with various countries to avoid paying taxes.
Additionally, they siphon a lot of monies in form of expenses on salaries and others, which is bad for our economy as compared to having a local contractor who would have all monies stay here to further develop our country.
Local contractors need to get more organized because the world needs people who are organized. They are better off forming a strong consortium to enable them execute contracts of big magnitudes.
The writer is the state minster for Works.