The construction industry in the country is currently constrained like many other businesses. At its peak in the mid-90s, the industry employed 50 000 people but after years of economic challenges, it now employs just about 10 000. A number of problems like funding, the legal framework and low barriers to entry continue to bedevil the industry. But, these do present opportunities as well. In this article, we explore some of these opportunities in detail.
Access to meaningful funding has hampered growth prospects for many local construction companies. This has resulted in most lucrative tenders being awarded to foreign companies who are better placed to access the required funding and bring in enough machinery to execute the work. An example is Group Five International, a South African company which scooped the tender for the refurbishment of the 828km Mutare-Harare-Plumtree highway. Just this project alone would have changed the fortunes of several local companies but unfortunately, none was better positioned to be able to do work of this magnitude. Group Five got $206 million from the Development Bank of Southern Africa (DBSA) to do the work. Although this seems unfair, it is a lesson and an opportunity for local construction businesses. If you are to make a killing in this industry, you have to do your homework and have the right contacts who can help fund your projects. This takes a high level of integrity and professionalism. Any local company which will have huge financial backing will most likely get the lucrative tenders, all other things being equal.
Another opportunity in the country is our ageing road network. Most of the major highways need a facelift. The interesting part is that the government has decided to start working on some of the roads using its own resources. This gives room for local contractors to render their services. Roads alone are a business worth billions of dollars. Look at the proposed Harare-Beitbridge road dualisation. It is a massive project which will have huge financial returns for those working on it. So, if you are to go into construction, focus on roads. Procure the right equipment to allow you to bid competitively for road tenders. With adequate machinery and funding, you stand a good chance of getting some viable tenders. Of course, it requires substantial amounts of money but the return on investment is almost guaranteed here. There is no harm in teaming up with better placed foreign companies as long as it’s a mutually beneficial partnership.
Low entry barriers
For long, the construction industry in Zimbabwe has had low entry barriers, making it easy for every Tom, Dick and Harry to join the bandwagon. This is due to the absence of a proper legal framework to regulate the industry. Fortunately, the Contractors Bill is being worked on although it has taken time. This piece of legislation is expected to make it harder for foreign players to come into the industry at will. The world over, if you want to enter into the construction industry, you have to partner with locals. The absence of such legislation here has seen an influx of Chinese companies who are getting a bigger slice of the local cake. Gladly, even before the bill becomes law, opportunities are there. You need to consider partnering with others, whether foreign or not, who can complement your strengths and supplement where you lack. Rather than crying foul over stiff foreign competition, you have to adapt and make friends in order to survive. This means your company will be stronger and more capable of executing large projects than if you wear blinkers and insist on doing it alone.
It is a fact that economic conditions in the country forced many Zimbabweans to flock abroad in search of greener pastures. This brain drain worsened just before the 2010 Soccer World Cup in South Africa as Engineers and other construction professionals were in demand there. As a result, Zimbabwe was left with a shortage of skilled workers. Although this is a challenge, it is also an opportunity. You should strategize to lure back the skilled workforce. It is difficult but it can be done. Your salaries and perks should be competitive. In addition, wherever possible, train your own workers in house. For more specialized qualifications, you may consider giving scholarships in fields of interest like architecture, engineering and the like. You then bond those people such that they are forced to work for you for a certain period after completion of their studies. Whatever you do, keep the talent happily at home. This will mean that your company is one of the few with a properly trained and skilled team who will deliver at the highest level.
One other opportunity lies in vast tracts of land that is not serviced. Due to greed, we have seen some land developers churning out stands in areas which have not been serviced. If you are in the construction industry seriously, you should desist from this. Ensure that all your areas are fully serviced with water and sewer infrastructure in place. This will aid your reputation and customers will want to work with you. Again, this can be costly, but, it has to be done.
There is still limited access to mortgage financing in the country. As such, it is worthwhile to venture into this as an add on to your construction business. There are a lot of people who want to build their own homes but lack the resources. If you can come in with good, flexible products to plug this hole, you are likely to make a killing.
It is not surprising that the construction industry is struggling because many businesses are. However, as outlined above, the challenges actually present good opportunities for players in the industry, both new and old. Differentiate yourself from the rest and you will get good returns for your investment.