The Association of Ghana Industries (AGI) has petitioned government to consider the establishment of a special development fund for its construction sector wing.
The purpose of the fund is aimed at cushioning contractors “heavily impacted” by high overheads from halted works during the COVID-19 lockdown.
In a release from the sector, signed by its Chairman, Mr. Rockson Dogbega, it reechoed the effect of the coronavirus pandemic on both clients and contractors.
According to Mr. Dogbega, contractors were faced with the challenges of fragmentation of the sector players which includes contractors, consultants, clients, and regulatory bodies.
It said a “special developmental fund” would, therefore, help in overcoming project financing hurdles and risks.
In furtherance, the construction sector, even before COVID-19, had long been bedeviled with the negative impact of delayed payment and the inability of the clients to meet the cash flow forecast on contractors.
It said COVID-19 had only made a bad situation worse, as clients were currently unsure of the immediate future trends, thereby holding back financing capital intensive projects.
The statement said the suggestions were well placed to support the players to make “the construction industry thrive rather than placing it on its knees as COVID-19 threatens to do currently.”
It said there were a lot of impacts of non-adherence to payment timeline on contractors, including financial difficulties with key players unable to effectively plan cash flow resulting in delayed completion of projects.
“Interest is prescribed by most conditions of contract to take care of delays with payments due to the contractor, however, most clients have chosen to turn a blind eye to these. Contractors who make the effort to administer the contract condition to the latter are seen to be litigants and, in some cases, suffer the brunt of being black-listed”, a statement signed by the Chairman of the sector, Mr. Rockson Dogbegah noted.
Other impacts on the non-adherence to the payment on time to contractors were bankruptcy and liquidation of construction firms and key players in the industry, abandonment of projects, negative social impact of projects left hanging and extended disputes to recover the cost by parties.
According to the AGI Construction Sector, any unanticipated increased cost of building materials should be covered by the introduction of the Fluctuation Indices in the contract but some current contracts have rather removed this component.
“Recent computations have shown the fluctuation indices do not necessarily compensate for losses to the contractor. It is recommended that clients accept the adjustment in the fluctuation indices to reflect the current and possible future trend as a means of dealing with the impact of Covid-19 on construction businesses”, the statement indicated.
As part of their request, the Construction Sector also appealed to government to pay advance mobilization to enable contractors resourced effectively to undertake projects timely.
Thus, to mitigate the challenges that have further been worsened by the Coronavirus Pandemic, the sector requests for an effective regime that will see to the implementation of various key measures including payment of Advance Mobilization.
