Uganda National Association of Civil Engineering Contractors (UNABCEC) has of recent been engaged in a constructive debate on how to promote the construction sector in Uganda.
They were particularly concerned with the advertorial of the Roads Industry Council (RIC) that appeared in the daily press headed “Why change is needed: challenges facing Uganda’s roads industry” For clarification purposes, I am a member of RIC.
I am, however, not its spokesperson and neither am I authorised to speak on the council’s behalf. The contents of this rebuttal are, therefore, my personal views and not of RIC. RIC, which is a five-year old advocacy think tank, works as an advisory board of the Cross Roads Programme and uses a multi-pronged approach in influencing government policy on road infrastructure development and maintenance. One of the core areas of focus for RIC and indeed the Cross Roads Programme is to strengthen the capacity of the local construction sector in Uganda.
The construction sector in Uganda faces major impediments some of which are interrelated. The situation was worse six years ago before the Government’s decision to prioritise the sector by allocating more resources. Though somehow improving, it has not reached anywhere near the desirable level. Key among the challenges the sector faces are weak local contractor capacity,(many small SMEs briefcase contractors and speculators) inadequate resources, lack of prioritisation and systemic intervention, weak procurement systems and lack of a strong government regulator to steer and guide the industry to prosperity.
The works and transport sector players including UNRA are in agreement that there is need for close regulation of the construction sector in Uganda to guide its growth. Given the amount of resources that the Government has committed to the sector, many speculators commonly referred to as “Brief Case Contractors” have come up to cash in into the sector with the largest national budget. In 2012, UNRA attempted to classify and grade contractors with an objective of identifying genuine contractors according to their expertise and experience. This would ease the pressure that come with speculator firms that are more often created for the sole purpose of winning certain tenders at the expense of seasoned companies. It should be noted that the construction industry is very fluid. Any construction company that is not assured of business for years cannot sustain itself because it cannot retain its skilled staff, nor pay its day-today costs. Over 95% of all road construction firms derive their incomes from government (UNRA and local governments) because it (government) is the monopoly owner of most roads in the country. Construction companies can only survive when they have work. According to UNRA, there are approximately 800 local construction firms in Uganda currently. Yet not all the 800 contractors can all have projects.
The brief case contractors, therefore, when allowed to flourish, can completely distort the market rendering it unpredictable and volatile. They breed corruption and malign competent companies through unnecessary administrative reviews because they feel they must always win. The sector is in advanced stages of establishing a very important institution called Uganda Construction Industry Commission (UCICO) which will regulate all construction companies in the country. Cabinet has already approved the UCICO Bill now due for debate by Parliament.
Whenever UNRA puts out a tender, the agency is overwhelmed with the number of bidders with many claiming to be what they are not in order to be selected. The more the projects a company handles the more the resources it gets and the more likely it is likely to grow. To ensure long term sustenance of construction firms, industry players agree that reputable firms should have term contracts (agreement specifying regular flow of maintenance, minor works and improvements carried out by a single contractor over a specified period of time). The other option is to pick from prequalified contractors according to their clarification and grade in lieu of scope of work. These are the best options so far to guarantee small firms to grow into bigger construction companies that would be able to compete with international companies on large scale projects such as Kampala-Masaka-Mbarara-Kabale Road
UNABCEC is in total support of small contractors although they rhetorically doubt the existence of contractor’s classification and grading database. They are of the view that government should not interfere with competition. This is quite erroneous. Unregulated competition is chaos. Chaos in any sector can never lead to progress. It is in the interest of contractors that they are regulated. Any market where there is free entry and exit is liable to either suffer stunted growth or hemorrhage or both. So many would-be medium contractors have been sacrificed in the “muddy waters” of open market of the construction industry in the last two decades. UNABCEC‘s view of supporting brief case contractors may be construed to mean that they support the notion that “if we can’t all benefit we should all lose”. This is unpatriotic.
Naturally, in any industry there are always winners and losers and the construction sector is no exception. However the construction industry is unique in a sense that it takes long to nurture and grow into a proficient one. It also tends to stagnate like it has been Uganda. With due respect to UNABCEC members, Uganda’s construction industry and specifically road construction companies have not seen a consistent growth over the years. One of the reasons explaining this is lack of consistent government policy and support to the industry. A distinction should be made between a small contractor and a “Brief case” one. There are credible small contractors who have clear strategies on how they want to progress their firms into viable companies. These must be supported and allowed to grow. The dangerous category which RIC is concerned about is the brief case contractors who jump at every opportunity to make quick money at every occasion. Theirs is not about sustainability and growth of their firms but amassing wealth through quick-fix contract jobs.
I am a neo-liberal economist, and a supporter of a free market approach to development. I am however a strong believer that private sector on its own without government regulation and support can never and will never deliver any country out of poverty and underdevelopment. In his book “Kicking away the ladder”, Ha-Joon Chang argues that USA and Britain which are the intellectual fountain of modern laissez-faire have never at any one moment practiced total free trade. Liberalisation is a myth and at worst a mirage which the developed world uses to hoodwink the developing world into believing the wrong notion that the Government is a “stupid” observer in the scheme of resource accumulation and development in a capitalist world. No one in RIC is arguing that all SMEs and contractor companies have to start in a big way after all startup capital and interest rates are quite prohibitive. Classification under UCICO will winnow out masquerading contractors who are in for short gains. UCICO Bill 2012 when passed by parliament will introduce structured grading of firms and contractors on a regular basis based on their performance, experience and commitment to become reputable construction firms in future.
The writer is the Executive Director of Uganda Road Sector Support Initiative (URSSI)
