Editor's Comment

Contractors shouldn’t spend on luxury at expense of investment

THE move by government to disburse K1 billion to three ministries to settle arrears owed to suppliers and contractors is indeed welcome and is a necessary step in dismantling the K10 billion debt bill.
Minister of Finance Felix Mutati announced on Monday that government is this week scheduled to release K1 billion towards the debt bill owed to suppliers and contractors.
According to Mr Mutati, the move is meant to turn around the wheels of suppliers before the end of the year.
While the amount being disbursed is only 10 percent of the total amount owed, it will help improve the cash flow of contractors and suppliers, thereby empowering them to re-invest into the economy.
During presentation of the 2017 national budget last Friday, Mr Mutati also assured the nation that government will accelerate the dismantling of arrears to suppliers of goods and services to unlock the crunch in the economy.
Small contractors, for instance, have very low financial reserves and rely on the profit from ongoing projects to finance their subsequent projects; hence a loss or delay in one project ultimately leads to a cash flow problem and bankruptcy.
Many small contractors also experience difficulties in obtaining money from financial institutions to finance their businesses due to lack of collateral and high interest rates.
Most contractors therefore depend on the advance payment for execution of their projects.
It therefore goes without saying any delay or non-payment of contractors has an effect on the implementation of projects.
In the wake of massive infrastructure development in recent years, we have also experienced a number of abandoned and shoddy projects.
Some of the contractors have attributed the abandonment to lack of payment by government.
The contractors and suppliers have argued, and rightly so, that any delay or non-payment has a chain effect on other players in the project implementation process.
For instance, in the case of contractors, suppliers of materials and workers need to be paid.
It is said a journey of a thousand miles starts with one step. It is therefore re-assuring that government has taken a step in ensuring that suppliers and contractors are given their dues for them to continue contributing to the growth of the economy.
While government is working at means of dismantling the K10 billion owed to suppliers and contractors, there is also need to look out for corruption in the processes of awarding contracts.
As President Lungu pointed out recently, overpricing is one aspect through which government is bleeding financial resources.
There is a saddening tendency by some suppliers to overprice commodities supplied to government.
It is therefore incumbent upon those charged with the responsibility to award contracts and supervise implementation of projects to ensure that government gets value for money.
While it is understood that some contractors are still small, we expect them to work towards growing their businesses.
Contractors should desist from the tendency of spending their profits on luxurious cars and lavish lifestyles instead of re-investing into growing their capital base.
Those suppliers and contractors who will benefit from the K1 billion government is scheduled to release this week should ensure the money is used for investment purposes rather than consumption.
And for those who still have pending projects, it is time to fulfil their obligations.

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