Local contractors at risk of missing out on Sh840 billion projects

Dar es Salaam. Despite government efforts to promote local contractors and empower them with major development projects, a growing wave of dishonesty and inefficiency within the industry threatens to derail these initiatives.

With Sh840 billion earmarked for repairing roads damaged by the recent El Niño rains, many local contractors could find themselves sidelined due to their inability to meet the standards set out in their contracts.

This troubling trend has not gone unnoticed by the government. Speaking on September 4, 2024, during the East Africa Green Construction and Infrastructure Summit, Works minister, Mr Innocent Bashungwa, expressed his frustration with some local contractors who failed to execute projects as agreed.

“There are some local contractors who, after being awarded tenders, fail to adhere to professionalism,” Mr Bashungwa said. “Once the contract is signed, the trickery begins.”

The minister’s remarks highlight a significant issue in Tanzania’s construction sector: the growing distrust in some local contractors due to their poor performance.

This distrust, according to experts, not only jeopardises the contractors’ future opportunities but also undermines the government’s strategy to prioritise local firms in national development projects.

The Sh840 billion set aside by Tanroads for road rehabilitation is intended to bolster the local construction industry in line with President Samia Suluhu Hassan’s directive to empower local contractors.

However, the recurring inefficiency among some contractors could lead the government to favour foreign firms—a move that would undoubtedly spark criticism from stakeholders who have long advocated for local participation in major projects.

In the past, the government has introduced several measures to enhance the capacity of local contractors. These include adjustments to Tanzania National Roads Agency (Tanroads) tender documents to make it easier for local firms to secure contracts.

The government also set aside Sh500 billion annually for road maintenance projects handled by local contractors, aiming to gradually increase their share of the construction market.

However, despite these efforts, the performance of some local contractors has been disappointing, according to the minister.

According to the Ministry of Works data, local contractors handled 35,351 out of 36,839 projects over the past decade. Yet, the total value of these projects only accounted for 38.5 per cent of the total project cost, with the average contract worth a mere Sh672 million, compared to Sh25.5 billion for foreign contractors. The disparity in project value underscores a crucial point: while local contractors may be involved in a larger number of projects, they are not entrusted with high-value contracts.

This discrepancy, experts believe, is largely attributed to the perception that local firms cannot deliver on more significant projects—a perception fuelled by the very inefficiency Mr Bashungwa decried.

The stakes are high, not just for the contractors themselves but also for the broader construction industry in Tanzania. As the government continues to push for local content in development projects, the actions of a few rogue contractors risk tarnishing the entire industry.

“We need the registration boards to deal with and filter out rogue companies that are tarnishing the trust of many,” Mr Bashungwa urged during the summit.

This sentiment is echoed by industry stakeholders, who fear that the current trajectory could have long-term consequences. The executive director of the Chamber of Construction Infrastructure of Tanzania, Mr Steve Mkomwa, emphasised the need for stricter measures to ensure that only capable contractors are awarded tenders.

“We are going to work closely with your ministry and CRB to ensure that we implement your directives to prune such contractors who are tarnishing this profession,” Mr Mkomwa said.

The impact of these inefficiencies extends beyond government projects. Private clients, who might have considered hiring local contractors for commercial or residential projects, will likely be deterred by the stories of delays, substandard work, and unfulfilled contracts.

This could result in a vicious cycle where local contractors miss out on both public and private sector opportunities, further weakening their position in the market.

Ultimately, a specialised construction consultant, Mr Johnson Mutisha, says the government’s directives to prioritise local contractors are well-intentioned and crucial for the country’s economic development.

“However, for these directives to be effective, the local construction industry must address the issues of dishonesty and inefficiency head-on. Only by restoring trust in their capabilities can local contractors hope to fully benefit from the opportunities available.”