Contractors are losing their homes, vehicles and livelihoods after going 11 months without payment for government projects, in a deepening cashflow crisis that is threatening to cripple the country’s construction industry.
In an account of the industry’s struggles, Ngubo Yengwe Construction Managing Director Sabelo Nhleko said prolonged payment delays have left contractors fighting for survival, with some forced to lay off employees, suspend construction work and watch their assets repossessed by banks.
This is as government seeks approximately E2.74 billion from Standard Bank and African Development Bank in new financing to address outstanding financial commitments, while still needing additional E1.05 billion from BADEA to finance the current financial year’s budget. All these loans total E3.79 billion.
Recent reporting also indicates that public debt stood at E43.04 billion in September representing 41.64% of the gross domestic product (GDP).
He said many of the affected businesses were contracted under the Microprojects Programme, but despite committing resources and taking on financial obligations to deliver public projects, they have gone months without receiving payment. Nhleko said the situation had brought construction activity to a near standstill at some sites, while the financial obligations facing contractors continued to mount.
He warned that the consequences were devastating.
Nhleko said most contractors were experiencing similar challenges. He stated that the prolonged delays had severely undermined the industry’s ability to operate.
Even where construction work had stopped, he said businesses continued incurring overhead costs including operational expenses and other financial commitments.
He added that the absence of income had also affected projected profits, leaving contractors with mounting expenses and little prospect of recovering their investments in the short term. Some companies had resorted to retrenching workers because they could no longer sustain their wage bills.
He warned that when government runs short of money, the consequences spread throughout the entire supply chain.
“Some had cars and houses repossessed as they had made them collateral for loans. That is how I can describe the personal and financial toll of the government’s cashflow constraints,” said Nhleko.
Nhleko added that this crisis has also exposed contractors to increasing pressure from financial institutions.
He said businesses had borrowed money to finance project implementation, often using personal assets as collateral, in anticipation that government would honour its payment obligations. With payments delayed, he said interest continued accumulating and contractors found themselves unable to meet their loan repayments.
He said the resulting damage extended beyond company balance sheets, affecting the personal financial security of business owners. He said contractors needed stronger representation and greater bargaining power to protect their interests when government failed to honour its financial commitments.
His criticism reflects growing frustration among businesses that feel they have been left to absorb the consequences of delays they did not create. Despite the bleak outlook, Nhleko acknowledged that some contractors had started receiving payments, describing the development as encouraging.
However, he said many businesses were still waiting for outstanding money with the partial progress doing little to erase the financial damage already suffered.
