Construction companies are big winners of 2021 budget as Govt extends infrastructure spending

PPC: Growing infrastructure orders paying off for PPC

The tax-heavy 2021 budget may be bad news for many, but not for construction firms.

Construction companies had a good comeback in the third quarter after a tough year.

Over recent weeks, construction firm Masimba, building materials supplier Turnall, brick maker Willdale and cement producers PPC and Lafarge have reported a recovery in business in the third quarter.

Now, that recovery is likely to continue in the new year as order books fill up on government’s extended infrastructure spending.

In his 2021 budget presented on Thursday, Finance Minister Mthuli Ncube said government’s infrastructure plan will rely “more and more on building capacities of our local companies and use of local resources.”

A total of ZWL$139.8 billion will be spent on the 2021 infrastructure investment programme, which includes roads, dams, housing and public buildings.

Government will spend ZWL$31.6 billion on roads. The bulk of this will be for the Beitbridge road project, where an additional 200km will be done in 2021. Completion is expected in 2022.

Masimba is one of five local companies contracted to rebuild part of the Beitbridge road.

Construction demand

In a recent trade update, Masimba says “significant amounts were expended in capital equipment to support the growing order book”. The company’s capital expenditure was funded by internal resources and external borrowings.

As at Friday’s close, Masimba stock on the ZSE was up 2697% since the start of the year.

Masimba CEO Canada Malunga: firm has increased capex to meet growing demand

PPC, in its own update, said it has “secured supply contracts for a substantial proportion of the large infrastructure projects in Zimbabwe”.

Lafarge sales volumes in July were the highest recorded in the month since 2003, as business recovered after the COVID-19 period. Third-quarter demand for cement was 34% higher than Q2.

Other projects planned by government in 2021 include the long-delayed Mbudzi overpass. A tender for the engineering design for the interchange was floated in September 2018, but no progress has been made to date. Other urban projects on the table include work on Lomagundi Road in Harare and Esigodini road in Bulawayo.

The African Development Bank (AfDB) has agreed to release ZWL$102 million in 2021 for projects to repair infrastructure damaged by Cyclone Idai. Masimba has also won contracts to build roads in Chimanimani.

Infrastructure gap

Here are some of the other infrastructure projects planned in 2021:

  • ZWL$200 million for construction of the tower at the JM Nkomo International Airport
  • ZWL$550 million for upgrades of Kariba, Buffalo Range and Grand Reef airports
  • Z$10.7 billion to complete ongoing dam construction. Gwayi-Shangani has an allocation of ZWL$4.5 billion
  • AfDB will fund ZWL$491 million to upgrade Bulawayo water and sanitation infrastructure
  • ZWL$10 billion housing budget, which covers institutional and other housing development

The AfDB estimates that Zimbabwe needs US$34 billion to close its infrastructure gap, funding that Zimbabwe cannot raise due to international isolation and the country’s failure to pay its debts.