Rising inflation at home and abroad may slow down Zimbabwe’s construction programs, one of the companies involved in the infrastructure rollout warns.
Masimba, which has contracts from both government and from large private sector clients, says the economic volatility over the last quarter in Zimbabwe and increasing costs of inputs in US dollars globally may affect the viability of projects in Zimbabwe.
“The operating environment in the first quarter remained volatile as characterised by continued hyperinflation and disparity between the official and alternative market foreign exchange rates,” Masimba says in a trading update for the first quarter.
“The worsening inflation threatens the viability and sustainability of long-term infrastructure development projects, given its impact on United States Dollar denominated materials pricing.”
Earlier this year, Masimba reported that its order book had grown from US$72 million in 2020 to US$214 million last year, the benefit of contracts from private players such as mines and government’s infrastructure programmes.
But the company now says turning this order book into projects on the ground may be disrupted by current market turbulence and the impact of the Ukraine conflict on the price and flow of supplies.
“The Group has a firm order book, the execution of which may be negatively impacted by the prevailing volatility in the current macro environment. In addition, the continued conflict in Ukraine has affected supply chains and pricing of key construction materials such as steel, fuel and bituminous products,” Masimba says.
Masimba has won contracts in mining, such as at Zimplats, where the mine is developing new mines and building extra processing capacity. Masimba is one of five local contractors repairing the Beitbridge-Harare highway. The company is also part of a consortium, Tefoma, awarded a contract last year to build the Mbudzi interchange in Harare.
But critics say while growth in infrastructure has been good for companies like Masimba, it has helped stoke inflation.
“The Zimbabwean dollar being paid by Government to the contractors is ending up chasing the greenback on the parallel market as they seek to preserve value,” the Zimbabwe National Chamber of Commerce has said.
Finance Minister Mthuli Ncube, in Parliament last week, said the government is paying contractors a third of their money in US dollars to try and manage the flow of Zimbabwe dollars onto the market.