Local Construction Companies irked by foreign Firms

 IBRAHIM KADILO

The government has been strongly called upon to intervene on a major hindrance of the Tanzania economy that is being mainly faced by local contractors who lack potential opportunities to obtain government's large construction projects due to these large projects being given to foreign companies instead of local contractors. Being an industry that is currently undergoing a lot of growth, construction activities should be directed toward local contractors instead of foreign companies to ensure that government funds stay within the country and local Tanzanians benefit from this spending in the forms of growth and employment.
 
In an exclusive interview with Business Times recently one of Tanzania’s leading class one construction companies, Advent Construction Limited's Director Dhruv Jog says that the government has the responsibility to empower local contractors. The government itself giving out its projects to foreign companies goes against the very principle on which a government is founded, that of looking after its own economy first. It is only expected that the government of a country gives preference to local companies during the tendering process so as to promote growth of local business’s, in any specter of industry.
 
The trend in the past few years has been to give large projects that are funded by governmental bodies to Chinese contractors. A common excuse for this is that local contractors do not have the capacity to execute these projects. However, the kind and volume of projects being done by local class one contractors now proves that this excuse is invalid. “ Some of the bigger local contractors today have the expertise, equipment and infrastructure that most foreign companies do not possess and there is no project that is outside the scope of viability for local class one contractors such as Advent”, Jog says.
 
“The fundamental principle behind stimulating national growth is increasing governmental spending via local companies which helps increase the circulation of funds in the market, this increased spending/ growth in industry creates growth in job opportunities, which helps in reducing poverty and thereby reducing crime, which are two of Tanzania’s biggest social problems” he says. “It is very simple to see the long reaching effects of the government ensuring that projects are given to local companies, it goes far beyond simply ensuring that contractors grow, the whole economy benefits, and as a result, the country benefits”, Jog says.

“Besides the benefits to the country in terms of increased job opportunities, lesser crime and lesser poverty, the government also benefits in the form of increased revenue from taxpayers that supply these local contractors”, Jog says. “Companies like us buy most of their needs from local suppliers, including heavy machinery and equipment and all other building needs, whereas foreign companies tend to bring in their needs from cheaper sources that not only deny local suppliers business but are also generally of inferior quality”. Local suppliers to companies like Advent are taxpayers and the more business they do supplying contractors, the more the government earns in terms of taxes. This also gives incentive to local suppliers to increase their capacity and gives them an opportunity to grow, once again instigating growth in the economy and creating more jobs and a more vibrant business environment. “An import dependent economy is not as sustainable as a self sufficient economy in the long run and the only way to get an economy to become self sufficient is to give local business’s an incentive to become producers instead of only importers, by creating growth. A good beginning to this would be to ensure that government funds stay within the country and are directed towards local companies” Jog says.

An example given by Jog of growth in the market is that of the cement companies,” Both Twiga and Tanga cement have increased their production capacities to cope with the increased demand in the market, thereby showing the impact that increased economic growth has on local industry. If large governmental projects are directed towards local contractors, they too will be similarly motivated to increase their capacity in terms of the volume and scope of projects they are capable of doing. If business’s are to grow, there has to be a reason for them to make the investments, the government ensuring its spending is done towards local business is one such reason.” Another offshoot of this is the investment of foreign funds within the market due to this growth. Jog says, “ In order to facilitate this sort of growth, investment will be required. This investment will be generally sourced from banks in form of capital investment loans and similar vehicles. Local banks then source their funds from shareholders and also foreign lenders, increasing the presence of foreign funds in the market, which means Tanzania can increase reliance on funds coming in for business rather than as aid”.

Commenting on current power rationing practices, Jog says that the construction industry has also been affected in a major way due to its effect on operational costs as all construction sites now run on generators. Also, manufacturers such as steel manufacturers are unable to supply materials on time due to their internal production being affected by lack of power.

Speaking on Advent Construction, Jog says that the company was established by his father, Mr Ashutosh Jog in 1994 as a class seven contractor, Mr Ashutosh has worked very hard to get the company to its current stage and make Advent a class one contractor. During the interview, the reporters carrying out the interview had the opportunity to view one of the company’s construction sites and the amount of machinery and infrastructure present at the site such as concrete batching plant, tower crane and backhoe and wheel loaders, and the speed at which work is being carried out and the quality of the construction give confidence to the fact that Advent is definitely one of the biggest and most capable construction companies in Tanzania today.
Jog says that the mission of Advent is to” Give quality construction well beyond customer expectations before due time and within budget.”