CONSTRUCTION DEVELOPMENT REPORT

ZAMBIA

2017
ACRONYMS
AADT Annual Average Daily Traffic

ESMF Environmental and Social Management Framework

ERR Economic Rate of Return FM Financial Management

GDP Gross Domestic Product GRM

GRZ Government of the Republic of Zambia

IDA International Development Association

MDRI Multilateral Debt Relief Initiative

MHID Ministry of Housing and Infrastructure Development

MLG Ministry of Local Government

MNP Ministry of National Planning

NRFA National Road Fund Agency

PRAMS Procurement Risk Assessment and Management System

QA Quality Assurance QCBS Quality and

RDA Road Development Agency

RED Roads Economic Decision

RPF Resettlement Policy Framework

RRMP Road Rehabilitation and Maintenance Project

RTSA Road Transport and Safety Agency

WB World Bank

Table of Contents

ACRONYMS.............................................................................................................................................2
REPORT SUMMARY..............................................................................................................................4
1. Introduction.......................................................................................................................................1
2. Construction Sector (2010-2017)......................................................................................................2
2.1 Broad Overview.............................................................................................................................2
2.2 Implementation Process................................................................................................................4
2.2.1 Spillover effects..........................................................................................................................6
2.3 Construction Subsector.................................................................................................................7
2.3.1 Road Construction.....................................................................................................................7
2.3.2 Airport Constructions...............................................................................................................7
2.3.3 Real Estate Construction...........................................................................................................8
2.3.4 Commercial Space Construction..............................................................................................8
3. Overall performance of construction in 2017..................................................................................9
4. Challenges in the sector - 2017........................................................................................................12
2.3.5 General challenges...................................................................................................................12
2.3.6 Other major challenges...........................................................................................................13
5. Conclusion and Recommendations.................................................................................................14
5.1 Conclusion....................................................................................................................................14
5.2 Recommendations........................................................................................................................14
4.1 Institutional, governance, and regulatory reforms..................................................................14
4.2 Industry-support policies and reforms.....................................................................................15
REPORT SUMMARY

In 2017, the major construction project which were undertook were road construction projects. This is in
line with the needs of the transport policy, road maintenance initiative, national development agendas and
plans and the mandate of the government. Financial Performance During the year under review, the
budgetary allocation in the RSAWP was K8.62 billion and comprised local and external resources.
Overall K6,245.11 million was received from both external and local resources. Receipts from external
resources were K3,769.72 million out of the budgeted K5,941.20 million. K2,475.39 million was
receipted against the budget of K2,682.79 million from local resources.

Local receipts and expenditures stood at 92 and 100 per cent respectively in the year (2017). External
expenditure was also at 100 per cent of the receipts. With regard to RDA, there was a reduction in
revenue collections by about 29 percent compared to 2016. The Agency collected K34.87 million from
various revenue generating activities compared to K49.13 million collected in the year 2016. The decline
in revenue collection was mainly attributed to the decrease in abnormal load vehicles movements and
reduced quarrying activities.

However, considerable progress was achieved on the Core Road Network (CRN) with regard to routine
maintenance works. From the annual target of 8,500 Km, the Agency achieved 6,198 Km on routine
maintenance for the paved and unpaved roads. There was also a significant improvement in performance
under routine maintenance in 2017 when compared to 2016. About 73 percent of the target was achieved
under routine maintenance in 2017 as compared to 67 percent achieved in the year 2016.

However, there was a 50 percent reduction on periodic maintenance in 2017 compared to 2016. Only 47
Km were achieved in 2017 compared to 104 Km achieved in 2016. Reductions in the target performances
are mainly attributed to erratic funding in the year 2017. Despite fiscal challenges in the year 2017,
significant improvement on upgrading works under the Link Zambia 8000 Project (LZ8000) was
achieved compared to the previous year. In 2017, 63 Km was achieved compared to 38 Km achieved in
2016 under upgrading works. Substantial progress was also made under major Rehabilitation,
Construction and Upgrading Projects. About 146 Km surfacing was achieved in 2017. This report
highlights the major achievements in the construction sector.
1. Introduction
The importance of good-quality infrastructure in determining the course of industrialization, structural
transformation, and economic development in any economy is generally well established in the literature
(ECA  2017). Economic infrastructure includes a range of basic services—physical structures, systems,
institutions, services, and facilities that are the foundational tool for developing the economy of a country,
region, or city. The stock of physical infrastructure or physical assets is one of the bedrocks of industrial
activity.

It broadly determines the efficiency with which producers and consumers operate and interact in clearing
markets, significantly shaping the fortunes of an economy. A range of constructed or capital installations
exist which qualify as (physical) infrastructure. These include: (i) transportation systems such as roads,
bridges, walkways, rail, airports, and ports; (ii) electric energy production and distribution systems such
as electric grids; (iii) water and sanitation systems that provide a supply of clean water, allow for water
resource management, and support sanitation through waste disposal subsystems; (iv) housing
infrastructure, including accommodation or buildings for residential and commercial purposes, office
buildings, and extractive industry and manufacturing infrastructure or factories, which are specialized
types of housing infrastructure; and (v) telecommunication installations like phone, television, or internet
network installations, satellites, etc. Because of the public good nature of most physical infrastructure,
most efforts to install or build physical assets, particularly in developing countries like Zambia, tend to be
public-sector-driven and state-funded.

Granted, contemporary infrastructure projects in Africa are generally financed through loan and grant
term-financing from cooperating partners or through public–private partnerships (PPP), albeit mainly
limited to energy projects. However, even these foreign-financed projects must eventually be paid for by
the host countries through loan or grant repayments. Thus, for a number of African countries the ultimate
direct financing of infrastructure projects out of domestic taxpayer resources has been inevitable and its
scale sizeable

In Zambia, efficient construction projects can provide a solid platform for reviving the Zambian economy
and for building a more balance and independent economy during stable political conditions. There is
probably no sector that has significant implications on the daily lives of human creatures than the
construction industry. It is universally accepted that for example, the wells and bore holes where human
beings get water as a source of life, the buildings where we live and work, the roads and bridges we drive
on, the utility distribution systems we use, the railways, airports, ferries and harbours we travel and trade
from, dams and power lines that give us electricity, are all products of this vital industry(Takim and
Akintoye, 2002).

For a number of reasons, in 2017 the performance of construction project were not as impressive,
fundamentally because of the Zambian Authorities’ failure to establish a coherent institutional and policy
framework (World Bank, 2017). Performance is related to many topics and factors such as time, cost,
quality, client satisfaction; productivity and safety.

2. Construction Sector (2010-2017)

2.1 Broad Overview
Zambia’s population was projected at 16.4 million inhabitants in 2017 1. The country covers a land area of
752,618 km2 (World Bank 2018b), meaning a fairly low population density of 22 persons per km2
compared with an average density of 44 persons per km2 in sub-Saharan Africa. The urban population is
1
https://www.dhsprogram.com/pubs/pdf/FR304/FR304.pdf

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estimated at 42 per cent of the total population, with the rest (58 per cent) residing in rural areas. Outside
the national parks, game reserves, Game Management Areas (GMA), and forest reserves, most rural and
urban spaces in the country are occupied by human inhabitants, although some districts are very sparsely
populated, with extremely low densities e.g. Mulobezi in Western Province, with 3.0 persons per km2 ,
Luano in Central Province (3.6), Mufumbwe, North-Western (3.8), Ngabwe, Central (4.0), Kasempa,
North-Western (4.1), and Sesheke, Western (4.3) 2. These human settlement patterns in rural areas add to
considerable pressure on the authorities to expand Zambia’s public sector infrastructure development
agenda to cater for the rural areas. This is because even the most sparsely populated areas are entitled to
physical infrastructure (roads, electricity, infrastructure, schools, health facilities, water and sanitation,
etc.)

Conversely, the high population densities in urban areas have raised demand for commercial and
residential real estate, thus pushing up demand for building construction services in these areas. Lusaka
District, where the capital city is located, has by far the highest population density at 5,808 persons per
km2 compared with, say, 856 persons per km2 in the second most densely populated district, Kitwe 3.
Lusaka has therefore established itself as the most preferred destination for private investments in
residential housing, as well as in commercial private buildings for office accommodation and retail space
(shopping malls and supermarkets). The demand for related building construction services is therefore
much greater in Lusaka than in other parts of the country. Added to these human settlement pressures, the
current political dispensation is anchored on an economic philosophy of state-led development, to be
achieved primarily through public goods infrastructure expansion. The 2011–2016 Manifesto of the ruling
political party in Zambia, the Patriotic Front (PF), asserts that:
“Under the MMD government, investment in infrastructure development has been limited and the
pace of development slow. Part of this is due to an obsession with maintaining ‘tight money’
through fiscal and monetary policies. This has resulted in many parts of Zambia resembling ghost
towns despite more than five years of record mineral prices and a production boom.” 4

In 2011, when the PF came to power, its manifesto locked the country into an ambitious infrastructure
development path that persists today. The public infrastructure development ambitions are also seen in the
Seventh National Development Plan 2017–2021. 5 The 7NDP has ten Strategic Development Outcomes,
including one on ‘Improved Transport Systems and Infrastructure’, which focuses on construction and
rehabilitation of railways; development of aviation infrastructure and operations; construction and
rehabilitation of the road network; and construction and rehabilitation of maritime and inland waterways.
Beyond this, the Development Outcomes in agriculture, tourism, water and sanitation, information and
communication technology (ICT), etc. all incorporate components of related infrastructure development.
Ultimately, the underpinning philosophy of a sustained expansionary fiscal path committed Zambia to,
initially, two major infrastructure development undertakings, namely:
 The Link Zambia 8000 road project—also known as Accelerated National Roads Construction
Programme (ANRCP)—which was initiated in 2012, aiming to transform Zambia into a land-
linked country through extension of the surfaced core road network by 8,000 km in three phases.
 The creation of new districts and revitalization of old ones, which saw an expansion of the total
number of districts from 72 in 2011 to at least 108 in 2017 (Brinkhoff 2018), with all the new
districts requiring administrative infrastructure (offices and personnel housing, schools, health
facilities, road network, etc.).

2
https://static1.squarespace.com/static/591343e103596e24bb42647b/t/5b3d0467575d1fd7a470bbb2/1530725500600/ZCP-
2017-Annual-Report.pdf
3
vccdata.org/climate-data/human-settlements/
4
https://sadcblog.wordpress.com/2011/08/20/pf-manifesto-2011-zambia-yes-a-better-zambia-for-all/
5
http://41.77.4.165:6510/extwprlegs1.fao.org/docs/pdf/zam170109.pdf

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2.2 Implementation Process
To date, Zambia’s political commitment to development through infrastructure expansion has remained
consistently strong, particularly during the period 2013–17. The country’s nominal expenditure on non-
financial assets (NFAs) (or capital spending on physical assets) grew from ZMK2.5 billion in 2010 to a
peak of ZMK12.8 billion in 2015 before slowing down somewhat to ZMK8.3 billion in 2017 6.
Concurrently, the share of NFA expenditure increased from 17 per cent of total budget expenditure in
2010 to a high of 25 per cent in 2015 (the year before the general elections of 2016), but declined to a
period low of 14 per cent in 2017 (a year after the elections).

The government roads programme was the most dominant planned nonfinancial capital expenditure item
in the National Budget during 2010–17 accounting for an annual average allocation of 42 per cent of
NFAs over the period. The other major capital expenditures, such as rural electrification, power
rehabilitation, railway line rehabilitation, and water and sanitation were relatively small and intermittent
to varying degrees during the period. Surprisingly, significant electric power rehabilitation expenditures
were made during 2012–15, with part of the financing (about US$255 million, or 34 per cent) meant to
come from borrowed proceeds (US$750 million) from the 2012 Eurobond 7. However, the notable
expenditure seen in the figure below, Panel (b), failed to protect Zambia from the power shortage that
would ensue as a result of a partial drought in 2015.

Figure 1: Public expenditure on physical assets

Notes: GRZ = Government of the Republic of Zambia; ZESCO = Zambia Electrical Supply Company. Source: Authors’ construction from
Ministry of Finance Annual Economic Reports (available at: www. mof.gov.zm/?.

For all industries in Zambia, 2016 was a difficult year, with the global recession, political uncertainty
during the election, and commodity prices taking their toll. However, several key sectors stood out for
their performance, among them building and construction. The sector has long been a star performer,
steadily growing at an average of 17.5% annually over the last decade. As of 2014, the sector contributed
27.5% to GDP growth, reaffirming its significance as a key catalyst in the country's economic
development8.

Activity in the sector were being supported by infrastructural projects initiated by the government, and in
recent years there were significant investments made in the education, transportation, energy, health,
6
http://41.77.4.167:6510/nrfa.org.zm/wp-content/uploads/2019/01/Annual-Report-2017.pdf
7
http://documents1.worldbank.org/curated/en/782221512459934813/pdf/WP-P157243-PUBLIC-
WorldBankthZambiaEconomicBriefDecemberFinalWEB.pdf
8
http://www.parliament.gov.zm/node/4987

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housing, communication, and power generation sectors. Private-sector investment has continued to
feature in the industry as well, with investment projects seen particularly in the mining sector as well as in
the areas of real estate, particularly houses, shopping malls, and offices. The uptick in activity in the
country is similarly reflected in investor confidence: The Zambia Development Agency (ZDA) in early
2017 announced that a total of USD3.4 billion in FDI had been registered in the country in 2016, a YoY
increase of 0.7%. The construction and real estate sectors each recorded 9% of total pledged investment,
just behind the energy, manufacturing, and agricultural sectors.
The government has acknowledged the importance of infrastructure development as a critical parameter
of a country's development and that the existing gaps across all sectors have to be addressed, putting
infrastructure construction on its agenda. In its 2017 Budget, the government of highlighted several key
areas that would receive funding. Of note, ZMK8.6 billion was allocated for road infrastructure projects;
ZMK1 billion especially for various infrastructural projects for the education sector, including schools,
universities, colleges, and training institutes; and ZMK822.8 million was set aside to rehabilitate and
construct water supply and sanitation infrastructure and solid waste management systems across the
country.

The sector, however, has had to battle several challenges in the form of rising prices of raw materials, a
decline in the value of the kwacha, and a lack of regulation in the industry that has at times resulted in
shoddy work practices and inflated costs. Ministry of Works and Supply's Mfune had acknowledged the
shortcomings in this area, and said the government is reviewing National Council for Construction (NCC)
Act No. 13 of 2003 to address existing gaps in the industry and upgrade it to better match the country's
current needs.

2.2.1 Spillover effects

The upsurge of construction projects in the country saw positive spillover effects in the form of increased
activity in the transportation, logistics, cement, and steel industries, and increased cement consumption in
the country overall. As a result of the construction boom across the country, the Zambia Development
Agency predicted an increased demand for steel from 200,000 tons in 2011 to 300,000 tons by 2016.
Cement producer Dangote, similarly, saw a business opportunity in Zambia with growing demand for
cement and supply deficits. Its new plant, with a capacity of 1.5 million tons, opened in 2015 and resulted
in prices of cement falling drastically while projects that had been placed on hold were revived. Stability
was vital, as it afforded people the opportunity to plan longer-term projects more accurately." In addition,
given the higher cement prices in neighboring countries, it was observed “even with transport costs,
Zambia prices were competitive," opening up export possibilities for the company. Similarly, given
Zambia's ambitions to become a regional logistics powerhouse, the logistics sector is seeing similar
construction frenzy in areas such as road and rail networks, warehouses, and logistic parks .

2.3 Construction Subsector

2.3.1 Road Construction
Chief among the government's priorities has been transportation. The lion's share of its infrastructure
budget was reserved for road networks projects, among them the Link Zambia 8000 project, which seeks
to upgrade and pave close to 8,200km of roads across the country at a cost of USD5.6 million, the Pave
2,000 project, which will rehabilitate 2,000km of roads using interlocking concrete pavers, as well as the
L400 project to construct up to 400km of roads in Lusaka at an estimated cost of USD348 million. Phase
I of the Link Zambia 8000 project saw close to 4,000km being completed as of 2017, with the remainder
expected to be completed by 2021. When completed, the road network, which will connect several

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provinces and regions, will significantly reduce travel time and transport costs in the country, and play a
pivotal role in spurring the economic development of rural areas. 9

2.3.2 Airport Constructions

Another key area is air travel. Several projects are underway to construct new airports and modernize
existing airports across the country. The largest project is the upgrading of Kenneth Kaunda International
Airport (KKIA) in Lusaka at a cost of USD360 million and expected to be completed by 2019 10. The
Minister of Works and Supply announced in November that 33% of the project had been completed and
that the expansion works of Zambia's largest airport has resulted in the employment of over 1,000
Zambians. Another key project is the construction of an airport of international standards in Ndola in the
Copperbelt region. Set to cost USD522 million, the new airport, with a capacity for 1 million passengers
annually, is expected to firmly cement the Copperbelt as a key mining, industrial, and air travel hub in the
region. The construction project includes hangars, an air control tower, a fire station, a five-star hotel, a
cargo terminal, a passenger terminal, and parking space.

2.3.3 Real Estate Construction

The real estate sector, in particular housing and commercial property, has been a hotbed of activity. The
largest opportunities lie in the affordable housing sector, where estimates have put the shortage of
housing units in Zambia at 2 million, requiring urgent action from the government. It seeks to increase the
existing stock of affordable and quality housing and is championing private and public investment to
boost construction of housing development projects and plug the supply gap. The Centre for Affordable
Housing Finance (CAHF) in Africa had noted the presence of a substantial gap in the market between
what companies were offering and what homeowners could afford in Zambia.

In 2016, the going rate for a newly built two-bedroom, 65sqm house was about USD24,382 at the
minimum, while developers targeting young professionals were building houses in the range of
USD60,000-100,000. With several housing development projects urgently required all over the country
the National Housing Authority (NHA) has over 10,000 project proposals with a combined cost of
GBP16.6 million for the construction of various housing types measures have been enacted to encourage
greater investment in the sector, including easy access to land, easy repatriation of profits, duty-free
imports of certain raw materials, and the removal of foreign exchange controls for investors .

2.3.4 Commercial Space Construction

In terms of commercial space, meanwhile, as with any up-and-coming country, Zambia has seen a boom
in shopping malls and offices in the last several years. Growing consumer demand from the emerging
middle class in Zambia has for the last several years driven the boom in construction of shopping malls
and developers are going all out to provide shoppers with better and larger shopping and entertainment
facilities. Real Estate Investments Zambia (REIZ), which manages Arcades Shopping Mall in Lusaka, did
some expansion the company planned to “expand the Arcades Shopping Mall from 19,000sqm to nearly
30,000sqm, adding 10,000sqm in two phases." Outside of Lusaka, REIZ opened in up-and-coming
provincial towns, such as Choma in the southern province. Constructions has been expanded even to
north western “Solwezi is the new Copperbelt, so again, we will focus our attention there.

In 2017, Mei Mei Dolla Hill Shopping Mall in Ndola was constructed and its noted for being Zambia's
first-ever wholesale city, similarly provides warehousing and storage facilities for companies in addition
to featuring an amusement park, a shopping mall, residences, five-star hotels, and a shopping mall to
9
https://www.mhid.gov.zm/link-zambia-8000/
10
https://www.airport-technology.com/projects/kenneth-kaunda-international-airport-lusaka/

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serve the surrounding regions. The first phase of the USD50 million-project was completed in 2016, and
the entire city is expected to be completed by 2025. The many projects being initiated across the country
are expected to drive economic growth, employment, and development, and the attention given to
infrastructural construction in particular is encouraging. 11

3. Overall performance of construction in 2017

In an effort to improve the business environment, Government has set out to make the country more
attractive by enhancing infrastructure development. That’s why the country in 2017 made infrastructure
development central to its vision to attract investors. As the year came to a close, it was gratifying to see
that government rolled out massive infrastructure development running the length and breadth of the
country. Roads and bridges, solar and hydro power projects, hospitals, schools, water reticulation systems
and other support infrastructure have been constructed and rehabilitated, thereby setting hestage for socio-
economic development.

In the transport sector, the year 2017 saw roads and bridges being constructed, upgraded, and
rehabilitated and maintenance works being The Road Development Agency (RDA) is one arm of
government that was implementing an ambitious programme called the Link Zambia 8,000 (implemented
in 2012) and Pave 2,000. The Link 8,000 aims to build 8,000 km of roads in order to open up the country
to further investment and development. The project was set to cost around US$31.4 billion. More than
2,000 km of roads have been constructed so far. Zambia is a landlocked country in Central Africa and
inadequate infrastructure in all key sectors is one of the country’s main hurdles 12.

In order to connect the country to various economic corridors in Africa and beyond, a good road network
is key and this is why government through National Road Fund Agency spent K5.3 billion on the
construction of roads. The agency was expected to fund the construction of more roads in 2018 and that
the Road Development Agency would continue to construct toll gates in order to find the money to
finance the rehabilitation and construction works.

Among the notable roads constructed during the year is the 375 kilometre stretch from Luangwa Bridge
to Mwami Border, at a cost of 168.7 million Euros. The works were done by Condril and Mota Engil
construction companies. The road project was co-financed by the European Union (EU) through the
European Development Fund (EDF) and the European Investment Bank (EIB), the French Agency for
Development (AFD) and the African Development Bank (AfDB). Another massive road project during
the year, whose construction commenced recently is the Great North, the 321-kilometre Lusaka-Ndola
dual carriageway. The Lusaka-Ndola dual carriageway could be one of the biggest road projects in
Zambia’s history. This is so because the said road is a key panacea for the country’s socio-economic
challenges, as it is an important route to and from the Democratic Republic of Congo and other Southern
African Development Community (SADC) and Common Market for Eastern and Southern Africa
(COMESA) countries.

Scheduled to be built at the cost of US$1.2 billion, the dual carriageway will according to plan, come with
the construction of a transit hotel, a service station between Lusaka and Kabwe, and a mini city to be
established between Kapiri-Mposhi and Ndola. A look at policies and frameworks put in place on the
African continent makes one conclude that Zambia too is headed for the continental vision is a priority.
For infrastructure development in the energy sector, the year 2017 has saw the construction of the
multinational power project called the Zambia-Tanzania-Kenya (ZTK) power interconnector 13. Ministry
of Energy (2017), reported that the project on the Zambian side had made tremendous progress.
11
https://realinvestzambia.com/investor/annual-reports/
12
http://www.rda.org.zm/jdownloads/Annual%20Reports/RDA%20Annual%20Report%202016%20Email.pdf

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The ministry reported that the project on the Zambian side had a funding gap of US$200 million to
complete its portion. The ZTK interconnector is a high voltage power transmission line connecting
Zambia, Tanzania and Kenya. The project is a Common Market for Eastern and Southern Africa
(COMESA), Southern African Development Community (SADC) and East African Community (EAC)
Tripartite Priority project as well as a New Partnership for Africa’s Development (NEPAD) programme
under the Programme for Infrastructure Development in Africa (PIDA) and the Africa Power Vision
which have been endorsed by the African Union Heads of State and Government Assembly.

Another hydropower project worthy noting in 2017 was the launch of the US$4 billion Batoka Gorge
Hydro-Electric Scheme implementation process with a call to the media to help market the project to
potential financiers locally and abroad. Batoka Gorge Hydro - electricity Power Station project has been
financed by both the Zambian Government and Zimbabwe. According to Zambezi River Authority (2017)
the project is in response to the energy crisis in the SADC region, the Government of Zambia and
Zimbabwe have embarked on the bilateral Batoka Gorge Hydro Electric Sceme 54km downstream of the
Victoria Falls. The project was expected to produce 2,400 Megawatts of electricity at an estimated cost of
US$4billion. On hospitals 2017 saw an improvement in the infrastructure in various health facilities
countrywide. Besides several other clinics and health centres that have been constructed, the mother of
them all is the upgrade of Levy Mwanawasa Hospital into Levy Teaching Hospital (LTH) at a cost of
US$48 million.

The upgraded facility once complete is scheduled to accommodate 3,000 students. “Government has an
on-going robust programme of constructing health facilities across the country in line with the vision of
providing equitable access to cost effective, quality health care services as close to the family as
possible,” President Lungu said in a speech read for him by Vice- President Inonge Wina at the ground-
breaking ceremony of the expansion of phase two of the Levy Mwanawasa University Teaching Hospital.
On schools, 2017 has seen Government construct 115 new secondary schools and 220 primary schools
are being upgraded.

In 2017, the country has saw basic reliable infrastructure coming up in terms of airports, road networks,
energy generation and transmission installations and telecommunication infrastructure. Clearly, investing
in infrastructure really pays off. Because a good and quality infrastructure does not only attract investors,
it also positively contributes to economic growth. Experts say increased public infrastructure investment
can have powerful effects on the macro-economy. Better infrastructure raises output in the short term by
boosting demand and in the long term by raising the economy’s productive capacity.

4. Challenges in the sector - 2017

2.3.5 General challenges
The industry-wide challenges included a variety of structural challenges, systemic inertias (‘red tape’),
and constraints which affect sectoral firms indiscriminately, but which larger, more sophisticated firms
can better contend with given their larger operating capital outlays, among other things. For instance,
other things being equal, the earlier-mentioned cost of registration with NCC e.g. a fee of ZMK7,750 per
year for Grade 3 firms compared with ZMK625 per year for Grade 6 firms forces smaller firms with

13
https://www.au-pida.org/view-project/719/

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financial constraints to stay small. The industry also faced significant constraints to doing business,
particularly in relation to acquiring a construction permit.
Weak institutional support and commitment in the industry was also a challenge which served as a
significant constraint to construction services supply.

There was weak institutional commitment is clearly demonstrated in that, in March 2017, the
(International) Board of Construction Sector Transparency (CoST) initiative informed Zambia’s Ministry
of Housing and Infrastructure of its decision to revoke the membership of CoST Zambia, an international
country-centred (public and private sectors and civil society) multi-stakeholder initiative designed to
promote transparency and accountability in construction. This was because over an extended period CoST
Zambia had not demonstrated progress towards implementing CoST standards. Thus, although the
country was among the eight where CoST was successfully piloted between 2008 and 2011, by 2015 it
had been declared ‘inactive’, having failed to make meaningful progress for an extended period. CoST
Zambia was given a further six months to get itself ‘reactivated’ through appropriate policy reform and
compliance measures. With no high-level commitment or movement from the responsible institutions, the
timeline and all subsequent timelines lapsed, forcing the board to take its March 2017 decision. The risk
is high that weaknesses in transparency, accountability, and good governance will continue to obtain,
making room for vices like corruption and rent-seeking.

Transparency International Zambia (TIZ) is on record as having recently cited ‘cadreism’ as a major
source of corruption in the construction sector in Zambia 14. TIZ’s opinion is that the common problems
faced by the construction industry include the non-disclosure of beneficial owners of bidding construction
companies and rigging of tenders, among others. While cadreism and ‘cadre-preneurial contract trading’
(the specialization by politically connected cadres in the illicit capture of public tenders and their sale on
illegal secondary tender markets) might be a new phenomenon, evidence of strongly suspected corruption
in the construction sector is now well documented. The Auditor General’s report for the year ended 2016
(OAG 2017) records over twenty major construction-related counts of financial irregularity and/or
misconduct on the part of procuring entities (ministries, provinces, and spending agencies) and/or
contractors

Essentially, a staggering US$55.96 million of suspicious and questionable cash transactions were made
between procuring entities and contractors in 2017. Moreover, the underlying weaknesses in the legal
framework which Cost Zambia should have helped to address have been prevalent for over a decade.
UNZA and COLMAK (2010) report that the legal requirement for the release of material project
information (MPI) established by the Public Procurement Act No. 12 of 2008 was (and still is) focused on
the disclosure of the best-evaluated bidder only. The disclosure of the wining contractor and consultant’s
name and the contract value are the only details required to be disclosed. The other MPIs that should be
required to be released include: the scope of the projects; the tender procedure; a list of tenderers; the
contract programme; and details of any re-award of main contract. Of the pre-tender MPIs, only the
Environmental Impact Assessment is permitted by law to be released.

2.3.6 Other major challenges

The main macroeconomic bottlenecks relate to variables with a direct impact on the cost of construction
services. These include the adverse business shocks and uncertainty associated with a local currency
collapse, coupled with heightened inflation such as occurred in Zambia from mid-2015 through most of
2016 (Figure 18.6, Panel (a)). They also include factors like high credit or borrowing costs (high interest
rates) and fuel price hikes due to policy reforms (Figure 18.6, Panel (b)). Another major risk, which is
perhaps not yet a bottleneck, is the high level of public debt.

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5. Conclusion and Recommendations
5.1 Conclusion
The report has highlighted that the Zambian economy has made significant progress in the last 5 years. So
may projects are under construction in different areas such as expansion of airports, constructions of
schools and health facilities, road, and housing units. The government have appreciated the economic
benefits of constructions to the countries GDP. However, in apparent contradiction with generalized
expectations, the reported growth and expansion in investment failed to lead to major improvements
within the local construction industry. Local contractors, producers of building materials, and associated
firms are finding it hard to compete in a liberalized setting. Only 5% of local contractors manage to bid
for construction projects requiring significant finance. The failure of local construction firms is rooted in
the following factors: (i) weak credibility associated to their age, dimension, track record and lack of
certification; (ii) the VAT level and the associated reimbursement delays; (iii) multiple and long
bureaucratic procedures associated to the state ownership of land, which raises the costs of access to land
in urban areas, increasing informality and hampering the development of the housing market; (iv)
inadequate government procurement codes; (v) limited access to credit; (vi) lack of qualified manpower;
(vii) weak use of modern technology; (viii) delays and bureaucratic barriers for import of raw materials
and; (xix) policy and institutional fragmentation, Partnership, as well as the local industry integration, do
matter for success in the global market. The emerging business association movement within the
construction industry has the potential to push for changes in the right direction, but, so far, it has not
been visible. It is weak and lacking in terms of human and financial resources.
5.2 Recommendations
 Encourage the development of certification programs involving all aspects of the construction
industry (human resources, management, and total quality control issues). The introduction of this
measure has the potential for minimizing the credibility gap of indigenous firms, while
stimulating, with multiplier effects, savings, gross domestic capital formation, employment, and
broad based growth.
 Promote an in-depth discussion on the benefits, costs and optimal approach to reforms on land
rights, including the introduction of marketable land titles for urban land. By removing the
monopoly power of government officials, this should lead to reductions in land related
construction costs, while increasing state revenue, through adequate property taxes. In addition,
marketable land titles also has the potential to encourage financial sector innovations in favour of
a more competitive formal housing market.
 Reform the government procurement code. The current code encourages market segmentation
and pushes local contractors and other construction industry players towards the low end of the
market. Reforming the code requires creating incentives for reducing the time lag in which the
public sector clears the construction sector bills as well as the associated reimbursements. It also
implies considering the introduction of mandatory requirements for sub-contracting local
construction firms and suppliers. These are acceptable procedures because the current market
practices go against indigenous firms. They are also in line with regional and international
practices. A good regional example is South Africa.
 Increase the resources available for technical and vocational training for mid level skills in the
construction industry. If the education budget allocations are kept unchanged, there will be a
crisis of manpower in the near future. Changing this scenario is a fundamental pre-requisite for
success. It will need to be supplemented with a program of technological upgrading.
 Encourage reforms of the financial sector in favour of a more competitive environment. For
reducing the perceived risk, this needs to be supplemented by changes in management practices
and corporate governance among the construction industry players.

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 The government should also reflect on the possibility for setting up a construction industry body,
bringing together all the concerned entities from both the private and public sectors (the Ministry
of Works and supply, the Labour Ministry, The Education Ministry, and Universities). If properly
run, a strong federation and construction body will make space for bottom-up interaction with
positive effects for the whole construction industry value chain, and would have a crucial role in
developing management capabilities, skills, standards, certifications, as well as promotion of
joint-ventures for procurement and biding purposes.

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