Road Contractors still not paid

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Created on Wednesday, 18 September 2013 00:00

Road Contractors still not paid

16 September 2013

The failure by the John Dramani Mahama led National Democratic Congress administration to pay road contractors for over a year now has led to many of them folding up their business.

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The New Statesman can confirm that the five-year period of the NDC-led administration has been characterized by undue delay in paying for work done by these contractors and “selective” payments to some others.

Whilst many payments are in two years arrears, others are paid even before the contractual 90-day period within which payment ought to be made expires.

Consequently the cash flows of many contractors have been seriously affected, with many of them losing the trust of lending institutions and creditors.

Sources at the Ministry of Roads and Highways has told the paper that whilst it is true that previous governments had delayed in paying for work done, the Mills/Mahama regime had been the worst in the nation’s history.

“Contractors have abandoned projects whilst others notified the employer of suspension as a result of undue delay in payment. Consequently, contractors laid off workers, some selling their plant and equipment and shifting from road construction into other business sectors,” a source told the New Statesman.

The source continued, “The stress which road contractors have gone through as a result of poor cash flow has contributed to the illness and untimely deaths of some of them during the NDC-led administration.”

The road construction industry has suffered severe jolts during the Mills-Mahama rule and the undue delay in honouring payment for work done has contributed immensely to the collapse of the industry.

This situation, analysts say, is dangerous for the nation because only 20% of the nation’s road network have been paved (tarred); the remaining 80% are in either gravel or earth surface awaiting development.

New Statesman investigations have further revealed that many road projects have been abandoned throughout the country and the people do not get the intended benefit and rather their plight become worsened.

Indeed, the Ministry of Roads and Highways, in April this year, put a freeze on the award of new road contracts in view of the huge indebtedness in the sector. As of last year, road contractors claimed that the government was indebted to them to the tune of about GH¢400 million.

In view of the undue delay in payments, the Ghanaian road contractor is compelled to raise invoices for interest on delayed payments in accordance with the conditions of contract.

These amounts are huge and the longer the payments delay the closer these interest amounts to the contract sums of the respective projects, thereby doubling the cost of the project.

Most of the on-going road projects have therefore, become costly and eroded their cost-effectiveness. Besides, a substantial amount of the revenue of the Road Fund has been used to pay these interest amounts, putting further stress on the already inadequate revenue, a situation the nation could avoid by proper planning of projects for execution and prudent management of the Fund.

A survey conducted by the New Statesman conclusively revealed that contractors depended mainly on loans from Banks to undertake projects, and any delay in paying them for work done on the agreed date would mean that the re-payments of the loans they took from banks would come with higher interest.

Joseph Ebo Hewton, the Vice Chairman of the Association of Road Contractors, has stated that the delay by government in paying local contractors has led to the contractors accumulating huge debts from their bankers.

He also noted that this development had also forced most of the contractors to bid low for contracts because “they attempt to use the little money they have to undertake those projects. The effect is that we often see poor roads constructed and others abandoned because contractors realise that the funds meant for the projects were not enough. This causes the nation to look for another means of raising funds to solve the problem.”

Source: The Statesmanonline