Security housing project contractors cry foul

The news was as exciting as that within eight years from April 2019, government would build 10 000 staff houses for security agencies nationwide.

On paper, it translated to 1 250 houses annually which, five years on today, should have yielded 6 250 units and the remaining 3 750 united on course for completion by March 2027.

Not a chance.

Weekend Nation has established that the ambitious project has only yielded 300 completed houses to date, plunged contractors into katapila-style driven debts worth billions of kwacha, and left government officials who manage the project dodging angry contractors chasing their money.

For Lot One of the project’s first phase, which involved the construction of 231 houses, most contractors borrowed money from informal lenders known as katapila as government took too long to provide agreed working capital and banks deemed the individual contractors too risky, according to Malawi Building and Civil Allied Traders Association (Mabcata), an umbrella body for local contractors.

The exorbitant interest rates from usury hit contractors hard, most of whom abandoned works, and some lost property to the loan sharks.

In that first lot, only 45 houses were completed and handed over while “construction progress for the remaining houses is at 81 percent on average”, according to government’s Public Sector Investment Programme (Psip) report or Budget Document Number 6 released in March this year.

Mabcata vice-president Kondwani Kadango said in an interview on Wednesday that the stress among the group’s members later forced the association to offer itself as security to banks which still put very high mark-ups on the facilities to hedge against non-payment risks. Eventually, the arrangement could not be sustained, largely because government was not paying the contractors.

He said the procedure in the arrangement with the banks is that once a contractor is awarded a tender, they are required to provide performance and advance payment bonds.

Explained Kadango: “For example, a contractor who is awarded a project worth K10 billion needs to own property valued at no less than K3 billion to use as security for the bonds. Unfortunately, very few local contractors have assets of that magnitude in their portfolios.

“Contractors had to pay billions of kwacha in premiums to banks for these bonds before receiving any funds from the client, the Ministry of Lands. Imagine the financial strain of having to repay a K100 million loan with interest accumulating for three to four months without receiving any payment from the client!”

He bemoaned what he described as “the growing trend of awarding contracts and requiring contractors to begin work without securing funds”, which he said is becoming a norm in Malawi.

As a result, Kadango said, while government’s decision to involve local contractors in substantial projects was commendable, the delay to pay them working capital is creating serious financial challenges for the contractors.

Kadango said, recognising the challenge that contractors face, his association stepped in to assist its members by negotiating with insurance firms and banks to help the contractors to obtain the necessary bonds using Mabcata as security.

“This arrangement was initially seen as a breakthrough, offering long-awaited relief to local contractors. However, the situation has since deteriorated. The deal is now in jeopardy, and banks have stopped issuing bonds due to the substantial amounts of unpaid advance payments for the security houses project,” he lamented.

According to the project timeline for the 10 000 security houses, under the first phase the Ministry of Lands was supposed to construct 1 028 housing units while 2 300 houses were supposed to be constructed in the second phase.

A source familiar with the project said it has stalled with less than 300 houses so far fully constructed.

The source said following implementation delays, the project cost, originally at K620 billion, has now jumped to an estimated K1 trillion.

President Lazarus Chakwera launched the flagship project on December 15 2020 in Karonga with funding expected from Treasury, Opec Fund for International Development and Arab Bank for Economic Development in Africa.

The houses are for the Malawi Defence Force (4 000), Malawi Police Service (4 000), Malawi Prisons Service (1 000) and the Department of Immigration and Citizenship Services (1 000).

From July 16 2024, Secretary for Lands Davie Chilonga has kept on promising to respond to our enquiry, but he has not.

Ministry of Homeland Security Principal Secretary Steven Kayuni, whose ministry is the project’s beneficiary, this weel referred us back to Chilonga, but to no avail.

Similarly, Hendrina Givah, director in the Presidential Delivery Unit (PDU), a special office under the Office of the President and Cabinet created to track progress of public projects, said the Ministry of Lands was better-placed to provide the details on the matter.