Treasury defaults sparkindustry bloodbath

State contractors owed millions of United States dollars for major public infrastructure projects have called for urgent legal reforms to criminalise what they describe as "fraudulent" contracting by senior government officials. The Zimbabwe Building Contractors Association (ZBCa) warned that the crisis has evolved from sporadic disputes into a systemic catastrophe, with private firms left exposed when Treasury fails to honour payment commitments.

Speaking to the Zimbabwe Independent, ZBCa president Tinashe Manzungu highlighted that contractors are increasingly facing insolvency, forced liquidations, and loss of personal assets, as some have pledged homes, vehicles, and equipment as collateral to secure bank loans. Many contracts issued by state bureaucrats were reportedly signed without secured funding, leaving firms to absorb severe losses while waiting months, sometimes years, for payment.

"The practice of issuing tenders based on ‘budget allocations' rather than ‘cash availability' must end," Manzungu said. "We are calling for a strict amendment to the Public Procurement and Disposal of Public Assets Act. No tender should be gazetted without a Certificate of Funding Availability from Treasury, confirming that liquid cash is ring-fenced for that project. Accounting officers who knowingly contract services without secured funding are effectively committing fraud against the private sector and should face administrative penalties."

Despite construction remaining a key pillar of Zimbabwe's economy—contributing over a quarter of GDP when linked sectors are included and employing more than one in ten workers—sector growth has stalled, with many projects delayed by chronic capital shortages. The 2026 National Budget indicates that of Zimbabwe's roughly US$23 billion public debt, arrears to contractors exceed US$1 billion, effectively locking up working capital in an environment of high inflation and volatile exchange rates.

Manzungu warned that the human cost is even greater, as the loss of experienced technical personnel is creating a capacity gap that could hinder the sector's recovery for years. While machinery can be replaced, rebuilding skilled leadership takes much longer.

Government has acknowledged tensions with contractors and announced reforms. Deputy Minister of Transport and Infrastructural Development Joshua Sacco said new payment frameworks are being introduced and urged contractors to take on projects they can sustainably finance. The State is also increasingly moving towards public-private partnerships, allowing projects to proceed only once funding is secured upfront to reduce reliance on delayed Treasury disbursements.

However, Manzungu stressed that reforms alone will not resolve deeper structural problems. He said that cash flows for major projects must be ring-fenced, with revenue streams held outside the Consolidated Revenue Fund, and sovereign guarantees must be enforceable in neutral jurisdictions to protect investors against currency and policy risks.

He predicted that any recovery will likely be fragmented, driven by mining-related infrastructure and selective civil works, while housing and municipal projects remain largely stalled unless structural reforms are implemented.