Unpaid contractors push back after govt backlash

Contractors owed billions of Zimbabwe Gold (ZiG) by the Government have pushed back against Treasury's rejection of private consultants being engaged to recover outstanding payments, arguing that the growing use of intermediaries is a consequence of delayed and opaque payment processes.

The dispute comes as government arrears estimated by the Auditor-General at about ZiG250 billion continue to place pressure on businesses that rely heavily on state contracts.

Some companies have reportedly been pushed to the brink by prolonged cash-flow problems, with several disclosing that banks have moved against their personal assets to recover loans taken while they waited for Government to settle outstanding invoices.

The arrears form part of Zimbabwe's broader debt burden of about US$22 billion, equivalent to roughly 37 percent of gross domestic product. The country's debt situation was described in March by key African institutions as among the continent's most distressed.

The issue came into sharp focus this week after it emerged that some suppliers had engaged private consultancy firms to help recover money owed by the state.

Finance Minister Mthuli Ncube responded by warning that Government would not recognise claims or obligations arising from arrangements between state creditors and consulting firms or other third parties.

"Government will not entertain claims or obligations arising from arrangements entered between government creditors and consulting firms or other third parties for the recovery or facilitation of payment on government arrears," Ncube said.

"No consultancy firm, agent or other third party has the authority or mandate to facilitate, guarantee or secure payment of funds owed by the government," he added.

However, Zimbabwe Building Contractors Association (ZBCA) president Tinashe Manzungu said the use of intermediaries reflected the frustration of contractors who had been waiting for legitimate invoices to be settled.

"Contractors are turning to intermediaries largely because government payments are often delayed and the process of following up outstanding invoices can be slow and opaque," Manzungu said.

He acknowledged Treasury's position that taxpayers should not be required to meet consultancy fees that were not included in original contracts, but said Government needed to address the underlying problem by paying valid claims promptly.

"Otherwise, desperate contractors will continue seeking intermediaries who claim they can expedite payment, creating opportunities for corruption and preferential treatment," he said.

The ZBCA represents one of the sectors most affected by Government's payment delays after contractors played a central role in the state's infrastructure programme, which has included the construction and rehabilitation of roads, bridges and dams.

Manzungu has previously warned that Government should not commission infrastructure projects without ensuring that adequate funding is available to pay contractors.

The scale of the arrears was highlighted by Auditor-General Vimbai Chikwenhere, who reported that Government had accumulated arrears of approximately ZiG250.34 billion dating back to 2020.

The Auditor-General warned that the absence of a clear repayment strategy could damage Government's credibility and make future borrowing more expensive.

"The lack of a clear plan to settle these debts may gradually affect the government's reputation and make it harder to access credit in the future," Chikwenhere said.

She also warned that delayed payments could result in additional interest costs, placing further pressure on public finances and reducing resources available for essential services.

Development economist Chenayi Mutambasere said Treasury's position risked punishing businesses that had already fulfilled their contractual obligations to the state.

She argued that the emergence of payment intermediaries was a symptom of declining confidence in Government's payment system.

"It is as though the government is penalising contractors for doing business with the state, yet the government is the biggest customer in the economy," Mutambasere said.

"A supplier that has delivered goods or completed certified work should not need an intermediary, a facilitator or political connections to recover an ordinary commercial debt."

Mutambasere said the prolonged delays were creating significant financial stress for contractors, with some facing lawsuits, equipment repossessions and potential business closures while waiting for payment.

"The mere emergence of a market in helping suppliers obtain money already lawfully due to them tells us that confidence in normal Treasury processes is being seriously eroded," she said.

She warned that prolonged Government arrears could also create fertile ground for rent-seeking and preferential treatment within public procurement.

"Scarcity, opacity and discretion create economic value around access," she said.

"Once businesses start believing that getting paid depends less on the validity and chronological maturity of an invoice and more on who can reach whom, rent-seeking becomes institutionalised."

Mutambasere said facilitation charges demanded by intermediaries could effectively become an additional cost of doing business with Government.

"A 5% or 10% facilitation charge then becomes, economically, an unofficial tax on doing business with the state," she said.

She warned that the effects of Government arrears were not confined to contractors and suppliers but could spread through the broader financial system.

"Government arrears create corporate arrears; corporate arrears create bad bank loans, tax arrears and business failures," Mutambasere said.

The dispute has therefore brought renewed attention to the need for Government to establish a transparent and credible mechanism for clearing its accumulated arrears.

While Treasury has drawn a clear line against private entities claiming authority to facilitate payment of Government debts, contractors argue that the most effective way to eliminate the market for such intermediaries is for the state to settle verified obligations within predictable and transparent timelines.