Construction industry in crisis as Gov’t debt exceeds GH¢16bn
The construction industry in Ghana is facing significant challenges due to the government’s outstanding debts to road and building contractors. The total amount owed is reported to be over GH¢16 billion. This indebtedness has had severe consequences, making it impossible for contractors to maintain equipment, repay loans, pay salaries, settle taxes, and cover other associated expenses. As a result, more than 90% of road and building contractors have been forced to leave project sites.
In response to this crisis, the CEO of the Ghana Chamber of Construction Industry (GCCI), Emmanuel Cherry, has petitioned Vice-President Dr Mahamudu Bawumia for assistance. Dr Bawumia has referred the matter to the Minister of Finance for resolution. However, the situation is further complicated by the fact that the previous administration had already committed GH₵17.8 billion as “commitment fees” on road contracts.
To finance road projects, the government typically relies on the Road Fund. Unfortunately, the previous administration used the fund as collateral and borrowed GH¢1.3 billion from UBA (United Bank for Africa) in 2016. This has contributed to the financial strain on the construction industry. Minister for Roads and Highways, Kwasi Amoako-Atta, disclosed that the government had paid GH¢10 billion to road contractors over four years, but the remaining arrears need to be addressed.
The outstanding debts are diverse in nature. For instance, Ghana Cocoa Board (COCOBOD) owes over GH¢4 billion for cocoa roads constructed, and the Road Fund itself owes over GH¢6 billion. Additionally, the government has an outstanding debt of approximately GH¢5 billion for various projects. The Ghana Education Trust Fund (GETFund), which finances education infrastructure projects, is also in debt, owing over GH¢300 million. Moreover, the Coastal, Middle, and Northern Belt Development Authorities are indebted to contractors for infrastructure projects.
Emmanuel Cherry argues that it is unfair for the government to award all major construction contracts to foreign companies. He believes that local contractors should be given the opportunity to compete and develop their capacity. Prompt payment for executed projects is crucial, as delayed payment erodes their capital and weakens their ability to withstand the worsening economic conditions. Cherry suggests that if the government supports local contractors by awarding them major contracts and paying them on time, it will enable them to compete with foreign counterparts. Furthermore, he emphasizes that this support is essential for Ghana to take advantage of the opportunities presented by the African Continental Free Trade Area (AfCFTA).
