BUSINESS
M
am Tut Wadda is principal transport
engineer at African Development
Bank (AfDB), responsible for the
bank’s transport portfolio in Ghana, and part
of the team responsible for public-private
partnership (PPP) transactions in the bank’s
infrastructure cities and urban development
department.
A civil engineer with 17 years’ work
experience in design, construction, and
management of complex, large-scale
engineering projects, Mam Tut Wadda has
worked with reputable international firms
in the design, construction, and project
management of infrastructure projects. She
joined AfDB’s transport department in 2010,
and has managed a number of bank-financed
transactions in roads, aviation, and port
development across the African continent,
including in Tunisia, Rwanda, Burundi,
Malawi, Mozambique, Zambia, Botswana,
Namibia, Uganda, Ghana, and Ivory Coast.
1.
What is currently the biggest
challenge for construction companies
looking for funding for road projects?
I will attempt to respond to this very pertinent
question, but acknowledge that the people
best placed to respond to give an in-depth
perspective of the challenges in funding road
projects are the construction companies
themselves. And once they are given the
platform to share their perspectives, it is
important to have the government and
all primary stakeholders joining in the
conversation to help address these challenges.
Here are a few challenges I believe
construction companies are grappling with:
Road construction projects by their nature
are short term, capital intensive, and
relatively risky. Huge front-end investment
is usually required for working capital,
acquisition or leasing of plant, equipment and
materials — and this defines the capacity of a
company to undertake contracts of a certain
magnitude and dictates how the company’s
bid is evaluated. The investment needs of
these companies are high and usually extend
beyond the life of a single project, to ensure
sustained growth. Without a guarantee of
constant work contracts, companies struggle
to generate the necessary and steady cash
flow to sustain themselves.
Access to finance is a major challenge!
Companies in the construction sector
generally face more difficulties than
firms in other sectors when it comes to
accessing finance. This is partly because
loans for construction projects represent
a considerable risk to financial institutions.
Well-established companies might have
access to trade credit from suppliers that
would supply equipment and material for the
works and allow repayment over an extended
period, sometimes even beyond the life of
a single project or contract. Such a facility
allows flexibility in repayment and eases the
contractors’ credit burden, particularly at the
early stages of construction. But this facility is
not available to all firms, particularly the smaller
ones that have to resort to traditional bank
loans for construction financing.
After trade credit from suppliers, financing
from banks is the p