HomeNews‘Liquidity crunch threatens roads rehabilitation’

‘Liquidity crunch threatens roads rehabilitation’

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BULAWAYO engineering company, Asphalt Products, is currently operating at 30% of its capacity due to foreign currency shortages, excessive cost of doing business and high taxation, among other challenges.

BY MTHANDAZO NYONI

Bitumen used in the rehabilitation of roads is imported, but due to depleted nostro account balances, road rehabilitation companies are finding it difficult to source the raw material
Bitumen used in the rehabilitation of roads is imported, but due to depleted nostro account balances, road rehabilitation companies are finding it difficult to source the raw material

The company’s managing director, Francis Mangwendeza told NewsDay that the firm was constrained by a number of challenges, chief among them foreign currency shortages.

“We are facing challenges such as shortages of foreign currency to import raw materials, excessive cost of doing business, indirect and direct taxes, excessive police and VID (Vehicle Inspection Department) roadblocks hampering operations. We are currently working at 30% capacity,” he said.

Mangwendeza said all bitumen was imported, but due to depleted nostro account balances culminating in local banks struggling to facilitate external payments for the importation of strategic raw materials, they were finding it difficult to source the raw material.

“Bitumen for road maintenance is derived from distillation of crude oil. Zimbabwe does not have a crude oil resource. All bitumen, therefore, has to be imported,” he said.

A nostro account is a bank account held in a foreign country by a domestic bank, denominated in the currency of that country.

Nostro accounts are used to facilitate settlement of foreign exchange and trade transactions.

Mangwendeza said 2017 would be hard for companies, unless the challenges with foreign currency were addressed.

“The economic outlook does not look good, so we will hold back investments unless major projects take off and the foreign exchange problems are addressed,” he said.

The company last year commissioned its first bitumen emulsion at a cost of $500 000.

However, the plant is yet to operate at full capacity due to shortage of bitumen.

It has the capacity of producing 10 tonnes of bitumen emulsion per hour.

Bitumen emulsion is used in road construction.

The company was formed in 1996 and offers services such as road maintenance, road construction, sports courts and infrastructure services.

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