Kwacha up is bad for client, Kwacha down is bad for contractor – which is better?

Swissco Construction Limited has warned that inflation and exchange-rate volatility are increasing construction costs, putting pressure on contractors and ultimately forcing clients to pay more for building projects.

Speaking in an interview with Zambian Business Times-ZBT, an official from Swissco Construction Limited said the cost of doing business had increased by between 20 and 30%, negatively affecting the construction industry.

“This has a negative impact on the industry because the cost of doing business has increased by between 20 and 30%. Exchange rates going up are not good for the client, and going down is not good for the contractor,” the ofexchange rate, construction material prices had not necessarily declined, forcing some businesses to turn to imports to maintain their margins and meet demand.

“What is surprising is that despite the exchange rate going down, the prices of materials remained the same. It meant that a ficial said. The official explained that unlike retail businesses, which can adjust prices more frequently, construction companies often operate under agreements that make it difficult to accommodate sudden changes in the cost of materials.

“We are not like a retail store where we buy a commodity today and adjust the price tomorrow. If we buy blocks at K5 today, within a year the price could rise to K6.50 or K7. This makes it difficult to grow the business,” the official said. The official added that unpredictable material prices make it difficult for contractors to plan projects, protect profit margins and maintain stable operations. The official further observed that despite movements in the lot of us started importing,” the official said.

The official noted that exchange-rate fluctuations also create uncertainty for contractors working under agreements denominated in either the United States dollar or the Zambian kwacha. The official said stable prices and a more predictable exchange rate would help contractors plan projects more effectively while reducing uncertainty for clients.

Article by Samuel Mutale