How has the so-called soft patch affected the construction sector in Tanzania?
DHRUV JOG The construction sector has seen a slump over the last 12 months, with fewer projects being launched, especially compared to the rate at which we have seen construction projects launched over the past 10 years. There has been a cooling down of investments, with many people waiting to see what happens, especially in the private sector, because there is uncertainty in what to expect from the government. The public sector, on the other hand, has been aggressive in pushing new projects, but these are taking a relatively long time to get off the ground. They are just now nearing the end of the tendering stage and gearing up to commence execution.
HAMISH HAMILTON The country lost a number of large companies initially, with many struggling to comply with the emphasis being placed on transparency and disclosure. Nabaki Afrika has not suffered too much, mainly because we are small, flexible, and transparent. In January 2017, a large number of foreigners without valid work permits had to leave Tanzania. That abuse has now stopped, with work permits becoming more stringent in their application. In a way, this is a positive development because it forces companies not just to think and act locally, but also to employ locally. Out of 120 people, Nabaki Afrika only employs three expatriates. In this area, we are also proud of our Mtaalam Program, which encourages our suppliers to train local installers and applicators to apply their products correctly. Under this program, over 200 people have been trained so far. We have developed an app for these installers, allowing them to market their services nationwide, and have built up a real loyalty base through that.
How have these changes affected your business?
DJ The procurement policies in Tanzania are governed by the Public Procurement Regulatory Act (PPRA). However, PPRA has been slow to listen to what the private sector is saying. We have been lobbying hard to make these changes and are at a point where we will probably start seeing some movement in the near future. Elsewhere, there has been a lot of improvement in terms of combating corruption and improving transparency in the tendering and evaluation process. The current government's stance on anti-corruption has trickled down through the economy and has had a welcome impact. On the other hand, we are still waiting to see how the government's ambitions to move 100% of its departments into the digital sphere will come into play. Certainly, this will also have a huge effect on how projects can be rolled out efficiently and smoothly.
HH On the whole, we have been making certain adjustments in order to keep our heads above water in this environment. We have suffered a little in the current climate and are probably down by about 9%; however, performance YoY is still strong. We have just opened a brand-new, 600sqm branch outside Boko, Dar es Salaam, which is right on the main road. We have also revamped our Oyster Bay premises in Dar es Salaam, increasing from 50sqm to 250sqm. In fact, we have recently revamped all our branches. One of our other main achievements has been to maintain our flexibility and independence as a company.
In line with this, how has your project portfolio developed?
DJ We are working on more infrastructure-related projects like water distribution, power generation, and satellite cities. There is some of that ongoing, but, as always, the biggest part of our order book is industrial construction. We have seen the government place more emphasis on industrialization and driving the manufacturing sector. However, the building sector has seen a slowdown with private investors not very keen on investing in the Tanzanian real estate sector at the moment. Furthermore, with the industrial growth that is being experienced, we will see a knock-on impact in the large-scale infrastructure space and vice versa, in order to support this industrial growth.
HH For the first time ever we are receiving large civil inquiries, including government tenders that we have never been able to do before. There are large civil projects in the pipeline in every sector, including roads and ports. Nabaki Afrika supplies a number of quality products, such as geo-membranes, that are required at the start of any large construction project. We have seen a large increase in our sales of quality construction chemicals as well. Our growth has been completely self-funded, and we have not had to rely on any loans to support our business.