Construction giant Masimba Holdings faces uncertain future in Zimbabwe

Masimba Holdings Limited, a major construction company in Zimbabwe, is experiencing the double-edged sword of government projects.

While participation in these initiatives like the Masvingo highway rehabilitation under the Emergency Road Rehabilitation Programme (ERRP) has fueled growth, delayed payments and a global commodities downturn threaten to stall progress.

Masimba Holdings engages in civil engineering, building contracting, quarry mining, steel fabrication, and property development businesses.

The past three years have been a period of expansion for Masimba. Backed by a strong order book, the company’s business has flourished.

Government contracts, including road projects like the Masvingo highway, alongside private deals with mining firms and property developers, have been a key driver.

This surge in activity saw Masimba’s order book balloon from US$104 million in 2022 to a staggering US$248 million in 2023.

To keep pace with this growth, Masimba made significant investments. They bolstered their plant and equipment capacity and even launched a new quarry stones unit. Revenue followed suit, climbing to US$53.8 million in 2023 from US$49.8 million the year before.

The final quarter of 2023, however, painted a different picture. Both government and private clients began delaying payments, forcing Masimba to slow down project execution.

The company acknowledges this shift in its financial report, stating that “growth declined in the fourth quarter as a conservative approach was taken by the group to align work execution in line with clients’ payment patterns.”

This slowdown had a direct impact on Masimba’s profitability. Pre-tax earnings dipped by 11%, falling from US$14.2 million in 2022 to US$12.6 million in 2023.

The company attributes this decline to “slow down of works in the fourth quarter due to delayed payments and liquidity constraints which negatively impacted project efficiencies.”

Adding another layer of complexity is the government’s insistence on settling payments in Zimbabwean dollars, despite the widespread use of US dollars within the economy.

Masimba’s report highlights this challenge, stating that “profitability of the group was impacted by the sub-optimal currency payment mix on most of the projects that were not in line with the increased dollarisation of the economy.”

Despite these hurdles, Masimba has invested US$4.2 million in capital expenditure to meet anticipated demand. However, the future of their hefty US$248 million order book is uncertain.

Government funding for infrastructure projects like the ERRP could be diverted towards drought relief efforts. Additionally, private sector clients, particularly platinum miners, are postponing major expansion projects due to the slump in global mineral prices.

Masimba acknowledges the looming challenges, stating that “The execution of this order book may be negatively impacted by the effects of the El Nino weather phenomenon and the declining mineral prices.

“These factors could lead to the Government prioritising food relief over infrastructure development and may result in capital expenditure budget cuts in the private sector.”

To ensure continued growth, Masimba Holdings hopes to navigate the uncertainties of government funding, currency fluctuations, and a subdued commodities market.