Egyptian contractors unhappy with government contracts

07 November 2016

Contractors working on public housing schemes call for new contracts as prices increase

Egyptian contractors working on a number of public housing schemes have halted construction, according to sources involved in government projects across the country.

Contractors are understood to be concerned over rising costs of materials and supplies caused by a newly added sales tax and the more recent flotation of the Egyptian pound.

The firms have complained about contracts signed with the Ministry of Housing, Utilities and Urban Development. One contractor working on a scheme near Cairo told MEED: “We signed the contract with the ministry last year and since then prices for imported materials have changed drastically. How can we continue with the same budget when the cost of building has almost doubled?”

The flotation of the Egyptian pound on 3 November has devalued the currency by almost 50 per cent, although companies have been suffering before this due to monetary restrictions from the central bank, which have forced companies to the black market, where the Egyptian pound was trading at highs of £E18 against the dollar.

The prices of key building materials such as steel have also increased. A recent price hike was due to an increase to the tax on raw materials from 5 to 13 per cent and the newly introduced value-added-tax (VAT) on reinforcing bar (rebar), which rose from 7 to 13 per cent.

A spokesperson from the ministry told MEED the government will not be renegotiating contracts and that the ministry is set to meet with contractors this week to resolve the issue.

Egypt has a number of affordable and government housing programmes under way as the government looks to fulfill its commitment to delivering about 300,000 units by the end of 2016.

Cairo also plans to deliver about 750,000 housing units by the end of 2018, in addition to the 135,000 units for those currently living in informal housing.

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