• Zimbabwe owes road contractors US$188 million in unpaid obligations, delaying infrastructure projects, weakening liquidity and increasing financing costs across the construction industry
• Treasury's expenditure arrears to service providers surged from US$34 million in 2024 to US$1.36 billion in 2025, exposing mounting fiscal pressures and payment challenges
• Government contracts exceeding US$2 million now require prior Treasury approval as authorities tighten expenditure controls and seek to prevent further accumulation of unpaid obligations

Harare – Zimbabwe's reported US$188 million backlog in payments to road contractors has exposed a widening problem in public infrastructure financing, with the government's latest debt disclosures showing that unpaid obligations to service providers reached US$1.36 billion at the end of 2025. The accumulation of unsettled bills is placing construction companies under financial pressure, increasing the cost of delivering public projects and forcing Treasury to tighten control over new commitments. Contractors are effectively financing part of the government's infrastructure programme through delayed payments, creating risks for project completion, employment and future tender pricing.

The US$188 million figure was raised in recent parliamentary discussions concerning road infrastructure obligations and separately cited by the Zimbabwe Building Contractors Association (ZBCA) at its annual conference on 11 November 2026. Association president Dr Tinashe Manzungu described the backlog in unpaid certified payment certificates as a serious threat to construction companies' working capital. Certified certificates generally represent work that has been assessed and approved for payment under contractual procedures, giving the figure particular significance for firms awaiting settlement.

The financial exposure extends beyond road construction. The Construction Industry Federation of Zimbabwe (CIFOZ) has reportedly estimated government arrears across infrastructure projects at more than US$1.5 billion. The industry estimate covers a wider range of obligations and requires reconciliation against Treasury's official accounts. Its scale is consistent with the substantial accumulation of domestic expenditure arrears disclosed in the government's 2025 Annual Public Debt Bulletin.

Treasury's debt bulletin provides the clearest official evidence of the deterioration in payment discipline. Domestic expenditure arrears to service providers increased from US$105 million in 2023 to US$34 million in 2024 before reaching US$1.361 billion in December 2025. The latest stock was approximately 40 times the previous year's reported amount, although Treasury attributes part of the increase to improved coverage of previously unrecorded obligations.

The composition of these arrears is particularly relevant to infrastructure contractors. The Auditor General's ongoing examination covers road development, dam construction, water supply projects and agricultural input support, which collectively account for 77.3% of the expenditure arrears identified in the bulletin. Treasury is responsible for validating the remaining 22.7%.

The US$1.361 billion figure is preliminary pending verification. It includes several categories of expenditure and cannot be treated as an exclusively construction-related liability. The reporting nevertheless establishes that delayed settlement has become a substantial component of domestic public obligations.

Zimbabwe's total public and publicly guaranteed debt stood at US$21.818 billion at the end of 2025, equivalent to 37.4% of GDP. Domestic debt accounted for US$10.061 billion, including US$2.119 billion in accumulated arrears across the reported domestic debt categories. Unpaid service providers therefore form part of an established fiscal liability that requires explicit consideration in government cash planning.

Road contractors typically incur significant expenditure before receiving payment. Diesel, bitumen, cement, equipment maintenance, wages and imported machinery components require cash throughout project execution. Payment delays increase the amount of working capital tied up in completed work and reduce the funds available for subsequent contracts.

A contractor carrying US$10 million in unpaid certified work for six months faces an illustrative financing cost of US$600,000 at a 12% annual borrowing rate, excluding bank charges and additional penalties. At an illustrative 15% annual rate, that cost rises to US$750,000. These are financing scenarios rather than estimates of actual interest being charged on Zimbabwe's outstanding certificates.

The government ultimately faces the economic consequences through higher future tender prices, contractor claims and reduced competition for public projects. Companies anticipating delayed settlement may incorporate financing premiums into their bids, raising the amount Treasury must commit to achieve the same physical output.

The US$188 million backlog also has a useful infrastructure equivalent. Using an indicative road construction cost range of US$1.2 million to US$2.5 million per kilometre, the amount corresponds to approximately 75 to 157 kilometres of construction expenditure. The comparison illustrates the opportunity cost of unsettled obligations, although actual Zimbabwean project costs vary considerably according to road specifications, terrain, drainage, bridges and rehabilitation requirements.

Finance Minister Professor Mthuli Ncube announced during the 2027 National Pre-Budget Seminar in Bulawayo that government contracts exceeding US$2 million now require prior Treasury approval. The measure is intended to prevent ministries and departments from entering commitments beyond their approved financial capacity.

The threshold does not prohibit projects costing more than US$2 million. Ministries can pursue larger contracts after obtaining the required authorisation. It also does not impose a US$2 million ceiling on contractor payments or existing claims. Its economic significance lies in centralising expenditure control before contractual obligations arise. A ministry planning a US$20 million road project must obtain Treasury concurrence, allowing the financing implications to be assessed before procurement proceeds.

Using the indicative road cost range, US$2 million could finance approximately 0.8 to 1.7 kilometres of construction. Major road rehabilitation and highway development contracts would therefore ordinarily fall within the approval requirement. The policy addresses the accumulation of new liabilities, but its effectiveness will be determined by the quality of expenditure commitments and subsequent payment execution. Treasury approval must be supported by realistic cash forecasts, verified project milestones and enforceable settlement schedules.

The payment problem is influencing how construction companies allocate capital and select projects. Listed contractor Masimba Holdings provides an important example of the industry's changing commercial environment.

The company reported an order book of approximately US$320 million at June 2026, up from US$278 million at the end of December 2025. Its revenue nevertheless declined by 13% to US$25.4 million during the first half of 2026, while profit after tax fell to approximately US$2.74 million.

The order book measures contracted future activity and does not represent cash available to finance operations. Revenue conversion depends on project execution, certification and payment arrangements. Contractors carrying substantial government receivables may therefore experience liquidity shortages despite maintaining sizeable project pipelines.

A greater allocation towards private sector contracts can improve payment diversification where counterparties have stronger financing arrangements. Public projects with predictable settlement terms can remain commercially attractive, particularly when supported by advance payments, bank guarantees or ring-fenced project funding.

The immediate concern for construction executives is the quality of their receivables. Contract values alone provide insufficient information about financial performance when the timing of cash collection is uncertain. Construction firms rely on specialised equipment and experienced technical teams whose costs continue during project interruptions. Extended payment delays can force contractors to reduce machinery utilisation, postpone maintenance and renegotiate obligations with suppliers.

The consequences extend through the construction supply chain. Quarry operators, cement distributors, transport companies, fuel suppliers and equipment providers depend on regular payments from principal contractors. An overdue government certificate can therefore create a sequence of delayed commercial settlements across several businesses.

Banks financing contractors face related risks. Receivables backed by public contracts may appear commercially attractive, but repayment depends on actual Treasury disbursements. Credit assessments consequently require evidence of certification, the age of outstanding invoices, contractual payment terms and the government's capacity to settle.

Construction companies seeking additional facilities may encounter tighter lending conditions when unpaid government certificates dominate their current assets. The resulting financing constraints can reduce their capacity to bid for new work and weaken competition in public procurement.

The 2027 National Budget will provide an important indication of how Treasury intends to manage verified historical obligations alongside new infrastructure commitments. The government's expenditure arrears clearance programme requires a transparent distinction between audited liabilities, disputed claims and newly approved projects.

Transport Minister Felix Mhona has reportedly indicated that government is examining options to restructure contractor obligations. Any restructuring would require careful treatment of repayment dates, interest claims and the financial circumstances of affected firms. Extended settlement arrangements without reliable cash backing could transfer additional financing costs to contractors.

Treasury has also warned creditors against engaging third-party debt recovery consultants whose commissions it does not recognise. The directive places greater importance on formal verification and payment procedures, particularly for contractors attempting to recover long-outstanding claims.

Construction company boards should immediately classify government receivables by age, certification status and expected settlement date. Project bids requiring substantial upfront expenditure should be assessed against confirmed payment schedules, with financing costs explicitly incorporated into contract pricing. Banks should apply differentiated credit limits to certified and disputed public receivables.

Treasury's immediate priority is to publish a reconciled schedule of contractor arrears and establish a funded settlement programme. A credible repayment calendar would improve contractors' cash forecasts, support supplier payments and reduce the financing premiums embedded in future tenders.

The US$188 million road contractor backlog has become an important measure of the government's ability to convert infrastructure commitments into completed and financially sustainable projects. The new US$2 million approval requirement can restrict further overcommitment. Its effectiveness will ultimately be measured through the payment record on contracts approved under the tighter controls.

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