Saudi contractors skeptical over 70% payments claim

Cash-strapped construction companies and contractors in Saudi Arabia are carefully parsing government assurances on contractual payments as they await developments in the next few weeks.

Last week, Saudi deputy crown prince Mohammed bin Salman in an interview with Bloomberg said delays in government payments to contractors were due to a restructuring process in the kingdom and would be streamlined soon.

One of his ministers said the government has paid 70 percent of contractors’ delayed dues and will pay up to 98 percent of those amounts within two weeks.

However, the reaction on the ground among the construction industry is of healthy skepticism.

“If 70 percent was paid on all outstanding construction dues, there would have been euphoria in the market,” said Terry Smith, chief executive of the Riyadh-based consultancy firm Bluewater Global Advisors.

The construction sector is the hardest hit by payment delays as companies depend heavily on government projects for their cash flow.

Nagib G. Al-Alam, vice-president of Saudi Arabian Trading & Construction Company (SATCO), said the past seven months were the worst he had seen in the sector.

“No payments were made for seven months straight and few contractors have received more than 50 percent on dues last month,” he added.

Some companies said they have been receiving payments in installments.

“We are told a payment of 50 percent of all total dues will be made in second half of April,” said an engineer at Saudi Binladen Group (SBG), who preferred to remain anonymous.

SBG, the largest contractor in the kingdom, is one of the firms that have been promised payment. It is said to be struggling with cash flow issues as it waits for deferred payments from the government. The company has reportedly had to delay wages to its employees.

Others said they have been partially paid.

“We are only aware that we’ll get a larger amount in the second half of April,” said a manager at Arabian Bemco Contracting, who did not want to be named.

Write to Farha Abdelhaq at farha.abdelhaq@argaamnews.com