“Those who want to earn a lot of money should start a career in the construction sector,” said the minister of Finance, Rama Sithanen, some time ago. He forecast a bright future for this field as from next year. But he could not have imagined the sector would be in such turmoil only a few days later. The trial of strength between the biggest supplier of the market, Desbro International Ltd, and the government over the possibility of increasing the price of iron bars, may lead to delays on building sites both now and later on.

The threat has been hanging over the industry since the beginning of last week. Desbro International Ltd, a subsidiary of Rogers Group, warned the government that it would stop production if the latter did not accept to review the price of iron bars. “Without starting a conflict, we have clearly and in due time stated to the ministry concerned that we will be forced to put an end to our industrial activity as from 1st November if proper changes to the commercial conditions related to iron bars are not made,” revealed the executive manager of the Cerena Group of Rogers, Jean-Philippe Couve de Murville. And it indeed carried its threat out on Wednesday when the factory stopped production.

But the government does not appear ready to give in to what it considers “blackmail”. “Desbro thinks it can blackmail us because it controls between 60% and 65% of the market. This will not work. The government has no intention of giving in,” the minister of Trade, Rajesh Jeetah, declared at a press conference. According to him, the “blackmail” of Desbro will simply not work because the country does not really need the iron produced by this company. Just as the prime minister, Navin Ramgoolam, did just before, the minister made it clear that other companies could easily meet the country’s demand in terms of iron bars for construction.

The prime minister mentioned two foreign companies that intended to start production in the country soon. Moreover, the government is studying other possibilities such as the Automatic Pricing Mechanism and the reduction of customs duty. The competitors of Desbro International – mainly Samlo Koyenco Steel Co Ltd, Misco Mtius Ltd (local subsidiary of South-African company, Murray & Roberts) and Consolidated Steel Ltd – are also believed to be able to help in this crisis, as they are expected to supply the market and fill in the gap left by Desbro.

<I>In view of the stubbornness of the companies, the government might finally have to comply with their requests. But their recent meeting where both parties agreed that they should reach a consensus is a step in the right direction.</I>

However, the stand taken by Samlo and CSL especially may have surprised the government. Not only do they agree with their competitor that an increase in the price of iron bars is vital for the industry but they also firmly believe that the end of Desbro’s activities will lead to a shortage in the sector. Gary Joonas, managing director of CSL, thinks that the “government should make sure it protects its local industry. This helps to keep employment safe and avoid social degradation. Mauritians have shown their know-how. The technology is there. We have been in the iron industry for the past 40 years”.

Both CSL and Samlo give an account of their difficulties in view of the prices of iron bars that have remained unchanged since June 2004. Rajeev Gowressoo, managing director of Samlo, believes, “the government will be forced to accept a price rise. Shortage is inevitable. The loss of earnings for us is very important. The operation costs have increased considerably”.

It seems the situation has reached a deadlock. None of the parties want to give in. The increase requested by Desbro is very big but all companies in the sector agree that they will not survive otherwise.

In view of the stubbornness of the companies, the government might finally have no other alternative than to comply with their requests. But their recent meeting where both parties agreed that they should reach a consensus is a step in the right direction.

The construction sector is expected to undergo a huge boom next year and jeopardizing it may cause trouble in the future. As the minister of Finance stated recently, “When the construction sector is fine, then all other sectors are fine as well…” Does the same logic apply when the construction sector is facing a crisis?