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CONSTRUCTION WORLD
AUGUST
2015
Interested parties had until
28 July this year to comment on
the amendment to the Construc-
tion Industry Development Board
(CIDB) Act 2000, published in the Govern-
ment Gazette on 29 May, 2015.
The CIDB Prompt Payment Regulations
and Adjudication Standard, contained in the
draft amendment, proposes changes that
would enable a ‘fair and speedy’ resolution
of payment disputes and provide contrac-
tors with unprecedented legal recourse to
demand timely payment for completed work.
A CIDB survey found that 43% of payments
to contractors were made more than 30 days
after invoicing.
What it entails
The new proposed Security of Payment
regulations prohibit the policy of ‘pay-when-
paid’ and withholding of payment, and
allow for the fair suspension of construction
activities owing to non-payment. It also enti-
tles a contractor to charge interest on late
payments, and insist on regular payments
within a defined time frame, or strictly within
30 days of being invoiced.
The proposed changes also incorporate a
mandatory statutory form of adjudica-
tion – a ‘fair, rapid and inexpensive’ mech-
anism. In essence, parties would under the
new legislation be compelled to resolve
disputes through adjudication within
28 days, extended by 14 days only in
prescribed circumstances.
Similar Security for Payment regulations
are applicable in the UK, Singapore, Hong
Kong, New Zealand Australia and Malaysia.
Industry comments
Charl Venter, current president of MBA North
and director of the Pretoria contracting
firm, J.C. Van der Linde & Venter Projects,
commented: "The proposed new legislation
is a lifeline for survival, something MBA
North has been seeking for almost 16 years.
If legislated, the new rulings will have a
huge impact on the construction industry in
which it has almost become the norm for a
contractor to finance projects in the public as
well as private sector.
"Hopefully, the new legislation will
ensure that local, provincial and national
government, as well as private developers'
finances are in place before any construction
work is started. Cash flow is the most impor-
tant factor in any business. Without cash flow
no company can exist – and in the struggling
construction sector the situation is critical.
Due to poor market conditions and very low
profit margins since 2007, most contractors
do not have any retained earnings and there-
fore little or no cash flow," Venter added.
Neil Duncan, past president of MBA
North and chief financial officer of flooring
company, Kevin Bates Albert Carpets, agreed:
"Many good companies have been forced out
of business as a result of late or non-pay-
ment. When a project fails, it is generally
the main contractors and sub-contractors
that bear the brunt of the failure because
developers’ or clients have failed to secure
adequate funding before starting a project.
Government projects are renowned for late
payment which places emerging businesses
– who do not have sufficient working capital –
under severe pressure.
"The fact that the proposed legislation
covers both private sector and public sector
clients is to be welcomed. If the legislation is
promulgated, it will lead to a huge improve-
ment in the financial wellbeing of all stake-
holders’ in the construction Industry and
also counter unemployment.
Employees in the industry are often
retrenched or find themselves without a job
when a business fails as a result of late or
non-payment," Duncan stated.
Hennie Bester, another past president
of MBA North and MD of Gauteng Piling,
which has acted as subcontractor on
several multi-million rand projects, said:
"For subcontractors, the biggest obstacle in
successfully doing business has been delay in
payments. Many subcontractors are relatively
small companies, some from previously
disadvantaged backgrounds, and such
businesses simply cannot survive with the
pressure late payments have put on
their profitability.
Gauteng Piling is, therefore, extremely
happy about the new proposed regulations."
Nico Maas, MBA North and Master
Builders SA past president, who has been a
campfighter for the new regulations for many
years, has urged all involved in the construc-
tion industry to voice their unequivocal
support for the new regulations.
"It must be remembered that the new
law is, at this stage, still a proposed measure,
and building industry members must also
bear in mind that there are parties likely to
oppose the new regulations. It is therefore
imperative that the building industry shout
its support from the rooftops for a legal
amendment that could save thousands of
jobs," Maas urged.
Wesley Soutter, commercial & legal
director of MBA North, said bodies such as
the Construction Adjudication Association of
SA would have to play major role to ensure
that the ‘rapid’ mandatory statutory adju-
dication outlined in the draft legal amend-
ments is complied with. "It is unfortunate
that the new proposed legislation at this
stage does not extend to house-building but
it is undoubtedly a stepping stone towards
economic stability in the construction
industry," he stated.
INDUSTRY
HAILS
PROMPT
PAYMENT
MEASURES
Master Builders Association North has enthusiastically
described the Department of Public Works' draft Prompt
Payment regulations as a ‘lifeline for survival’, and
has urged all players in the construction industry to
immediately register their strong support for the
proposed amendment to current legislation.
>
Hennie Bester, MD of
Gauteng Piling, says many
subcontractors come from
previously disadvantaged
backgrounds, and their new
businesses rely on prompt
payment for survival.
Charl Venter, president
of MBA North, says the
new Security of Payment
regulations would be a
lifeline for a struggling
building sector.
>
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