Construction World April 2016

CONSTRUCTION WORLD

APRIL

2016

GCC 2015

dwindling water and electricity resources would also eventually curtail

private sector property developments, particularly because of the

drought. “Dam levels have fallen by 55%. It is not a crisis yet – but it’s

very difficult to predict what lies ahead.”

Maluleke said rating agencies were not comfortable with the state

of the SA economy and were keeping a close eye on the scenario. “SA

might not be downgraded to junk status, but there is a lot of pressure

on government. We are looking at a very tough outlook this year.”

He warned that this, together with a rapidly increasing public

sector wage bill and social grants, would lead to an increase in taxes.

But, because this was an election year, it was highly unlikely the public

sector would reduce its wage bill, but rather opt for a more ‘political-

ly-correct’ package by cutting on spending on hard infrastructure.

“All signs lead to a tough year ahead and the building industry may

find itself following the example of civil engineering that is undergoing a

process of ‘right-sizing’, while pursuing more lucrative contracts across

the country’s borders. But be warned: choose your African destination

carefully. The end of the commodities super cycle, and the drastic drop

in the price of oil, have also left many other African countries in a very

precarious economic situation,” he added.

GCC 2015 revision enables contractors to

cease work due to non-payment, says

Alusani

Course Leader.

2016: a year of

SCARCE

CONTRACTS

MARKETPLACE

Speaking at MBA North’s 112

annual general meeting in

Midrand recently, ABSA economist, Miyelani Maluleke, said

with government spending on infrastructure starting to slow

down after the global economic collapse at the end of 2008,

private sector investment at least had remained buoyant. “However,

there are strong indications that property developers will have to

take a more cautious approach forward. This will have a negative

impact on the order books of the building industry: from architects,

consulting engineers, contractors and in fact, the entire supply chain,”

he cautioned.

“The construction sector has always been closely connected to GDP

growth so we can not expect any strong growth from this industry soon.

South Africa should experience only a 0,9% GDP growth rate this year.

This means the building industry is going to have to search much harder

to find work.”

While Maluleke attributed many of the economic woes SA was

experiencing to the dismal state of the world economy, there were local

extenuating circumstances that had compounded the situation, such as

the severe drought that would, inevitably, result in an increase in food

imports, placing further strain on the consumer. The price of maize was

now already 150% higher than a year ago.

Players in the retail property space would also feel the impact of

subdued growth in durable, semi-durable and non-durable goods, as

well as related services. “Confidence is weak across all income groups

so the consumer is not going to supply the growth the economy needs.”

The situation is like a double-edged sword considering that

The construction industry is facing an

extremely challenging year, Master Builders

Association North has been warned by a

leading economist.

ABSA economist, Miyelani Maluleke (right), pictured with Mohau

Mphomela, executive director of MBA North, at the MBA's recent

annual meeting in Midrand.

The GCC 2015 revision remains widely unpublicised, but there

are a few key changes that can have a large impact on the

negotiation power of contractors when doing business in the

construction industry.

The upgrade to the contract, which is largely used by state-owned

entities, was necessary due to the fact that there were a number of grey

areas that needed clarification.

GCC course leader at Alusani Skills & Training Network

, Steve du

Toit, says that the most significant revision to the contract is a clause that

gives contractors the right to suspend work on current projects if they

are not paid.

He says: “This is a major breakthrough in contract agreements.

In the past, contractors were never able to suspend work on an ongoing

project, regardless of whether a

payment certificate was issued

or not, but now this right has

been formally carried over to

the GCC 2015.”

Du Toit, who has practiced

as an attorney for over two

decades and has defended

individual contractors, clients

and large construction compa-

nies in legal cases pertain-

ing to construction and build-

ing projects.