SA construction industry: delayed payment causing division - industry body | Fin24
 
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SA construction industry: delayed payment causing division - industry body

Jun 27 2019 21:05
Compiled by Carin Smith

The issue of delayed or non-payment of subcontractors by main contractors, within the South African construction industry is occurring at a more frequent rate.

As such, subcontractors are currently faced with the dilemma of either accepting work from main contractors on onerous terms and risking late or non-payment or closing their doors, and subcontractors are finding that trading under these conditions is no longer viable.

According to the Master Builders' Association Western Cape (MBAWC), some main contractors are making changes to the standard contract agreements used. These changes serve to unfairly shift the balance of contracting risk and adversely affect the subcontractors' contractual rights, in the view of the MBAWC.

"Subcontractors are accepting this practice simply because they are desperate to ensure continuity of work for their employees,"

Executive director of the MBAWC Allen Bodill says it is ultimately up to every main and subcontracting entity to carefully assess their own commercial and enterprise risks and weigh these against the possible rewards, when deciding whether accepting work in terms of these altered contract conditions is acceptable or not.

"Too many subcontractors are going into business rescue because they are working at rock-bottom prices and accepting risks that they don't understand," says Bodill.

To address this, the MBAWC has offered to provide workshops to help subcontractors better understand their contractual obligations and rights, as enshrined in the standard contract documentation.

Main contractors are finding themselves in as risky a position, as do their independent subcontractors. They are dealing with massive business risks and then try to transfer the risk onto each other. This is causing divisiveness in the industry.

"Subcontractors and main contractors must collectively fight back on the altered contractual terms and conditions that are being forced upon them," says Bodill.

"We all need to work together, to uphold the rights that are enshrined in the standard contractual documentation, in order to save both main contractors as well as subcontractors from the adversarial and costly consequences, that all-too-frequently result from such trading arrangements."

master builders  |  construction
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