An update.
In our Construction and Construction Insurance Law Snippets Article of October 2016 we reported on progress relating to the introduction of an amendment to the Construction Industry Development Regulations, which would introduce mandatory prompt payment and adjudication requirements. The progress of these Regulations had ground to a halt following substantial objections to the initial draft of the Regulations by several large state owned entities (SOEs), who wished to be exempted from the Regulations.
In a move seen as a compromise, the National Treasury launched a walk-in payment call centre, in order to help facilitate payments by SOEs that were overdue by more than 30 days.
The proposed introduction of the Regulations was regarded at the time of the introduction of the initial draft Regulations, as a lifeline for the survival of the construction industry. A Construction Industry and Development Board survey found that 43% of payments by SOEs to contractors were being made more than 30 days after invoicing.
There had throughout the course of last year been little if no reporting from Government on what progress had been made by the walk-in payment call centre, in redressing the problem. However, in a statement in February this year, the Public Works Minister confirmed that late payments by Government entities were "still a big issue".
What is perhaps revealing is the Minister's acknowledgement that this state of affairs was not necessarily only the consequence of administrative delay in the processing of payments, but that payments were also "disputed". In the light of this the case for the introduction of the Regulations must remain as good as it ever was. Government, it seems, recognises this as the Minister went on to say that a process had been started as part of a turnaround to review all of their legislation affecting the building environment, and this had been made a priority.
It is hoped that the introduction of these Regulations will be part of this review and will be introduced sooner rather than later, as non-payment, by both SOEs and the industry in general, of suppliers, contractors and sub-contractors generally, will continue to impact negatively on the construction industry.
Certainly the introduction of adjudication in the UK, Australia and Singapore (on terms not dissimilar to those initially proposed for South Africa) has been successful in getting cash into the industry.
Of course, for adjudication to be successfully implemented, it is necessary to have an adequate pool of competent adjudicators on the ground. It is imperative therefore, if adjudication is to be implemented, that Government make its intentions clear as soon as possible, to permit an adequate gearing up.
Mandatory Prompt Payment And Adjudication Regulations In South Africa
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