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Addressing the impact of late payments

by Darren
MBA Prof Maritz Jnl 5 14

Late payments by Government are adversely affecting the building industry, necessitating the need for drastic action.

According to Professor Tinus Maritz, Head of the Department of Construction Economics and Chairman of the School for the Built Environment at the University of Pretoria, one of the biggest challenges facing the South African building industry is late payments for projects – particularly by government departments and enterprises.

Speaking at a recent Master Builders Association North (MBA North) business networking breakfast, Tinus said the effects of such late payments were severely impacting an industry already faced with several major challenges.

“Smaller and emerging contractors are most prone to being negatively affected and even ruined by late payments,” he said. “It is worrying that regulations, proposed by Master Builders South Africa and submitted to the National Department of Public Works (NDPW) by the Construction Industry Development Board for promulgation, have still not been acted upon nearly four years after first being drafted.”

Tinus said countries such as the UK, Singapore, New Zealand and Australia had gone beyond regulations with specific construction legislation put in place to protect contractors against late or non-payment. “We feel the draft regulations submitted to the NDPW are a move in the same direction although, even if accepted, the local industry would still be years behind those countries in terms of refining the laws and getting Government and all other parties involved to cooperate,” he continued.

“The draft regulations address some of the major causes of late payments, contractual issues and disputes, as well as the rights and obligations of each party. They also seek solutions that may mitigate lengthy court battles and work on the premise that, as long as all parties involved understand the requirements of a project, there will be fewer disputes in future. We also need to put in place set standards of uniformity and standard documentation to ensure everyone understands the contents of a contract.”

He concluded by saying that this would increase cost efficiencies and provide uniformity in procurement, as well as making tendering easier and more precise. Tinus urged all parties, including Master Builders South Africa, to maintain pressure on regulators to fast-track the proposed legislation, especially the parts relating to prompt payment protection and adjudication in the event of a dispute. “This would allow a more nurturing environment for contractors and SMMEs in future,” he emphasised.

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