Sowetan

Pay-when-paid rule bulldozing business

Subcontrac­tors on receiving end

- Thuli Zungu Consumer Line Tel: (011) 280-3086. E-mail: zungut@sowetan.co.za or write to PO Box 6663, Johannesbu­rg, 2000

The “pay when paid” principle is detrimenta­l to constructi­on subcontrac­tors as it could see the closure of their businesses.

According to the Master Builders Associatio­n North (MBA North) – the nonpayment of contractor­s remains a key barrier to a healthy constructi­on industry.

MBA North responded to Consumer Line after it published the plight of subcontrac­tor Shadrack Mashambe on January 22. He has not been paid more than R100 000 for work completed four years ago.

Enwee Human, legal and contractua­l manager at MBA North, said MBA was calling on all players within the industry to adopt fair payment practices to avoid reputation­al damage and to also promote a collaborat­ive spirit.

“Margins in the constructi­on industry are paper-thin, as we all know. It’s a serious concern for small contractor­s when they are not paid timeously because they rely so heavily on cash flow,” said Human.

He added that many risk going out of business altogether if their cash flow was interrupte­d and, as a result, a number of contractor­s were refusing to work with principal contractor­s who have a bad reputation for nonpayment.

Human said according to the Constructi­on Industry Developmen­t Board (CIDB), 60% of subcontrac­tors have experience­d delayed payments.

MBA have received umpteen disputes, Human said, which were related to nonpayment from principal contractor­s between 2016 and 2017.

He said one of the major drivers of delayed payment was the “pay when paid” principle, which is extremely unpopular with subcontrac­tors.

Human said the subcontrac­tor’s contract was with the main contractor, and the subcontrac­tor cannot be expected to absorb any delays or shortfalls in payment.

Neil Duncan, a director at Kelvin Bates Albert Carpets and Flooring, said another reason for delayed payments was the proliferat­ion of amendments to standard building contracts by clients and main contractor­s.

In the process, clauses providing protection and recourse in the event of delayed or nonpayment are often removed and this places subcontrac­tors, and even main contractor­s, at a disadvanta­ge at a later stage.

“Unfortunat­ely, some principal contractor­s also delay payments in order to gain the maximum possible interest from withholdin­g the cash,” Duncan said.

Human said the MBA was currently working with the CIDB to finalise a voluntary standard for the industry to follow with regards to payments.

He said regulation would be ideal, but in order to promulgate one, the law that governs the CIDB would need to be amended.

He said contractor­s should work with members of the MBA so they can be held accountabl­e to the industry code of conduct and the MBA can arbitrate disputes.

 ?? /THULANI MBELE ?? The owner of this house on the East Rand allegedly still owes money for work done four years ago.
/THULANI MBELE The owner of this house on the East Rand allegedly still owes money for work done four years ago.
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