Non payment is destroying the construction sector

The lack of construction work is threatening the survival of sub-contractors, many of them black-owned. Sub-contractors were also suffering financially, because of non payment or payment delays by main contractors.

Mohau Mphomela, the executive director of the Master Builders Association (MBA) North, said the entire construction industry was suffering from a lack of investment and expenditure by both the public and private sector.

“If main contractors cannot obtain work, it will inherently cause sub-contractors to not have work themselves. A large percentage of the work done on every project is done by sub contractors,” he said.

Mphomela added that the 30 percent preferential procurement requirements fell wholly within the scope of public sector works, where it had been allocated on a project-to-project basis.

“With a decline in public infrastructure spend or other investment by the government, it will result in a decline in the amount of projects available for sub contractors to obtain work as part of the 30 percent preferential procurement requirements,” he said.

Mphomela said MBA North was aware of various sub contractors who have had to take various actions, because of the current depressed construction environment, including lay-offs, business rescue and liquidation.

Roy Mnisi, the executive director of Master Builders South Africa, confirmed this was a problem nationally, adding that to some degree the survival of sub contractors was in the hands of main contractors.

Mnisi said several sub contractors were affected by the demise of Cape-based NMC Construction, which was liquidated earlier this year.

Other sub contractors were affected by main contractors, including the Gauteng-based Liviero group and Basil Read, applying to go into business rescue. “There are still sub contractors that are approaching us for assistance in instances and situations like this.

“It becomes difficult for them to get out of this situation, because they have put their workforce and equipment there,” he said.

Mnisi added that these issues were also having a negative impact on employment in the construction industry which, including formal and informal employment, accounted for between 12 and 15 percent of South Africa’s entire labour force.

From a supply chain perspective, it was also having a huge impact on employment in allied industries, such as among cement producers.

Mnisi said the construction industry had never been so low and the government had to play a major role in igniting the economy and the appetite for infrastructure expenditure.

He confirmed that there were still problems with delayed and non payment by government and by main contractors to sub contractors.

Nico Maas, the executive chairperson of Gauteng Piling, said his company had witnessed a steady increase in non payment by principal contractors over the past seven years.

“My company has lost about R9 million in profits and has outstanding debts of R11m at this point. We’re a small company with 22 permanent employees. Our very survival is threatened,” he said.

Problems cited by sub contractors included not being paid for years without earning interest.

Enwee Human, the legal and contractual manager at MBA North, said smaller companies could not grow their businesses and may even be shrinking if they were consistently not paid, which most unfairly affected the most poorly paid workers the most.

Article and Image Source: IOL

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