Government currently owes construction and building industry contractors about R5.5 billion.
And the recent business failures and job losses in the sector have been blamed on the non-payment or late payment of contractors.
Roy Mnisi, executive director of Master Builders South Africa (MBSA), told Moneyweb that this practice by government departments and government entities is the biggest challenge facing the industry curently.
Mnisi said there has been no improvement year-on-year, even despite government ministers in the built environment and even President Cyril Ramaphosa addressing the issue.
“We see no action on the ground to see that contractors are paid within the 30-day period after invoicing, as stipulated by National Treasury regulations.”
He added that the majority of cases are, where the work has been completed but for one or other reason the government department or entity is unable to pay.
The Construction Industry Development Board (CIDB) reported that 60% of payments to contractors are delayed for longer than 30 days after invoicing.
MBSA in January 2018 postponed a planned class-action court application against government, to recoup billions owed to its members for work done for municipalities, provincial and government departments and state-owned entities (SOEs) to engage with National Treasury in a last-ditch effort to resolve the problem.
Mnisi says National Treasury highlighted some of the reasons for the non-payments and late payments during a meeting with MBSA earlier this year:
- Bad budgeting
- A lack of proper financial management in the department or government entity
- Corruption, and
- The lack of consequence management.
Mnisi says these reasons provided are unacceptable to MBSA, because they involve efficiencies that ought to exist in any government institution.
He says the payment issue has been the direct cause of many of their members going into business rescue and in some instances, filing for final liquidation, with the companies citing non-payment as one of the reasons they have had to close shop.
Listed construction companies in business rescue include Group Five, Basil Read and Esor while others, including Aveng, have experienced severe financial difficulties.