Associations
From left: Barney Richardson, Hennie Basson, SARACCA Western Cape Chairman and Allen Bodill, executive director MBAWC.
construction industry. The MBA South Africa is well aware of
the problem and is consulting on a solution.
The SARACCA Gauteng branch meeting was held at the
Johannesburg Country Club in Woodmead. The meeting
was opened by vice chairman David Botha who introduced
independent construction consultant and Master Builders
Association North (MBA North) board member, Francois Spies.
Spies gave a short talk about payments and contracts
providing advice to contractors on how to avoid business
hindrances thereof. Many members have expressed concern
at the difficulties in receiving payment from builders and
clients alike.
Notifications must be in writing
to ensure proper communication
between the parties and efficient
management and operation of the
contract requirements.
In light of a few construction companies going into business
rescue, his talk focused on the retention of money being
held far longer than necessary. In a business rescue there
is no recognition of retention money. This is a problem and
the MBAs are aware of it. Nationally, MBSA is working on a
solution and believes it is a problem that can be solved. He
www.hvacronline.co.za
explained the processes involved in going into business rescue,
unpacking that the period in which the business does this is
where payment/monies for subcontractors should be paid out.
“So when a company goes into business rescue, the retention
gets held as a creditor and the company in business rescue
then gets post-commencement financing, which is where
they get guarantors and other people to put money in to
keep them afloat, and try and get them through the business
rescue process. The problem that then comes in is that the first
money that comes in after that, these post-commencement
funders get paid first. And your subcontractor money is further
held back,” he said. He explains that what ends up happening
is that the subcontractor gets paid a lesser value of the services
provided. This is because the business rescue process doesn't
contemplate payment terms like a retention amount and the
law has a blanket approach to this aspect. “It’s not tailormade
for our industry,” he adds.
The MBSA together with (Federated Employer's Mutual
Assurance Company) FEM have come together to set up a
retention trust fund with the agreement of the principal contract
and the subcontractor that places retention money in a Trust
that neither the contractor nor subcontractor can easily access.
“With this set-up, the problem of subcontractors’ payment being
held back will not exist as the money will be in a Trust,” he said.
Although he shared a few challenges around the administration
of the fund, such as getting the retention money released. He said
subcontractors can apply to get payment through programmes
that organisations like SARACCA and the MBA have. RACA
RACA Journal I January 2020
39