Construction Act Review: Adjudication in South Africa: heading in the wrong direction?

In 1994, in South Africa, apartheid officially ended. The apartheid government had enforced a strict system of economic and social segregation, race being the "all-pervading and inescapable criterion for participation by a person in all aspects of political, economic and social life".1 The result was a divided society, poverty and degradation existing alongside lavish wealth, modern cities and a developed mining, industrial and commercial infrastructure.2 The aim of the newly elected democratic government was to "bridge … the past of a deeply divided society characterised by strife, conflict, untold suffering and injustice, and a future founded on the recognition of human rights, democracy and peaceful co-existence and development opportunities for all South Africans".3 In pursuit of this goal, it developed the Reconstruction and Development Programme (RDP), a policy framework aimed at mobilising South Africa’s people and resources, to finally eradicate apartheid.4 The RDP identifies as key to the eradication of apartheid, not only the provision of infrastructure to the previously disadvantaged, but in so doing growing the construction sector and enabling those previously disadvantaged persons (in particular small and micro businesses operated by these persons) to participate therein. *Const. L.J. 484 5 In accordance with the RDP’s mandate, the Department of Public Works, published a Green Paper6 in 1998, entitled "Creating an Enabling Environment for Reconstruction, Growth and Development in the Construction Industry". This was followed by a White Paper of the same name in 1999. This White Paper proposed the introduction of certain recommendations on alternative dispute resolution (ADR), adapted from the Latham Report,7 specifically in public sector contracts. These were to include: 1) the adoption of the same ADR terms in both main and subcontracts8; 2) no restrictions on the type of issues capable of being referred to ADR9; and 3) for selected categories of contract, the immediate application of ADR awards.10 Pursuant to the White Paper, the Construction Industry Development Board (CIDB) was established by way of the Construction Industry Development Board Act 38 of 2000 (the CIDB Act), and certain regulations were published thereunder.11 The Department of Public Works published draft amendments to the aforementioned regulations,12 for comment, in 2012, proposing to prohibit "pay when paid" provisions and create a statutory entitlement to stage payments, suspend performance for non-payment and refer payment disputes to adjudication. These draft regulations, which largely reflect Pt II of the Housing Grants, Construction and Regeneration Act 1996 13 (the Construction Act), were amended and again published for comment in 2015 (the Prompt Payment Regulations).14 It was originally anticipated that these Prompt Payment Regulations would come into effect in 2016, however, according to the CIDB 2015/2016 Annual Report they have been withdrawn "to ensure that they are appropriately aligned to the CIDB Act".15 Until the Prompt Payment Regulations, in one form or another, do come into effect, adjudication proceedings under South African construction contracts, will remain contractual, and largely discretionary, in nature. In the interim, procurement of construction works in the South African public sector alone is currently estimated to be worth about 220 billion Rand per year, with the construction sector, as a whole, providing approximately 14 million jobs. *Const. L.J. 485 16 A culture of poor/non-payment is perceived to have developed among government departments and to be greatly contributing to the financial difficulties of contractors and subcontractors working within the sector, with a total of 91 liquidations having been recorded in the construction industry between January and December 2017.17 There is, therefore, a dire need for reform of both payment practices and payment enforcement mechanisms within the industry. By adopting a "black letter" approach, this paper aims to critically analyse the efficacy and impact of the provisions of Prompt Payment Regulations, should they (or equivalent legislation) be enacted in South Africa. In doing so, the paper analyses primary and secondary legal sources, scholars’ commentaries and best practices in similar regimes in the UK and Australia to inform the critical review.