12
CONSTRUCTION WORLD
APRIL
2016
GCC 2015
dwindling water and electricity resources would also eventually curtail
private sector property developments, particularly because of the
drought. “Dam levels have fallen by 55%. It is not a crisis yet – but it’s
very difficult to predict what lies ahead.”
Maluleke said rating agencies were not comfortable with the state
of the SA economy and were keeping a close eye on the scenario. “SA
might not be downgraded to junk status, but there is a lot of pressure
on government. We are looking at a very tough outlook this year.”
He warned that this, together with a rapidly increasing public
sector wage bill and social grants, would lead to an increase in taxes.
But, because this was an election year, it was highly unlikely the public
sector would reduce its wage bill, but rather opt for a more ‘political-
ly-correct’ package by cutting on spending on hard infrastructure.
“All signs lead to a tough year ahead and the building industry may
find itself following the example of civil engineering that is undergoing a
process of ‘right-sizing’, while pursuing more lucrative contracts across
the country’s borders. But be warned: choose your African destination
carefully. The end of the commodities super cycle, and the drastic drop
in the price of oil, have also left many other African countries in a very
precarious economic situation,” he added.
GCC 2015 revision enables contractors to
cease work due to non-payment, says
Alusani
®
Course Leader.
2016: a year of
SCARCE
CONTRACTS
>
MARKETPLACE
Speaking at MBA North’s 112
th
annual general meeting in
Midrand recently, ABSA economist, Miyelani Maluleke, said
with government spending on infrastructure starting to slow
down after the global economic collapse at the end of 2008,
private sector investment at least had remained buoyant. “However,
there are strong indications that property developers will have to
take a more cautious approach forward. This will have a negative
impact on the order books of the building industry: from architects,
consulting engineers, contractors and in fact, the entire supply chain,”
he cautioned.
“The construction sector has always been closely connected to GDP
growth so we can not expect any strong growth from this industry soon.
South Africa should experience only a 0,9% GDP growth rate this year.
This means the building industry is going to have to search much harder
to find work.”
While Maluleke attributed many of the economic woes SA was
experiencing to the dismal state of the world economy, there were local
extenuating circumstances that had compounded the situation, such as
the severe drought that would, inevitably, result in an increase in food
imports, placing further strain on the consumer. The price of maize was
now already 150% higher than a year ago.
Players in the retail property space would also feel the impact of
subdued growth in durable, semi-durable and non-durable goods, as
well as related services. “Confidence is weak across all income groups
so the consumer is not going to supply the growth the economy needs.”
The situation is like a double-edged sword considering that
The construction industry is facing an
extremely challenging year, Master Builders
Association North has been warned by a
leading economist.
ABSA economist, Miyelani Maluleke (right), pictured with Mohau
Mphomela, executive director of MBA North, at the MBA's recent
annual meeting in Midrand.
>
The GCC 2015 revision remains widely unpublicised, but there
are a few key changes that can have a large impact on the
negotiation power of contractors when doing business in the
construction industry.
The upgrade to the contract, which is largely used by state-owned
entities, was necessary due to the fact that there were a number of grey
areas that needed clarification.
GCC course leader at Alusani Skills & Training Network
®
, Steve du
Toit, says that the most significant revision to the contract is a clause that
gives contractors the right to suspend work on current projects if they
are not paid.
He says: “This is a major breakthrough in contract agreements.
In the past, contractors were never able to suspend work on an ongoing
project, regardless of whether a
payment certificate was issued
or not, but now this right has
been formally carried over to
the GCC 2015.”
Du Toit, who has practiced
as an attorney for over two
decades and has defended
individual contractors, clients
and large construction compa-
nies in legal cases pertain-
ing to construction and build-
ing projects.
>
I
I