Construction World May 2016

Managing director, Terry Brown.

The South African Competition Commission recently ruled that the practice of using fee guidelines within the Built Environment Industry is non-competitive and effectively results in price-fixing. ARE FEE GUIDELINES A THING OF THE PAST? costly and least adversarial means to resolve their dispute. If under- taken by a suitably experienced and qualified construction professional, mediation can be just that,” adds Brown. Like many emerging markets, South Africa is experiencing difficult economic conditions which are forecast continue for the foreseeable future. “What we are experiencing in financial markets, not only in South Africa but internationally, is unprecedented. Uncertainly and volatility are set to be the order of the day. In these turbulent times many investors are looking for ‘bricks and mortar’ as a secure invest- ment option and I believe that that this trend will be sufficient to ensure that the South African property industry will not only endure, but thrive. Positive outlooks such as this are needed if the industry is to shake off the recent downturn. Construction confidence indexes have shown a negative sentiment in the past two quarters, but output and order books appear to have shrugged off this downbeat outlook. We asked Terry Brown for a final comment on this. “When reviewing the scale of ongoing development in areas such as Gauteng and the Western Cape, it does not tally with the high levels of pessimism in the local construction industry. Africa is a wakening economic giant. We need to embrace this going forward, and adopt the more positive outlook seen other growing markets on the continent.” This follows an application, in 2014, by the Council for the Built Environment to have the practice of Fee Guidelines exempted from the Competition Act. Simon Berry, director, Fresh Projects, an online business platform tailor made for South African built environ- ment professionals, says the rejection of fee guidelines could potentially be positive move for the local industry. “South Africa is more than two decades behind international markets in terms of its use of fee guidelines. A decision to move away from using them could be good news for the local industry, although it will prob- ably take a decade to fully eradicate the practice in totality,” says Berry. The Competition Commission claims that the use of fee guide- lines reduces price competition and could also result in prices within the built environment being set above the competitive level to the detriment of consumers. “If we had to follow international practice then we should have scrapped this approach a long time ago. There have been too many guessing games within the industry, with so many professionals relying too heavily on fee scales and not understanding the true cost of a project,” says Berry. He says that this results in a bidding frenzy on discount percentages and bidders who are not even aware of what amount will result in a profitable job. >

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CONSTRUCTION WORLD MAY 2016