More intervention could follow from proposed South African construction regulation changes

Recently released for public consultation by the Department of Public Works and Infrastructure (DPWI), the draft Construction Industry Development Board Amendment Bill (46-page / 562KB PDF) aims to extend registration requirements for contractors participating in publicly procured and private sector works. The Bill also aims to provide for the registration of construction professionals, such as architects, engineers and surveyors.

According to the DPWI, the Bill will enable the CIDB to drive developmental interventions in the private sector and improve compliance with the CIDB’s rules. Given recent high-profile disasters in South Africa, many will consider this direct intervention necessary - even so, it will be interesting to see whether the DPWI’s intentions are watered down in the revised Bill, by those in the construction industry who feel the proposed interventions go too far.

Impact on the construction industry

One of the changes proposed in the Bill is the introduction of a new body within the CIDB referred to as ‘the Council’. According to the proposed Bill, there will be a clear delineation of roles between the Board and the Council within the CIDB, with many of the functions and duties traditionally performed by the Board to be transferred to the newly formed Council. The Council’s function will be to provide strategic leadership to the construction industry, while the Board will oversee managing the day-to-day operations of the Council.

Currently, under section 17(1) of the Construction Industry Development Board Act, the Board is required to maintain a national register of contractors, categorising them in a way that facilitates public sector procurement and promotes contractor development. The Bill aims to expand this obligation, by requiring the Board to establish a national register of contractors with a view to facilitating both private and public sector procurement. 

Section 17 of the Bill will require all contractors to be registered with the Board and, according to section 17(9) of the Bill, private sector employers will be required to procure from the register of contractors.

According to section 18(1) of the Bill, contractors will be prohibited from executing any construction work for both the private and public sectors if the contractors are not registered with the Board and do not hold a valid registration certificate. Contravening this requirement will result in a fine of up to 10% of the accepted contract value.

Extending the requirement for registration to private sector works should provide an additional safeguard for developers and consumers, which will be generally welcomed. It is important to note, however, that it could be burdensome for those involved in comparatively minor projects - such as low value residential home renovations - which would otherwise fall within the very broad definition of “construction works” in the draft Bill.

A further change is that professional service providers will be required to register with the Board according to section 21A (7) of the Bill. Under section 21C (1), unregistered professional service providers will be prohibited from undertaking any construction work for private or public sector contracts which were awarded under a competitive tender.

In addition, if a professional service provider is found to have contravened section 21C (1), the Board will impose a fine up of to 10% of the accepted contract value. Professional service providers are likely to have pushed back on this change during the public consultations, as they are already required to be registered with statutory industry regulators, such as the South African Council for the Architectural Profession. Such bodies generally require that professional indemnity insurance is held by practitioners and impose their own high professional standards.

One mitigating factor for professionals is that, according to section 21C (7) of the Bill, the relevant minister must prescribe a financial value of the construction works, with work that falls below this allowing for services to be performed by an unregistered CIDB professional service provider. It is not clear from the wording of the Bill, however, what this minimum amount should be.

It will be interesting to see the revised Bill once it has been updated to reflect the consultation process. Once the Bill is enacted, and assuming its core components remain unaltered, contractors and professional service providers who participate in public and private sector processes should prepare to register with the Board to ensure a smooth continuation in their business activity and to avoid receiving hefty fines for contravention of the Bill.

Co-written by Evaendren Naidoo and Njabulo Gumede of Pinsent Masons.