South Africa: South Africa Construction And Construction Insurance Law Snippets

Updates on some recent developments in the construction, construction insurance and mining industries in South Africa

This newsletter contains updates on some recent developments in the construction, construction insurance and mining industries.  We look at:

  • Building Information Modelling ("BIM") - the risks which should be of interest to liability insurers and to consultants.
  • Considerations in relation to the level of design liability – which should be of interest to liability insurers and to consultants.
  • Proposed amendments to the recently introduced financial provisioning regulations published in terms of the National Environmental Management Act, and which should be of interest to the mining industry including guarantee insurers.
  • Developments in relation to the introduction of mandatory prompt payment and adjudication regulations – of interest to all participants in the construction industry.

Building Information Modelling ("BIM") – What are some of the risks?

BIM is a digital technology which allows for planning, design, construction and operation of a project/facility in an accurate virtual model. It is currently prescribed for use in the United Kingdom for mid-level centrally procured public sector construction projects, and its use is spreading throughout the world, including in South Africa.

The use of BIM in South Africa raises several potential risks for both insurers (particularly professional indemnity insurers) and insured parties alike.  These risks include:

  • whether insurance cover is sufficiently broad to cater for liabilities established under contracts and protocols;
  • increased exposure around data security and cyber liability;
  • increased risk for the party inputting data into the building information model; and
  • potential confusion surrounding responsibility for design and design errors.

A more detailed analysis of some of the potential risks is available here.

Design Professionals/Understanding the Level of Design Liability

The traditional obligation on design professionals is to use reasonable skill and care in their design.  This obligation, which is implied by law, requires proof of fault in the form of negligence before liability is established. 

The obligation is always implied where an agreement (appointment) is silent on the matter.  However the express terms of an agreement may override this implied obligation.  This will be so in circumstances where the express terms are capable of being interpreted as importing a strict obligation (or liability) to achieve a specific result (in other words one fit for purpose).

This was demonstrated in two decisions of the English Courts (Queens Bench Division (Technology and Construction Court)) handed down in the course of 2015.  The decisions bear out that it cannot be assumed that the level of reasonable skill and care is of universal application, and stand as a cautionary to drafters of agreements and consultants alike.  Drafters and consultants must give particular consideration to what effect the wording of the agreement has, or may have, on the traditional obligation.

From a professional liability insurance coverage point of view – both insurers and insureds must give consideration to the usual approach adopted by insurers that warranties, or other higher standards of care, are not usually covered. 

Thus in the case of Costain Limited v Charles Haswell & Partners Limited (ICL:20150096.20) the court held that the following clause:

"Any part of the works designed pursuant to this Agreement if constructed in accordance with such design, shall meet the requirements prescribed in the specification or reasonably to be inferred from the Tender Documents or the Contract or the written requirements of Costain ..."

"imposed an obligation of strict liability" on the consultant "in respect of its design" and this despite the express inclusion in the agreement of the traditional obligation as follows :

"In the provision of the services the consultant shall exercise all reasonable professional skill, care and diligence".

The Court added:

"It is perfectly normal, in any given case, for such a professional man to give express warranties which impose strict liability or a performance obligation such that the finished building will be reasonably fit for a specified purpose."

In a second decision (MW Hightech Projects UK Limited v Haase Environmental Consulting GmbH (ICL:2015 0096.36)) the agreement contained similar clauses in effect to the clauses referred to above in the Constain case.  In this second decision the Court held that the consultant was also strictly obliged to meet the specification requirement.

This concern as to the level of liability imposed by an agreement may be still further emphasized in the context of a designer led (architect, engineer, architectural technologist or other professional designers) design-build contract.  The design-build concept contemplates a single point of contact/responsibility, such that the employer enters into a contract with one entity that has the responsibility for both design and the construction of the project.  The concern is emphasized in view of the fact that the respective design and build phases are very often overlapped. 

While these two decisions referred to above are decisions of the English Courts, our Courts would adopt the same approach.

Department of Environmental Affairs Releases Proposed Amendments to the Financial Provisioning Regulations for Comment

Following a clarification note which was issued by the Department of Mineral Resources (DMR) at the end of August 2016, on 9 September 2016 the Department of Environmental Affairs (DEA) released a call for comments on proposed amendments to the Financial Provisioning Regulations which were published in terms of the National Environmental Management Act (NEMA) in November 2015. A copy of the proposed amendments is available here.

The proposed amendments come after widespread industry outcry in response to the Regulations, which changed the manner in which mines must make financial provision for rehabilitation of land, changed how the required provision must be calculated, and introduced requirements for financial provision for rehabilitation of latent environmental impacts and indefinite water treatment after the mine's closure.

Some of the major changes in the proposed amendments are the extension of the period for the review and adjustment of all existing financial provision from February 2017 until February 2018, an exclusion of existing trust funds from the limitation of the use of such funds for post-closure purposes only, and the deletion of Appendixes containing pro forma wording for financial guarantees and trust deeds. In addition, an attempt has been made to allow for a decrease of the financial provision towards the end of the mine's life.

Although the period for comments on the proposed amendments has now closed, it is expected that an additional period for comment may be announced, in light of the fact that these amendments do not address some major issues – such as their incompatibility with the Income Tax Act, the unhappiness with the restriction of the use of trust funds to post-closure rehabilitation, and the increased cost of mandatory auditing oversight – and the fact that it is unclear what will replace the deleted Appendixes. We foresee some further proposed amendments before the Regulations are finally amended.

A link to our previous article on the Financial Provisioning Regulations is available here. A more detailed analysis of the proposed amendments will be published shortly.

Statutory Construction Prompt Payment and Adjudication Regulations Still In The Pipeline

The Minister of Public Works proposed amendments to the Construction Industry Development Regulations in May 2015, intended to introduce prompt payment requirements into all construction works contracts (excluding home building contracts), and would have brought into effect mandatory statutory adjudication for the construction industry in relation to payment disputes. Our previous article on the proposed amendments can be found here

The introduction of the Regulations is set to have a profound impact on the construction industry.  The Regulations were expected to be introduced into law in 2016, and would have brought us into line other commonwealth jurisdictions, including the UK and Australia.

However, the process has ground to a halt following substantial objections to the initial draft and an indication by several large state-owned entities, including Eskom, the South African National Roads Agency Limited (Sanral) and Transnet, that they wished to be exempted from the proposed regulations.

In a move which may be seen as a compromise, the National Treasury has launched a walk-in payment call centre in order to help facilitate payments that are overdue by more than 30 days. This is an enforcement of section 38(1)(f) of the Public Finance Management Act (PFMA), read with the Amendment of Treasury Regulations in terms of Section 76, which was published on 15 March 2005, which already requires that all creditors must be paid within 30 days of receipt of an invoice (unless determined otherwise in a contract). Non-compliance with section 38 of the PFMA by an accounting officer is a criminal offence.

The walk-in payment call centre was launched in partnership with the Black Business Council, who donated computers and pay for five staff for a period of 2 years, in order to try to speed up payments to government's small and medium suppliers (and who make up a large contingent of the members in the Black Business Council). In conjunction with this, Treasury has announced that it will name and shame delinquent departments.

It now remains to be seen whether the Amended Regulations will indeed be introduced, in order to further assist contractors, sub-contractors and suppliers in the construction industry.

Future Construction and Construction Insurance Law Snippet Topics

  • State procurement – the nuclear question, tendering and administrative review of tender awards.
  • Composite single project construction all risks and liability policies; and the waiver of insurers' rights of subrogation.
  • The Amended Preferential Procurement Regulations – introducing a compulsory sub-contracting clause.
  • An update on strict compliance and the fraud defence in relation to construction guarantees.

South Africa Construction And Construction Insurance Law Snippets

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions