Should South Africa learn from the UK's renewed late payment debate?

The UK is again asking how long businesses should wait to be paid and what the consequences should be when payment does not arrive.

In May, the Commercial Payments Bill was introduced to parliament as the government vowed to tackle late payments between businesses which are estimated to cost the UK economy £11 billion a year.

To address this issue, the government proposes introducing maximum commercial payment terms of 60 days, mandatory late-payment interest at 8% above the Bank of England base rate, compensation where an invoice dispute is raised late or without adequate information, a prohibition on construction retentions, and stronger enforcement powers for the Small Business Commissioner.

These powers would include investigating persistent poor payment practices, imposing financial penalties and making binding interim decisions in certain payment disputes between smaller suppliers and larger businesses.

The bill is still being debated in parliament, and the government has not yet indicated when the changes are likely to be introduced. However, it sits against an already substantial statutory framework, including Part II of the Housing Grants, Construction and Regeneration Act 1996 (as amended) – commonly called the Construction Act – which gives parties to qualifying construction contracts rights to periodic payment, to suspend performance in the case of late payment, and statutory adjudication.

The Late Payment of Commercial Debts (Interest) Act 1998 provides an overlapping commercial remedy, implying interest into qualifying commercial debts and providing fixed compensation and recovery-cost protection.

Large UK businesses must also report publicly on their payment periods and performance, while the voluntary Fair Payment Code recognises businesses meeting specific payment standards.

The significance of the Commercial Payments Bill is therefore not that it introduces payment protection into an unregulated industry. It seeks to strengthen an established regime because late payment has persisted despite almost three decades of statutory intervention.

Existing payment protections in South Africa

South Africa does not have a generally applicable construction security-of-payment statute. Instead, payment protection is principally contractual.

The commonly used JBCC, GCC, FIDIC and NEC forms provide mechanisms for valuation, certification, interim payment, interest, retention or other security, suspension, termination and dispute resolution. Late payment interest may also arise by way of common law mora or the Prescribed Rate of Interest Act, whilst South African courts have increasingly supported the interim binding effect of contractual adjudication decisions.

If properly administered, these mechanisms can therefore provide meaningful protection to employers, contractors and subcontractors.

The UK regime – on paper at least – offers objectively stronger payment protection. However, payment protection and market opportunity are not the same thing.

The historical pitcture

Late public sector payment is demonstrably serious in South Africa. The National Treasury’s 2024-25 report (29 pages / 1,907KB PDF) presents a stark picture. National and provincial departments paid 464,188 invoices worth R43.6 billion ($2.7 billion) after 30 days. As of 31 March 2025, a further 142,801 invoices (22 pages / 1,116KB PDF) worth R18.2 billion were more than 30 days old and remained unpaid.

The municipal evidence is no more reassuring. The auditor-general found that 136 municipalities – 53% of those assessed – failed to pay suppliers on time in 2024-25. At the 2024-25 year-end, 174 municipalities lacked sufficient cash to pay their creditors. Poor payment practices and the resulting interest and penalties accounted for 83% of R6.36 billion in fruitless and wasteful expenditure.

These figures establish a serious public sector supplier-payment problem. However, they are not reliable construction industry statistics. They do not identify how many late invoices arose from construction contracts, whether work had been certified, whether the amount was disputed, or how long correctly submitted construction invoices remained unpaid.

Insolvency, CIPC and CIDB data is mixed and unreliable

South Africa’s national statistical service, Stats SA, substantially revised its historical liquidation data in 2026, revealing the following classified construction liquidations:

Analysis of the revised 2000-2025 series produces a long-run annual average of approximately 87.5 liquidations, compared with an average of 64 between 2021 and 2025. Recent levels are therefore not unusually high in historical terms.

However, liquidation is not a complete measure of financial distress. Stats SA records a substantial number of liquidations as unclassified, and does not take into account related insolvency procedures, such as business rescue.

The Companies and Intellectual Property Commission (CIPC) does record business rescue data but does not provide verifiable links to industry and does not reveal the underlying causes for entering the process.

Data from the Construction Industry Development Board (CIDB) also does not reveal a simple pattern of sustained growth or decline. The number of registration entries used in the CIDB’s Grade 1 analysis – which covers the smaller enterprises – was broadly unchanged between 2020 and the end of 2025, although it fluctuated materially during that period.

By contrast, the number of active contractor enterprises in Grades 2-9 increased from 17,087 at the end of 2022 to 21,323 at the end of 2025, before remaining essentially unchanged during the latest year.

This demonstrates that the underlying data does not generally support a proposition that poor payment practices are inhibiting the ability of contractors to trade.

Macro data refinement

Those who have followed the well-publicised troubles of a number of larger domestic contractors may disagree. However there are other, more fundamental, market conditions driving this particular trend.

It is true that South Africa’s macro-construction industry statistics demonstrate a structural challenge. 

Construction activity contributed 4.2% of national value added in 2008, but only 2.3% in 2025. In constant-price terms, the industry declined from R156 billion in 2016 to R99.1 billion in 2025.

Yet there are reasons for optimism. The 2026 Budget provides for an estimated R1.07 trillion of public-sector infrastructure spending over the three-year medium-term expenditure framework, led by transport and logistics, energy, water and sanitation. 

Infrastructure South Africa reported 81 Strategic Integrated Projects comprising 263 individual projects with a combined value close to R2 trillion; 82 projects worth R502.7 billion were under construction as of August 2026, while 54 worth R206 billion were in documentation stage or procurement.

However, as has been the case over the years, planned investment does not necessarily translate into construction activity. Fixed investment was only 14.2% of GDP in 2024, for example, less than half the National Development Plan’s 30% target.

Stronger payment rights cannot build that bridge by itself. A contractor may have excellent rights to notices, interest and rapid adjudication, but still face a shortage of profitable work, weak project preparation, uncertain procurement, limited working-capital finance or an employer without the funds to meet a valid certificate. 

Stronger rights, improved outcomes?

Reform has previously been attempted. Draft CIDB regulations published in 2015 contemplated progressive payment, automatic interest and compulsory adjudication. However, they were withdrawn due to concerns that the proposals exceeded the regulation-making powers of the CIDB Act. 

There has long been recognition that UK-style mechanisms would bring improvements to payment practices in the South African construction industry. The fact that they have not been implemented is a reflection either of ineffective or inefficient governance, or that prompt payment issues are not a critical inhibitor of construction industry performance.

It might well be both, or neither, but whichever it is, experience in the sector demonstrates that certain reforms would help the existing market.

For example, whilst payment mechanisms are prevalent in South African construction contracts, there are frequent examples of certificates being withheld, in some cases for prolonged periods of time, in order to avoid sums becoming “liquid”. This means that claims are often unresolved until the final account, during which a contractor must establish and prove the merits not only of its interim payment claim, but of the entirety of its account.

Mandatory interim payment notices backed by a default statutory scheme would compel an employer or contractor to certify promptly what is due, explain why any amount is withheld, and to pay undisputed sums within short defined timescales. 

Unless the requisite notices have been served, the presumption would be that the sum applied for would be due, with interest, with a consequential right to determination and payment via fast-track adjudication, thereby avoiding the extended processes that those who have conducted adjudication in South Africa will have experienced.

However, with every reform, there are always inevitable trade-offs. A strict invoice-dispute deadline must accommodate the time required to inspect and value complex works. A retention prohibition may improve cash flow but could increase the price of bonds and other security, particularly for smaller contractors. Mandatory interest may compensate a creditor while adding to the liabilities of public sector employers already unable to meet current obligations.

There is also a risk in importing rules designed for a mature UK market into South Africa without adapting them to local constitutional, procurement, fiscal and municipal realities.

Furthermore, the UK experience is itself a caution. Its renewed reform debate has arisen despite decades of statutory intervention. 

The correct question is not therefore simply whether South Africa should copy the UK’s Commercial Payments Bill and the Housing Grants Act. It is which forms of payment failure require new law, which require better enforcement, and which arise from deeper weaknesses in project preparation, funding and market demand.