Beware the impact of insurance risk during water restrictions

Beware the impact of insurance risk during water restrictions

Master Builders Association Western Cape advises its members of the following important information relative to insurance risk whilst water restrictions are in place:

As you are aware, the City of Cape Town declared water restrictions in January 2016 which have led to institutions, residents, farmers and businesses all being adversely impacted.

To make matters worse, water resources have been put under tremendous strain due to the holiday season.

What Impact may this have on your insurance policy?

As the drought conditions continue to deteriorate, the shortage of water could materially affect the function or effectiveness of water-dependent fire-fighting equipment and sprinkler-systems. The water crisis therefore requires additional precautions to be taken by yourselves to minimise the risk of loss or damage to property – a general policy condition in most insurance contracts. During these prevailing conditions, failure to take reasonable measures to safeguard property and lives could prejudice you in recovering from a loss event and may also be in contravention of the regulations on safety in the workplace.

Precautions taken should always be in line with the principles of water conservation outlined by the City of Cape Town.

With respect to sprinkler-protected property, the following conditions apply:

Fire cover will respond during a period of intentional water cut-off, reduced water pressure or any form of water rationing by the Authorities (other than suspension of the water supply due to, for example, non-payment of accounts, etc.) as a result of the prevailing drought conditions, that directly gives rise to sprinkler systems not performing their function or being ineffective during an event.

You are still responsible for the maintenance of the building’s sprinkler-system and for ensuring that the system is in good working order. Should the system be defective, at the time of the loss, your claim may be rejected.

You must keep records and proof of the last service and/or test of the system (on premises and elsewhere). In this regard, we encourage the closed-circuit test which does not require more or additional public water supply than already in the system.

Should at the time of loss, the last date of service or the last test be out of cycle or out-dated, your claim may be rejected.

Loss of Income due to the business being interrupted

Unfortunately, insurance policies do not respond to losses resulting from damage directly or indirectly caused by drought or shortage of water.

Theewaterskloof Dam, Cape Town

The above-mentioned is intended as a guide only to assist your thinking and decision making. Please contact your broker if you have any further queries.

Could discontent’s winter get any colder?

Could discontent’s winter get any colder?

As a first order of business I must pay respects to my predecessor, Bafikile Bonke Simelane, not only for the highly professional way in which he conducted his presidency of Master Builders South Africa, but also for his very erudite and informed monthly Comment in our magazine.

The building industry in South Africa is subject to influences from a welter of sources, perhaps more so than any other national business. Keeping an eye on those influences is a job all on its own. Bonke managed to do that and take in the bigger picture as well.

John Matthews, President – Master Builders South Africa

Whereas retail, tourism, banking and many other essential enterprises are driven predominantly by market forces, the building and construction industry has myriad other impacts, some obvious and others a great deal more subtle. Bonke had his finger firmly on the pulse and regularly told us just where the next threat may be waiting or opportunity to be exploited.

But he didn’t have to be an oracle to spot the elephant so evident on the climatic horizon – a hundred-year record drought.

The factors peculiar to the building industry are often intangible. Whereas supplies, raw materials and labour are common to all industry, builders are often sandbagged by the simplest of needs. The much-vaunted issue of water has never been more top of mind than in the past year in the Western Cape, and as the summer slips into early autumn, the denizens at the Cape scan the horizon for signs of a merciful cold front, and the upper slopes of Lion’s Head are scrutinised for a wisp of cloud that inevitably presages the winter rains.

So it’s water that preoccupies our industry right now on the southern tip and potentially throughout South Africa, and it’s a commodity in enraging short supply. Rarely has the fairest cape been less fair, less green, less juicy than over the past 18 months or so, and seldom has the building industry had to concern itself so desperately with what it had become to consider – rightly or wrongly – a reliable resource.

And if that’s not enough, there’s another essential that is under threat as we wait to hear exactly how the new South African President’s Zexit deals are working out. The other elephant in the room is land.

We don’t argue for a minute that the redistribution of land to those who lost theirs through unfair practices must be restored and, in a way that Cyril Ramaphosa proposes, must have no effect on the economy or the production of food. But as someone wisely said, there’s no nice way to take someone’s property without paying them for it.

So the building industry right across the nation, along with clients the developers watch to see how even-handed the solution will be. Farmers and, industrialists and those that hold development land, play a painful waiting game.

In both cases we can only say, this is no way to move forward as a nation. Water problems are by no means the sole preserve of the Western Cape. The rest of South Africa stands on the brink of equally crippling droughts as climate change establishes its reality. The uncertainty of who will own the land and when, stops development in its tracks.

Both are government issues right now, but it’s time for them to become issues driven by those at the coalface of the economy to exert their considerable influence and tackle the Augean task that is South Africa right now, on the ground.

John

Advice to CT contractors on tender submissions during the water crisis

Advice to CT contractors on tender submissions during the water crisis

Master Builders Association Western Cape offers the following cautionary advice to its members regarding submission of tenders, due to the water crisis in the Greater Cape Town area:

At the time of submitting a tender for any works, both main contractors and subcontractors need to be very careful concerning the risks that the situation arising from the current water crisis presents and should carefully consider the following:

Theewaterskloofwater Dam, Cape Town, March 2018

Access to the municipal water supply for use on building site activities is likely to be further restricted, possibly to a major degree, and;
The cost of municipal potable water is likely to increase significantly;
To this end, the specific contract conditions should be carefully studied, particularly as they relate to the party recorded in the contract documentation as being responsible for the supply of water, and the cost thereof.

Note should also be taken that relevant conditions of contract vary significantly. Such variance is not only between different types of contractual agreements, but also between various editions (this is the case with various recent JBCC editions).

Care should be taken to study the specific contract conditions, particularly any amendments to standard conditions, and note taken of the fact that, even where Agreements contain force majeure provisions, this is unlikely to protect the contractor on newly submitted tenders.

Qualifying tenders is permissible in law, but carries risks, particularly in the public sector, where qualifications are likely to result in disqualification. Needless to say, collusion with other tenderers is unlawful.

The risks that will confront contractors and subcontractors include contamination of water from sources other than the municipal supply and stringent quality control measures must be maintained to ensure both the quality of the water as well as the testing of structural concrete and mortars to ensure compliance with design strengths.

Many subcontract agreements allocate the responsibility of supplying water to the contractor. Contractors need to take due account of this

Contract conditions in current tenders are likely to qualify and reduce the employer’s responsibility and risk and contractors must scrutinise the documents to ensure that they have a thorough understanding of the risks that any amended documentation shifts to them and take the appropriate precautions when submitting their tenders in order to contain or manage these risks.