As global oil markets react to escalating geopolitical tensions, South Africa’s construction sector is facing a sharp and immediate consequence: rising fuel costs that are beginning to erode project margins, strain contracts, and trigger disputes across the value chain.
According to construction specialist law firm NSDV, the current fuel price shock is not just a recent pricing issue - it is a fundamental contractual issue and it’s here to stay.
Speaking at an urgent industry webinar hosted by the Master Builders South Africa (MBSA), NSDV Director - Construction, Litigation & Dispute Resolution attorney, Samantha Reyneke, outlined how contractors can navigate the intersection of fuel volatility, contract law, and project delivery.
“Fuel volatility is external. Contractual discipline is not,” says Reyneke. “In this market, that’s the difference between absorbing the shock or shifting it, correctly and contractually.”
Contracts Are Already Deciding Who Pays
With April’s anticipated fuel increases already feeding into cost projections, NSDV notes that many contractors are discovering - often too late - that their contracts have already allocated the risk to contractors.
Standard form contracts such as JBCC, GCC, MBSA subcontract agreements, FIDIC and NEC each treat escalation and compensation differently, with contractors often carrying the risk and subcontractors frequently carrying disproportionate exposure where upstream recovery mechanisms are not secured. “If the contract doesn’t allow for escalation, rising fuel costs remain your problem - even when they could have been recoverable,” Reyneke explains.
From Fairness to Facts: Why Claims Are Failing
NSDV highlights a recurring issue in construction disputes: reliance on “fairness” arguments instead of contractual entitlement. “Fairness is not a clause. If you can’t point to it in the contract, it’s not going to rescue your margin” – Reyneke.
To successfully recover fuel-related cost increases, contractors must demonstrate clear, data-backed causation, including:
- Accurate daily site diaries
- Daily fuel usage logs
- Plant hours and transport records
- Real-time site reporting
- Direct linkage between fuel increases and cost impact
“Industry-wide increases don’t win disputes. Evidence does” – Reyneke.
Equally critical is timely notice. Missed notices, NSDV warns, don’t merely weaken claims - they extinguish them. “The most expensive line item on a project is often the notice that you didn’t submit” – Reyneke.
Dual Compliance: Delivering While Defending
A common strategic misstep is reducing or halting performance to strengthen a claim. “A contractor who stops performing to prove a claim usually loses both,” says Reyneke. “Entitlement and performance must coexist.” This principle - known as dual compliance - requires contractors to:
- Continue executing the works
- Simultaneously preserve contractual rights through disciplined claims management
Governance: The Real Differentiator
Beyond claims, NSDV emphasises that governance maturity is the key differentiator in volatile markets. Practical tools available within standard contracts include:
- Interim commercial arrangements
- Without prejudice negotiations
- Ringfencing disputed amounts
- Structured and documented communication
“Good governance gives you leverage. Disputes are what happen when you don’t use it early enough” – Reyneke.
Geopolitics Meets Ground Reality
The current fuel shock is being driven in part by renewed instability in the Middle East, with global supply concerns pushing oil prices upward. For South Africa, this translates into:
- Rising input costs across construction and infrastructure
- Upward pressure on CPI
- Increased scrutiny from interest rate decision-makers
Yet, NSDV argues that within this disruption lies an opportunity. “South Africa can differentiate itself through execution - through how well we manage contracts, governance, and delivery in a volatile environment” – Reyneke.
Survival Will Favour the Contractually Disciplined
As the sector adjusts to sustained volatility, NSDV’s message is clear: success will not be determined by the strength of arguments after the fact, but by discipline during the project lifecycle. The firm is of the view that geopolitical tension and volatility will be the norm for some time to come, risk management now lies in the fine print and administrative backbone of a project.
Contractors who outperform in this cycle will be those who:
- Price risk accurately in a volatile fuel environment
- Administer contracts in real time
- Treat compliance as a strategic function - not administrative overhead
“In this market, survival doesn’t go to the cheapest contractor,” says Reyneke. “It goes to the most contractually disciplined one.”
