If you are a contractor on a government project in South Africa, there is a good chance you are handing over more money in retention and security than the law allows. And the public sector client holding it may not even know they are acting unlawfully.
This is not a technicality. It is a binding obligation – backed by criminal sanction – that governs every organ of state. Yet it is routinely ignored
The Legal Framework
The Construction Industry Development Board Act 38 of 2000 (CIDB Act) is the starting point. Regulation 24 of the Construction Industry Development Regulations, 2004(as amended) requires every organ of state soliciting construction tenders to comply with the “Standard for Uniformity in Engineering and Construction Works Contracts” (the CIDB Standard) published in Government Gazette No. 42622 of 8 August 2019. Regulation 30 makes non-compliance a criminal offence, punishable by fine.
The Rules on Retention and Security
The CIDB Standard sets hard caps. They are not guidelines. They are not negotiable:
| Scenario | Maximum retention deduction per certificate | Maximum total retention held |
| No guarantee / bond provided by the contractor | 10% of amount due | 10% of contract price |
| The contractors provides a Guarantee / bond | 5% of amount due | 5% of contract price |
Three consequences flow directly from this:
– A public sector client may never deduct more than 10% retention per certificate – regardless of what the contract says.
– Where the contractor has provided any form of guarantee or bond, total retention held is capped at 5% of the contract price.
– A contract requiring both a 10% guarantee and 10% retention – simultaneously – is unlawful on its face.
What This Means for You
Scrutinise every public sector contract before signing. If the retention and security clauses exceed these caps, raise it. The employer and its professional team are obliged to fix it. If they refuse, you have the right to declare a dispute and, if necessary, to report the non-compliance to the CIDB.
A contract that contains an unlawful obligation is not enforceable on that point. Pacta sunt servanda – contracts must be honoured – does not rescue an illegal term.
The law is on your side. Use it
References
1. Construction Industry Development Board Act 38 of 2000, Government Gazette 21849, 1 December 2000.
2. Construction Industry Development Regulations, 2004 (GN R692 in GG 26427 of 9 June 2004), as amended by GN R1367 in GG 42779 of 18 October 2019 and GN R995 in GG 43726 of 25 September 2020. Reg 24 [Preparation for Construction Procurement] | Reg 30 [Offences].
3. CIDB Standard for Uniformity in Engineering and Construction Works Contracts, Government Gazette No. 42622 of 8 August 2019. Clauses 4.4.3.3 – 4.4.3.4.
