Johannesburg – Many South African construction contractors have little or no protection against the rising cost of diesel, which is a material hit to the bottom line for contractors running plant-heavy operations.
With no end in sight to the conflict between Israel and the United States,on one hand, and Iran, on the other, the vital Strait of Hormuz remains closed, prompting the cost of diesel to rise to record highs.
Construction law specialist MDA Attorneys, which has seen a sharp rise in queries from contractors grappling with fuel and materials costs, warned that many contracts offer little protection against this surge and that their window to claw back additional costs was closing fast.
MDA Attorneys said it advises clients across various suites of standard construction contracts and warned that the surge in oil prices was likely to be treated under FIDIC, one of the most widely used construction contractual frameworks.
“This is no longer a theoretical risk,” Clairize Malan, senior associate at MDA Attorneys, stated on Monday, 11 May 2026.
“Diesel has jumped within a short time. For contractors running plant-heavy operations, that is a material hit to the bottom line.
“Most standard contracts were simply not designed to assist contractors in absorbing a shock of this magnitude.”
Under many FIDIC contracts, price adjustments were agreed up front using formulas and indices, via a mechanism known as contract price adjustment (CPA).
While CPA clauses are designed to account for fluctuations in the cost of labour, materials, and fuel, they are calibrated against longer-term trends.
The CPA mechanism is not built to account for sudden, steep price spikes driven by geopolitical conflict.
When oil prices jump sharply over a short period, as they have since February 2026, contractors may find the CPA mechanism does not cover the gap, leaving them to absorb the shortfall themselves.
The situation is set to worsen.
May’s official fuel prices were calculated based on Brent crude averaging below $101 per barrel, but oil has since traded higher following the collapse of US-Iran peace talks.
June’s prices are likely to be higher still.
And from June, the government’s temporary fuel levy relief, which has been cushioning South African consumers and businesses from the full impact, will begin to be phased out, falling away entirely in July.
Contractors are therefore facing rising global prices and a rising structural price floor simultaneously.
With CPA clauses offering limited relief, some contractors are looking to force majeure provisions as an alternative avenue for recovery.
FIDIC’s force majeure clause allows a contractor to claim costs where it is prevented from performing its obligations due to an extraordinary event, and war is specifically listed as one of those events.
Recoverable costs include expenditure reasonably incurred by the contractor, whether on or off-site.
But relying on force majeure is not straightforward. It depends on how the contract defines war and whether that definition extends to conflicts beyond South Africa’s borders.
“Employers will typically push for the narrower interpretation, which limits their exposure,” explained Malan.
“Contractors understandably prefer a wider reading that would allow them to recover costs flowing from conflicts beyond our borders.
“Whether a contractor can recover these costs ultimately depends on how the contract is interpreted.
“However, you cannot even have that argument if you have failed to give notice of a force majeure event.”
This is where many contractors are at the greatest risk.
Under FIDIC, a contractor who fails to give timely notice of a force majeure event loses the right to claim altogether.
For contractors who have not yet issued notices, each week of inaction further weakens their position. In some cases, it may extinguish their claim entirely.
MDA Attorneys is urging contractors to act now on three fronts: examine whether their CPA formulas adequately cover increases in oil-linked costs; assess whether force majeure notices should be issued immediately; and ensure that cost records are being meticulously maintained.
“The construction industry is already operating on tight margins,” said Malan.
“Contractors cannot afford to wait and see.
“They need to understand their contractual position now, take the right steps to preserve their claims, and engage with employers early.
“The longer this is left, the harder it becomes to recover these costs.”
MDA Attorneys said it was monitoring developments and advising clients across the full range of standard-form contracts.
Contractors operating under NEC, JBCC, and GCC contracts face different contractual positions and should seek advice tailored to their specific agreements.
