South Africa’s infrastructure ambitions will remain difficult to realise unless projects are properly prepared, risks are shared more equitably and contractors have access to the financial guarantees needed to deliver them. While funding remains critical, industry experts argue that a fragmented approach to project development, procurement delays and inadequate contractor capacity are preventing viable infrastructure projects from progressing to construction.

These issues were explored during a webinar hosted by Creamer Media Webinars on behalf of global underwriting management agency Credeq Africa, titled “Building South Africa’s Future: Infrastructure and Excellence in Action”, which brought together representatives from the construction, engineering, financial and rail sectors to examine what is needed to turn infrastructure plans into tangible projects.

Moderated by SWM Communications MD Brindaveni Naidoo, the discussion highlighted the importance of bankability, effective project preparation, construction guarantees and collaboration between government, funders, developers and contractors.

Adenco Construction CEO Kashif Wicomb emphasised that access to construction guarantees remains a significant constraint for contractors, including established companies, as well as emerging businesses seeking to participate in South Africa’s infrastructure development.

He noted that the construction sector currently accounts for about R350-billion in yearly expenditure and supports about 1.2-million jobs, making contractor capacity a matter of national economic importance.

Large infrastructure contracts typically require bid bonds, performance guarantees and advance payment guarantees. However, traditional bank guarantees can require contractors to provide equivalent cash collateral, effectively tying up capital that would otherwise be used to execute projects.

“If you require a bid bond or a payment guarantee of R100-million, you need to have R100-million of cash in the bank,” Wicomb explained.

He argued that insurance-backed guarantees offer an alternative by allowing contractors to access additional guarantee capacity without placing the same demands on their banking facilities.

Credeq Africa head of construction guarantees Oren Zukerman explained that insurance guarantees provide the same instrument from the employer’s perspective as bank guarantees, while offering contractors a separate facility that can preserve their working capital.

He described working capital as the lifeblood of a construction business, enabling contractors to pay suppliers, labour and material costs, as well as meet overhead expenses during project execution.

Moving guarantees away from banking facilities can, therefore, provide contractors with additional financial capacity to undertake larger projects and participate in more tenders.

Zukerman also encouraged emerging contractors to prioritise sound business management alongside their technical capabilities. He identified three fundamental requirements for construction businesses, including securing work, executing work and accounting for work.

Contractors should not pursue project volumes at the expense of profitability, he cautioned, adding that joint ventures with established businesses could help emerging contractors build track records, access technical expertise and strengthen their guarantee capacity.

From a financing perspective, Rand Merchant Bank infrastructure finance transactor Amber Bolleurs highlighted the importance of allocating risk to the parties best equipped to manage it.

She explained that bankability depends on more than whether infrastructure is needed. Funders also have to assess whether projects are structured to withstand financial and operational uncertainties over their lifetimes.

Misplaced risk allocation, weak credit credentials and insufficiently robust business cases are among the factors that could undermine a project's ability to attract funding.

“The key behind non-recourse project finance is really not to try and eliminate all risk, but rather to allocate the risk to the party that is best able to bear it,” she said.

Bolleurs pointed to South Africa’s Renewable Energy Independent Power Producer Procurement Programme as an example of effective risk allocation. Early engagement with financial institutions, standardised agreements and the allocation of manageable risks to private-sector participants contributed to the programme's success.

She also encouraged project developers to engage with banks early in the development process to test proposed financing structures, risk allocations and guarantee requirements before projects reached procurement.

Consulting Engineers South Africa CEO Chris Campbell noted that stronger project preparation is equally important, warning against the tendency to rush infrastructure projects through procurement without adequately assessing their feasibility and long-term costs.

Projects should follow a structured process, beginning with a clear understanding of the problem they are intended to solve, followed by prefeasibility assessments, feasibility studies and detailed consideration of capital, operational and maintenance costs.

He cautioned against selecting solutions simply because they appeared attractive, without properly evaluating alternatives or considering whether the resulting infrastructure will address the original problem.

Campbell also challenged the emphasis on securing the cheapest professional services during procurement, arguing that this could increase risks and costs further down the line.

He noted that professional services accounted for about 2% of an infrastructure asset's total ownership costs over a 30-year period, while construction represents about 15%. The remaining 83% is associated with operations and maintenance.

Investing in quality engineering and adequate project preparation could therefore deliver substantial long-term savings.

Campbell further highlighted South Africa’s shortage of engineering skills, noting that the country has about one engineer for every 3 000 citizens, compared with one for every 300 citizens in India.

He called for greater professionalisation of the public sector, stronger retention of technical skills and improvements to basic education to strengthen the future pipeline of engineering professionals.

Rail infrastructure is another important focus of the discussion, with Transnet Rail Infrastructure Manager acting GM: rail engineering and network modernisation Ndleleni Mkhonta outlining the opportunities emerging from rail reform.

The separation of rail infrastructure management from train operations has created opportunities for private-sector operators to use the network, with about 11 private train operators expected to participate in the reforms.

However, Mkhonta stressed that opening the network to additional operators will require substantial investment in maintenance, rehabilitation and expansion to ensure that infrastructure is safe, reliable and capable of accommodating increased freight volumes.

He said projects need to be supported by proper asset-condition assessments, clear commercial cases, appropriate funding and contractors with the necessary technical and equipment capacity.

Without consistent maintenance, infrastructure could deteriorate to the point where costly renewals become unavoidable. He also warned that an inconsistent project pipeline makes it difficult for contractors to maintain machinery and invest in the capacity needed to deliver large-scale infrastructure programmes.

The discussion returned repeatedly to the question of risk-sharing, with Wicomb pointing out that contractors are increasingly being expected to absorb risks beyond their control.

These included delays caused by utilities, inadequate project information, unexpected ground conditions and access restrictions, all of which can affect construction schedules and project revenues.

He called for a more collaborative approach, rather than simply transferring contractual responsibilities down the supply chain.

“It is in nobody’s interest to cash in a guarantee,” Wicomb said, emphasising that developers, lenders, contractors and subcontractors all benefit when projects are successfully completed.

Zukerman echoed the need for greater collaboration, while pointing to international models in which governments provide support to private-sector guarantors to absorb catastrophic losses and expand guarantee capacity for smaller contractors.

He cited the US Small Business Administration and Italy’s export credit agency, SACE, as examples of mechanisms that combine public-sector support with private-sector capacity.

In their concluding remarks, the panellists identified procurement delays and inadequate coordination as further obstacles to infrastructure delivery.

Campbell cautioned that transferring risks without providing sufficient project information does not eliminate those risks, but simply increases costs and uncertainty. Mkhonta called for consistent maintenance programmes to sustain contractor capacity, while Bolleurs reiterated the value of early engagement between project sponsors and financial institutions.

The overarching message was that unlocking South Africa’s infrastructure pipeline requires more than capital commitments. It demands properly prepared projects, capable contractors, sustainable funding structures, reliable public-sector institutions and a more balanced approach to risk.

As the discussion demonstrated, infrastructure delivery is an interconnected process, and progress depends on all participants working together to move projects from planning and funding approval to successful implementation.