South Africa is entering an ambitious new phase of infrastructure investment, with the government having committed R1 trillion to development over the next three years and President Cyril Ramaphosa calling on the private sector to quadruple that figure to R4 trillion. While this renewed infrastructure drive stands to revitalise the construction sector, it also brings heightened risk for contractors and developers who may be underestimating the scale and complexity of their project-specific exposures.

This is according to Mpho Rakometsi, Claims Specialist at Santam Specialist Solutions, who says the greatest threats to infrastructure delivery are not always physical hazards, but systemic weaknesses that tend to go unaddressed. “Poor project preparation, unclear responsibilities in joint ventures, late payments and supply chain disruptions frequently derail delivery, while overlooked regulatory and environmental approvals create further exposure,” he explains.

Engineering design flaws are another significant issue, often leading to costly rework and delays. “Errors and omissions in design are a common source of professional indemnity claims,” says Rakometsi. “In South Africa, these risks are compounded by criminal interference, including corruption, site extortion and construction mafias, which cause disruption, cost escalation and reputational damage.”

The hidden cost of underinsurance and non-disclosure

Even when projects are well managed, underinsurance/non-disclosures remain a major pitfall that could dramatically reduce claim payouts. Rakometsi recalls a case where a contractor did not disclose the actual contract value at award stage, which in turn meant that the Contractors All Risk (CAR) Policy did not cover the damage associated with that specific contract. “When a major storm caused structural damage, the Insured did not disclose the actual value of the contract, the value which exceeded the limit in their annual contract. This non-disclosure found the contractor/Insured exposed – and their repudiated, leaving them to absorb all costs of damage associated to the project,” he explains.

“This example highlights how failing to insure at full value or with adequate limits can undermine a project’s financial viability,” he says.

Rakometsi emphasises that CAR and PI policies remain the cornerstone of risk transfer in the construction sector. “A CAR policy protects against physical damage to the works during construction, while a PI policy responds to errors in design or professional services,” he says. “But CAR and PI alone are not enough. A Broadform Liability Policy is equally critical, as it addresses third-party claims that fall outside the scope of CAR.”

Closing the gap with single project liability

For large-scale developments and joint ventures, Single Project Liability (SPL) policies have emerged as a key solution to coverage gaps left by annual Liability, PI and CAR policies. “SPL ring-fences a dedicated limit for one project, avoiding dilution across multiple sites,” explains Rakometsi. “It is especially useful in joint ventures, where SPL unifies cover for all parties under one policy, removing disputes over whose annual cover applies. Importantly, it also extends to completed operations, ensuring liability protection remains in place for defects or claims that arise after handover.”

He points to a case where defects in completed works were discovered several years after handover. “Because a Single Project Liability policy had been placed, there was a dedicated aggregate limit tied to that specific project, ensuring the claim was fully covered. Had the contractors relied only on their annual Liability, PI and CAR policies, the available limits would have been eroded by unrelated claims, leaving the project underfunded.”

Scale matched by capacity

To meet the demands of this expanding market, Santam Specialist Solutions offers underwriting capacity of up to R350,000,000.00, subject to underwriting criteria and market conditions. “This means we can commit to very large limits on a single risk, giving contractors and project owners confidence in the insurer’s ability to respond to major claims,” Rakometsi explains. “In practice, this capacity is typically available on a per-occurrence basis for public liability and in the annual aggregate for professional indemnity, subject to policy terms.”

Such high levels of cover, he says, are best suited to mega-projects such as large transport corridors, power generation facilities, dams or major public-private partnerships, where both the complexity and potential liabilities are significant.

Preparing for the wave ahead

As South Africa’s infrastructure boom gathers momentum, Rakometsi urges contractors and project managers to balance ambition with prudence. “They should prioritise three things: sound risk management, robust insurance, and strong governance,” he says. “Careful planning around budgets, timelines and supply chains will be essential to limit delays and overruns. Equally, ensuring adequate cover, from CAR and PI to Liability and SPL, will safeguard projects against costly setbacks.”

In short, “preparation and protection will be as important as technical execution,” he concludes.

This media release provides general information only and does not constitute financial advice. Clients should consult a licensed adviser for guidance on their specific needs.