The cost of insuring public infrastructure projects in South Africa has risen steeply over the past few years. This is mainly due to poor workmanship by unqualified contractors, theft and vandalism.

The cost of insuring public infrastructure projects has increased by 100% between 2011 and 2014. Local Authorities Manager at Lion of Africa Insurance Pride Choruma says the cost of insurance is estimated to triple over the next two years unless government introduces stricter procurement processes and quality control measures for contractors.

The common risks associated with insuring infrastructure projects include, poor workmanship by unqualified contractors; poor maintenance; deteriorating infrastructure; vandalism and theft; liability claims from the public; and poor project planning which leads to greater risks like flooding.

“The issue of vandalism, theft and underperformance by contractors should be tackled head-on. Municipalities should work closer with their insurers to implement risk management strategies that will lead to cost savings on maintenance and reduced insurance rates,” Choruma told ITInews.

He says the biggest risk lies in appointing unqualified contractors that expose municipalities to financial and liability risks, due to delays in completing projects and poor workmanship. He states municipalities need to ensure that contractors are qualified and have a performance bond guarantee that verifies their credentials.

Contractors who default and abandon projects also put the municipality at risk. Although contractors are required to take out a Contractors All Risks (CAR) insurance policy when working on large construction and infrastructure projects, if they default, the municipality is often held responsible for any liabilities the contractors incurred. This results in many construction and infrastructure projects get delayed as additional funds are then required.