Contractors must be aware of specific risks to construction projects in Africa

The investment climate is gradually improving but a set of challenges unique to South Africa – notably the risk of the ‘construction mafia’, persistent community unrest, and escalating cost pressures driven by global and domestic factors – risk derailing progress.

Many of these risks derive from unlawful outside interference and, while provision can be made to cater for those risks, they nevertheless have the potential to cause significant delay, cost overruns, and even the abandonment of the works altogether. However, there are steps contractors can take to mitigate these risks and increase the chance of successful project delivery.

The construction mafia

Operating under the guise of ‘business forums’, the construction mafia has evolved since 2015 into a highly organised crime syndicate. These groups exploit legitimate empowerment policies – particularly the 30% local procurement rules – to justify illegal demands for participation in projects. Their tactics include site invasions, intimidation and extortion, sabotage of equipment, and threats to workers and contractors.

Projects in the energy and mining sectors are especially vulnerable, with forced hiring of unqualified labour and demands for protection fees becoming commonplace. The result is often delays, inflated costs, and investor withdrawal.

Responses from the government in a bid to tackle this issue have included crackdowns and specialised enforcement units, extortion hotlines and witness protection, and court interdicts against perpetrators. However, enforcement remains uneven, and the threat continues to undermine confidence in South Africa’s infrastructure pipeline.

Community unrest and site disruption

Beyond organised crime, local community unrest poses another layer of risk. Disruption can stem from seemingly minor changes – such as replacing a security contractor – which can trigger protests and intimidation aimed at reversing decisions. In private sector projects, communities often demand employment entitlements, blurring the lines between public and private obligations.

However, there are some mitigation strategies that may help avoid disruption and delays. For instance, appointing credible community liaison officers (CLOs) can allow management of expectations and foster local buy-in. Early engagement and transparent communication can also be beneficial as well as the use of legal remedies, such as interdicts against violent or disruptive actors, if required.

Projects backed by foreign investment (China, for example, is a predominant participant) automatically face heightened scrutiny from civil society. Transparency, media engagement and showcasing local benefits – for instance, job creation and upskilling, investment in local communities by contributing to education or heath – will go a long way to fostering and maintaining a healthy relationship with the local community which in turn will support successful delivery of the project.

Contractual relief and legal considerations

Contractors impacted by site disruption may seek relief under ‘force majeure’ provisions, allowing for extension of time, revised completion dates, or even termination in cases of prolonged stoppage.

However, claims may be challenged on grounds of foreseeability, especially if the contractor failed to conduct adequate risk assessments. Contractors should also address exclusions, such as disruptions caused by the contractor’s own workforce.

Cost pressures and supply chain volatility

South African projects are not immune to global economic headwinds. Rising costs in recent times have been driven by conflicts in Ukraine and Gaza, high interest rates and slow post-Covid recovery, and as well as tariff uncertainty and currency volatility. Wage inflation and unionised sectors alongside utility tariff hikes also continue to have an impact.

Locally, load shedding and water shortages add further strain, requiring alternative supply – for instance, diesel generators and water tanks – that inflate project costs. Recovery of these costs depends on contract structure – fixed price contracts transfer risk fully to the contractor.

There are, however, various contractual tools that can be used to help. These include price adjustment clauses and specific risk-sharing regimes as well as contract ‘change in law’ provisions. The latter may perhaps be relevant in the event of a surcharge on overseas PV panels. However, apart from the negotiated price adjustment clause, a change in law provision presumably would not cover this type of surcharge, as the change in law is based on the law of the country where the project is being executed.

Reform and resilience

The South African government is reviewing procurement regulations and considering the criminalisation of construction mafia activities. Additionally, multi-disciplinary task teams are being deployed to tackle site-level risks.

Meanwhile, the private sector is adapting by carrying out additional checks and risk assessments, such as vetting subcontractors and local partners as well as thorough risk audits. Centralising procurement and enhancing site security as additional measures allow for preparation and potential avoidance of risks, as well as budgeting for any legal remedies and private protection that may be needed during the process, ensuring that companies maintain legal readiness.

Further, sustainable development models – such as benefit-sharing with communities – are gaining traction as a way to align project goals with local interests.

South Africa’s infrastructure and energy sectors hold immense potential but realising that promise requires navigating a landscape fraught with legal, social, and economic risks. Contracts can offer protection, but success ultimately hinges on proactive engagement, robust legal frameworks, and on-the-ground resilience.

As the market warms to these realities, stakeholders must remain vigilant, adaptive, and committed to inclusive development.