Regulatory reform in South Africa creates new opportunities for international contractors

Following the formation of the Government of National Unity last year and a commitment of R1.03 trillion (approx. US$54.7 billion) for public infrastructure projects by state-owned companies over the next three years, the country has presented itself as an investment landscape full of potential for international contractors and firms.

The country’s push to reindustrialise has been further bolstered by the creation of the National Transmission Company of South Africa (NTCSA), the establishment of the South African National Water Resources Infrastructure Agency and the designation of the Richards Bay Industrial Development Zone.

International expertise and foreign investment will be required to deliver the ambitious plans given the scale of the potential opportunity and will be particularly attractive to those already possessing market knowledge, including contractors and developers from China and Europe. 

Energy leading the charge

Energy remains a major growth sector, with the unbundling of Eskom, SA’s electricity utility, and the creation of NTCSA leading to a clear roadmap for development, aimed at significantly expanding and upgrading the country’s transmission infrastructure.

NTCSA has announced an independent transmission project for the construction of an initial 1,164km of 400 kilovolts (kV) transmission lines and 2 630 mega volt-amp (MVA) transformers in the Northern Cape, North-West and Gauteng in March 2025. A request to pre-qualify interested delivery partners is scheduled to be released in July 2025 and NTSCA aims to formalise requests for proposals at the end of November 2025. 

The South African government has promised to have a clear and comprehensive regulatory framework, alongside environmental approvals, permits, rights of way and servitudes, in place by the time the tender is released. The infrastructure will be procured by either using the build-operate-transfer (BOT) or the build-operate-own-transfer (BOOT) model. A new credit guarantee vehicle, covering payment and termination risks for the 14,500km of new transmission lines and 210 transformers needed in the next ten years, will be finalised in early 2026.

The government has also released the South African Renewable Energy Master Plan (SAREM), providing a comprehensive framework for the further development of the renewable energy industry with an initial focus on developing solar and wind energy and lithium and vanadium-based battery technologies

The Renewable Energy Independent Power Producers Programme (REIPPP) is set to deliver a total of 1,760 MW of new solar photovoltaic (PV) capacity across four provinces, and up to 5,000 MW of further capacity may be reallocated because of an absence of sufficient transmission infrastructure in wind generating areas.  

This, alongside the battery energy storage solutions (BESS) procurement windows which have procured a total of 1744MW capacity in just over two years, have created further opportunities.

Manufacturers and suppliers from Asia, including China, are a key source of materials and goods, including PV panels, wind turbines and batteries, and have to a large extent enabled the rapid roll out of these projects.

The future pipeline for the estimated 56GW of new generation capacity, however, is less certain following the delayed finalisation and implementation of the Integrated Resource Plan (IRP) 2025, which is set to outline the country’s long-term energy mix. The GAS IPP procurement Programme, launched in December 2023, has also stalled due to outstanding government approvals, with the bid submission date extended to October 31

Despite these challenges, the National Energy Regulator of South Africa (NERSA) published its gas, renewable energy and hydrogen partnership in South Africa report on 22 April, providing prospective investors with a predictable, stable, and business friendly environment to reduce risk and boost investments.

Several recent events have highlighted the importance of balancing private, individual and national interests while developing energy infrastructure, including a review of environmental authorisation and an investigation into consultation for power lines above private land in the Western Cape and challenges to renewable developments on land which already has had mineral or petroleum rights awarded.

Water infrastructure

South Africa is entering a transformative phase in its water infrastructure landscape, marked by the establishment of the National Water Resources Infrastructure Agency (NWRIA).

This newly formed state-owned entity, created under the 2024 Act, is tasked with consolidating and managing national water assets more efficiently. Its mandate includes developing, operating, and financing large-scale infrastructure projects, such as dam construction, water transfer schemes, pipeline development and water treatment facilities, with a strong emphasis on attracting private capital through public-private partnerships (PPPs). This shift presents a strategic opening for global contractors with experience in large-scale water systems and advanced engineering solutions.

The model was inspired by South Africa’s successful Independent Power Producer Programme and signals a clear intent to replicate that success in the water sector, creating a stable and transparent framework for private sector participation.

South Africa’s regulatory environment encourages international firms to engage through joint ventures with local partners. International contractors will need to meet local content and skills transfer requirements, which includes employing local labour, sourcing materials domestically, and aligning with Black economic empowerment (BEE) policies. While this adds complexity, it also offers a pathway to long-term market integration and preferential treatment in public tenders, while partnering with established local firms can provide valuable insights into regulatory navigation and community engagement.

A robust pipeline of mega-projects is already underway, including the R53.3 billion Lesotho Highlands Water Project Phase 2, the R24 billion uMkhomazi Water Project, and the R10 billion Vaal Gamagara Phase Two Project. With strong government backing, a clear regulatory roadmap and a growing demand for technical expertise, South Africa offers a compelling environment for international contractors looking to expand their footprint into Africa’s water infrastructure development. 

Rail infrastructure

South Africa’s rail sector is undergoing a pivotal transformation, driven by the need to revitalise a historically monopolised and underperforming logistics system.

Over 24,000 kilometres of rail infrastructure, primarily managed by Transnet and PRASA, has suffered from underinvestment, operational inefficiencies and security challenges. In response, the government has launched a comprehensive reform agenda to restore the rail network’s competitiveness and reduce pressure on road networks.

Key policy instruments such as the National Rail Policy White Paper and the Freight Logistics Roadmap outline a strategic vision for modernising both freight and passenger rail and open the door for private sector participation in areas such as rolling stock provision, infrastructure upgrades, and operational partnerships.

Legislative reforms are reinforcing this momentum. The Economic Regulation of Transport Act, effective from April 2025, establishes the Transport Economic Regulator to oversee equitable access to rail infrastructure and ensure fair pricing and competition. The Railway Safety Act, meanwhile, refines safety governance and introduces more transparent regulatory procedures and the Transnet Final Network Statement sets out the procedural framework for private sector access to the rail network. Although Transnet retains ownership of the infrastructure, opportunities are emerging for private entities to operate and maintain specific corridors.

Road infrastructure

South Africa’s road infrastructure sector is similarly experiencing a significant surge in investment, with the South African National Roads Agency (SANRAL) currently evaluating 96 tenders worth R35 billion. Since April 2024, SANRAL has already awarded 86 contracts valued at R15 billion, as part of a broader plan to inject R50 billion into the economy during the current fiscal year. 

This wave of investment is aimed at upgrading and expanding critical road corridors across the country, creating substantial opportunities for experienced road building contractors.

Major projects are underway across the country and reflect a strong commitment to modernising South Africa’s transport infrastructure and improving logistics efficiency, however, contractors should be aware of emerging legal and procedural risks.

There has been a noticeable increase in legality reviews initiated by state entities, including SANRAL, which can delay or suspend project delivery, even after contracts have been awarded. This trend underscores the importance of robust compliance and due diligence in procurement processes.

Recent court rulings have also suggested that contractors may face financial consequences if found to have benefited from flawed procurement processes, even without direct knowledge of irregularities. Ignorance of such flaws may not be a sufficient defence, particularly where a contractor is deemed to have been ‘wilfully blind’ or unreasonable in their approach. For international contractors, this highlights the need for strong local partnerships, transparent governance and proactive legal oversight when engaging in South Africa’s infrastructure market.

Future developments

South Africa is entering a new phase of infrastructure renewal, with transformative reforms across the energy and infrastructure sectors creating a dynamic landscape for investment and delivery. From streamlined procurement processes to ambitious mega-projects, the country is actively inviting global expertise to help modernise its logistics and public services.

For international contractors, the opportunities are vast, but success will hinge on building strong, trusting partnerships with experienced local players, as navigating evolving regulations and aligning with national development goals will be key to unlocking long-term, sustainable growth in this high-potential market. 

A key potential development is the anticipated overhaul of the public procurement system. The National Treasury is considering the creation of a centralised structure to coordinate project planning, PPPs, funding, and credit guarantees. This initiative is supported by amendments to the Treasury Regulations under the Public Finance Management Act, which came into effect on 1 June which aim to simplify procurement, encourage private investment, and reduce fragmentation across government departments.

The introduction of a single regulatory framework for public procurement is expected to enhance transparency and reduce corruption. A new tribunal will be established to handle procurement disputes, although its role may overlap with existing judicial review mechanisms. Proposed amendments to the Construction Industry Development Board Act will require all contractors and professionals, across both public and private sectors, to be registered. Non-compliance could result in significant penalties, underscoring the need for all market participants to ensure their credentials and processes are up to date.

Sustainability is also becoming a central pillar of infrastructure regulation. The Climate Change Act of 2024 codifies carbon reduction targets and paves the way for sector-specific regulations, particularly in energy, construction and infrastructure. These changes are likely to drive the adoption of more collaborative and incentive-based contracting models.

For contractors, this signals a shift toward long-term, performance-driven partnerships and a need to embed sustainability into every stage of project delivery.