Shirleen Ritchie | Partner | Webber Wentzel | mail me |
Kirsten Wolmarans | Partner | Webber Wentzel | mail me |
Among the greatest threats facing infrastructure development today is climate change.
To mitigate the associated risks for all sector stakeholders, we urgently need to make better use of modern technologies. We also need to establish contractual frameworks that are appropriately structured from the outset.
The importance of early warning systems
KwaZulu-Natal’s recent history provides a clear warning. Heavy rains and flooding in 2024 caused over 40 deaths and significant infrastructure damage. This event followed extreme flooding in the province in 2022, which resulted in over 400 deaths. Reports have described it as one of the worst floods ever recorded in the province’s history.
On both occasions, tens of thousands of people were displaced from their homes. The infrastructure damage caused by the 2022 floods alone was estimated at over ZAR 15 billion. These events demonstrate the urgent need for climate-resilient infrastructure that can withstand extreme weather conditions and protect vulnerable communities.
As the world adjusts to climate change, two notable trends are emerging in the infrastructure and energy sectors. The first is the increased use of early warning systems.
Rethinking contracts in climate-resilient infrastructure projects
The second is the inclusion of more robust contractual provisions to address extreme climate events.
Each contracting party holds a positive duty to take steps to mitigate risks and resulting damages. This duty is particularly important in the suite of agreements that support large infrastructure and energy projects.
In this context, early warning systems play a critical role. These systems are especially vital in mitigating the devastating effects of climate change, such as flooding. These trends reflect broader developments in the regulatory environment.
Banks and insurers are adjusting to new climate-related risks and disclosure obligations. These changes aim to ensure fund stability. At the same time, workplaces are adapting to promote safety and sustainability.
Early warning systems are a bulwark against climate change risk
A case study from Somalia illustrates the value of early warning systems. Between 2023 and 2024, the Somali government partnered with the United Nations Office for Disaster Risk Reduction (UNDRR) and other stakeholders. Together, they established a multi-hazard early warning system.
In 2023, flooding in Somalia reportedly affected 2.4 million people. It displaced over 1.2 million individuals and caused more than USD 193 million (approximately ZAR 3.5 billion) in damages. In 2024, although flooding persisted, early warning systems helped reduce the damage and displacement.
According to the UNDRR, the 2024 floods affected only 160,000 people and displaced 37,000. Financial losses were also significantly curtailed. This example illustrates how early warning systems can support the development of climate-resilient infrastructure by enabling timely responses and reducing long-term harm to people and assets.
Closer to home, a 2025 study focused on the Hennops River catchment area in Centurion, near Pretoria. Researchers used flood hazard monitoring, modelling systems, machine learning and geospatial tools. These technologies helped enhance climate change risk management in the area.
The impact of climate change on infrastructure and energy projects
The study found a concerning trend. Flood frequency has increased every two years. This rise is largely due to the impact of climate change on rainfall patterns, intensity, and frequency. The study concluded that low-lying areas in the catchment zone, with elevations from less than 1305m to 1430m, face higher flood risks due to their proximity to the Hennops River.
Insurers may soon require institutional policyholders to implement early warning systems as a condition for coverage. This requirement is likely to extend to the broader infrastructure and energy sectors. Project stakeholders should therefore consider it during contract negotiations and risk assessments.
Funders and investors may also mandate the use of early warning systems. Their goal is to protect asset value, reduce delays and minimise reliance on indemnity claims. These claims often lead to costly and protracted litigation.
Viewed from a dispute resolution perspective, these developments highlight the importance of including risk mitigation and monitoring obligations in project contracts. Doing so strengthens the foundation for climate-resilient infrastructure that meets both legal and operational standards.
Infrastructure contracts are increasingly focused on risk mitigation
As stakeholders adapt to climate-related risks, the contracting phase has gained new importance. It now serves as a key moment for effective risk management. Clients are increasingly focused on two areas. The first is the precise allocation of liability. The second is the clear definition of conditions for triggering force majeure clauses and related obligations.
The emphasis on force majeure provisions grew during the COVID-19 pandemic. During that period, many parties invoked force majeure to defer contractual performance.
Infrastructure and energy projects typically involve high costs, lengthy approvals, and extended construction periods. These features make them especially vulnerable to disruptions. This is true even before factoring in the growing impact of climate change.
These challenges raise important questions for parties at the start of a project:
- What force majeure, indemnity and damages provisions are appropriate?
- Should environmental risks be proactively monitored with technology to reduce loss of life or project damage?
- If early warning systems detect a flooding risk, does a duty arise to minimise ensuing damage?
- What happens if that technology fails?
In conclusion
As climate risk becomes more embedded in project planning, lead times may increase. Parties are devoting more time to evaluating the risks involved in contract formation. They are also considering the potential consequences of climate-related events.
These risks will likely become more common. Their proactive consideration at the contracting stage is becoming a critical priority for all stakeholders striving to deliver climate-resilient infrastructure and energy projects.
