Megan Holliday | Head | Claims and Procurement | Western National Insurance | mail me |
South Africa loses nearly half (47.3%) of all municipal water supplied through leaks, infrastructure failures, and other non-revenue losses. Meanwhile, copper theft costs the economy an estimated R45 billion a year. Road maintenance backlogs also exceed R197 billion.
These problems reflect the increasingly interconnected nature of South Africa’s infrastructure systems. Consequently, disruptions to electricity or water supplies, road deterioration and stormwater drainage failures can quickly escalate. They can cause significant property damage, business interruptions and supply chain losses. SA’s infrastructure crisis therefore poses a growing threat to business continuity.
Rising infrastructure-related insurance claims
Infrastructure-related claims have increased noticeably in recent years. I attribute this rise largely to deteriorating municipal infrastructure, ageing utility networks and ongoing criminal activity targeting public infrastructure.
The most common infrastructure-related claims stem from failures in essential public infrastructure rather than insured assets themselves. In many cases, businesses face financial consequences that extend beyond physical damage.
In many cases, the financial impact of being unable to operate, fulfil orders or maintain service delivery can exceed the cost of repairing the physical damage itself.
Regional infrastructure challenges
Although infrastructure challenges affect businesses across the country, it can be noted that certain regions experience higher concentrations of specific claim types.
In Gauteng, ageing municipal water infrastructure, frequent water supply interruptions, cable theft, deteriorating road networks and electrical infrastructure failures create significant challenges. These problems particularly affect manufacturing, warehousing and logistics businesses.
KwaZulu-Natal faces a different set of challenges. Following the severe flooding events of recent years, many businesses continue to face infrastructure vulnerabilities. These include damaged road networks, flood-prone drainage systems and transport disruptions, she explains.
Agricultural businesses often face additional pressures. Water supply interruptions can affect irrigation systems and livestock operations. Meanwhile, unstable electricity supplies can compromise cold storage facilities. Poor road infrastructure can also delay produce transportation, increasing the risk of spoilage and financial losses before goods reach the market.
Growing risks demand proactive planning
Looking ahead, infrastructure-related risks will likely remain a significant operational challenge for South African businesses. Continued deterioration of municipal infrastructure, more frequent and severe weather events, criminal activity targeting critical infrastructure, water scarcity and transport network constraints will place additional pressure on organisations in the years ahead.
Although businesses have little or no control over public infrastructure, they can significantly improve their resilience through proactive risk management.
Businesses must shift from reactive responses to long-term risk planning. This requires investment in infrastructure redundancy, stronger supplier networks, technology for asset monitoring and comprehensive insurance programmes. These programmes should include appropriate business interruption protection.
Strengthening business resilience
I recommend several practical measures to help businesses manage infrastructure-related risks. These include installing surge protection and backup power systems, maintaining backup water storage where necessary, upgrading physical security, diversifying suppliers and logistics routes, and conducting regular risk assessments.
Ultimately, SA’s infrastructure crisis reinforces the need for businesses to prepare for disruptions before they occur. Businesses best positioned to withstand future disruptions will invest in resilience measures. They will also work closely with their brokers to review their insurance cover regularly.
This approach helps ensure that both physical assets and business interruption exposures remain adequately protected.
