Much has been written about the beneficiaries of the massive infrastructure development programmes underway in South Africa at the moment. The media is full of reports about the Gautrain Rapid Rail Link transport system (Gautrain), 2010 Soccer World Cup stadium construction and more...
And if we believe the reports, the only winner emerging from all this activity is the construction industry. Whether small-scale suppliers or massive listed entities, these companies expect to benefit from the coming infrastructure boom. Companies like Murray & Roberts, Group 5 Holdings and Pretoria Portland Cement should thrive, to name a few.
But with our narrow focus on typical construction plays, we've forgotten about the other sectors which will benefit on the back of these projects. The billion rand budgets allocated to the Gautrain project and others will boost numerous industries not least the insurance sector.
Glenrand M.I.B. scores with the Bombela consortium
The financial transactions involved in projects of this nature are staggering - and the risks are huge. Wherever there is risk, there exists a need to insure the risk. In the case of the Gautrain project, that's where Glenrand M.I.B (Glenrand) comes in.
Late last week, Glenrand announced they had been appointed as the South African insurance brokers to the Bombela Concessionaire on Gautrain. The consortium includes Murray & Roberts, Bouygues Travaux Publics of France, Bombardier Transportation of Canada and the Strategic Partners Group of South Africa.
Glenrand sites its strong expertise in the construction insurance field coupled with BEE credentials as contributing to the company being awarded the business. Its experience on similar projects also stood it in good stead.
A complex insurance solution spanning two decades
Glenrand will provide insurance during the construction and operational phases of Gautrain. The insurance solution will have to provide cover for "construction of tunnels, viaducts in dolomitic areas and complex station designs" amongst others. The contract stretches into the operational phase and is likely to run for as long as 20 years.
Despite the complex nature of the required insurance solution, Brian Thompson, executive director of Glenrand says:
'Glenrand not only has considerable experience in dealing with insurances for principals and contractors, but has in recent times acted as brokers and advisers on large concession projects involving both development and operational insurances, including the interests and requirements of lenders. We are well placed to meet the further needs in respect of the upturn in the construction industry, including the insurance expertise needed for these contracts."
Natural expansion through GDP growth
South Africa continues to grow at close to 5% per annum. This growth should enable companies in all sectors to produce strong performances in coming years.
With the 2010 Soccer World Cup looming, the benefit to the local economy will go beyond only the construction and tourism sectors. There will be spin-offs for every sector of the economy, including financial services, information technology, communication, healthcare and retail, to name a few.
Andrew Chislett, a national executive director of risk services at Glenrand, quoted in the Sunday Times, 4 March 2007, says: 'These projects provide the platforms for increased economic activity - Gautrain being a good example. Socioeconomic changes are creating sizeable emerging markets for insurers."
Editor's thoughts:
Opportunities provided by South Africa's continued economic growth outweigh the stresses placed on the insurance sector by regulation. Short-term insurers and brokers should use the current regulatory challenges to re-structure their businesses, identify their strengths and focus on the many opportunities offered by a growing economy. Send your comments on this to gareth@fanews.co.za.
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