The opportunities for project and infrastructure procurement are significant, but local regulatory requirements mean companies entering the market need to do thorough due diligence and take expert advice as they look to navigate the challenges the region presents
Legal framework
Construction procurement in South Africa is strictly governed, with the country’s constitution requiring ‘organs of state’ to offer fair, transparent and competitive procurement policies
Section 217 of the constitution outlines the need for public procurement to be cost-effective and equitable, while also promoting preferential policies to provide advancement and opportunities for minorities and disadvantaged groups
This extends to the Construction Industry Development Board (CIDB) Act – issued in 2000 – which regulates public sector construction projects and provides best practice guidelines to the industry
Under the terms of the CIDB and the Preferential Procurement Policy Framework Act, local participation in procurement is preferred, with grading against CIDB requirements determining the value of contracts companies are allowed to tender for
This obviously has a significant impact on foreign contractors entering the market, where ensuring they meet CIDB guidelines is essential on publicly procured projects, and where failure to comply can see potential bids disqualified or penalised – such as in failing to keep CIDB registration valid or to register sub-contractors
However, following a number of high-profile disasters, proposed amendments to the CIDB have been tabled by way of a draft bill. They include registration requirements for contractors, architects, engineers and surveyors carrying out projects in the private sector too, as well as fines for non-compliance
Irrespective of the bill, foreign registered contractors bidding for a publicly funded project would be required to partner with a local CIDB-registered subcontractor to meet eligibility criteria. This sort of partnership enables compliance and improved local stakeholder engagement, opening the door to bidding for more lucrative contracts
Sub-contracting works
Public infrastructure projects in South Africa usually require a percentage of the work to be subcontracted to local companies, particularly those which are either Black-owned or compliant with the Broad-Based Black Economic Empowerment (BBBEE) Act
This brings with it subcontracting challenges for foreign main contractors, such as quality control, payment delays and scoping issues, which will require clear resolution mechanisms for disputes to be covered within contracts, along with performance guarantees and retention clauses in order to mitigate potential risks
Operating joint ventures is a reliable way for foreign companies entering the South African market to ensure they meet the local regulatory and BBBEE requirements, either as incorporated joint ventures – which operate as a separate legal entity with shared liability – or unincorporated ones, where the relationship exists as a contractual one
Joint ventures allow companies entering the sector to leverage local knowledge and ensure compliance with legal and regulatory requirements while still maintaining operational control. However, given that a foreign contractor will likely be the dominant partner, joint venture agreements require care in their drafting to ensure risk and reward are appropriately addressed, with particular attention being given to work scope, payment mechanics, oversight and supervision clauses, as well as termination and exit rights.
Supply and importing materials
South Africa’s supply chain is shaped by local content requirements, import regulations, and logistical challenges, many of which are designed to encourage local sourcing from suppliers which are BBBEE and CIDB compliant
Importing materials into the country can be a slow process, with strict standards compliance at the borders ensuring materials that do not comply with mandated specifications can be rejected, while SARS procedures at the ports can slow down construction material being cleared – particularly at the primary entry points of Cape Town and Durban
Furthermore, certain products attract import tariffs and potentially also export tariffs at the point of manufacture. This adds additional costs, while international hostilities have also disrupted supply chains, bringing with them the need to
As a result, while it may not have the same cost advantages as importing material, localised sourcing for projects can reduce delays and ensure projects remain compliant with procurement legislation – not least as South Africa’s membership of the Southern African Development Community, and the African Continental Free Trade Area, opens up the opportunity of reduced tariffs when bringing in materials from other member states
Staffing chains
Contractors in South Africa must also comply with the country’s Labour Relations Act and Basic Conditions of Employment Act, which protect workers’ rights and entitles them to fair wages and working hours, and enforce safety standards for working conditions
While the country boasts many skilled engineers and technicians, there are still skills shortages in specialist trades, which may require contractors entering the country to either invest in providing training reies to upskill staff on infrastructure projects
One common issue facing international contractors looking to import delivery teams from overseas is the requirement for – and processing times associated with – working visas. Immigration rules require that certain jobs are first advertised to locals, and even where a genuine skills shortage exists which would justify employing an overseas national, processing times can be slow
Understanding the skills base in the local market, the ability of a joint venture partner and supply chains to provide a competent domestic workforce, and compliance with visa requirements and processing times for importing critical skill positions is key to ensuring that mobilisation and start up efforts are not impacted and early project delays are avoided
Liability and insolvency
According to Statistics South Africa, 30 companies in the construction sector were liquidated in 2025. In the year to May 2026, there were 30 liquidations in the same sector. When coupled with statistics from the manufacturing sector – where 56 liquidations occurred in 2025 and 10 in the year to date – it is clear that South African construction companies and their supply chains remain vulnerable
Foreign companies entering the market must therefore ensure that enhanced due diligence is undertaken and the financial health of clients, partners and subcontractors are regularly monitored to avoid exposing themselves to unnecessary risk
Regimes encouraging accounting transparency, and accompanying audit rights, are common under joint venture agreements and construction contracts, whilst payment regimes backed with performance bonds and guarantees provide security against cashflow issues
South Africa does not yet have prompt payment legislation which would provide a measure of protection against bad payment practices, and so contractors must ensure that clear and operable fast track dispute resolution mechanisms are available under their respective construction contracts
The Joint Building Contract Committee (JBCC), NEC and FIDIC standard form contracts generally provide such mechanisms in their unamended form, and the South African courts have shown a propensity to enforce the decisions of adjudicators as binding pending final resolution in arbitration or court, albeit subject to relatively lengthy court application timelines
Future opportunities
South Africa presents significant opportunities for international contractors looking to expand into the market – but success in the region is dependent on understanding South Africa’s legislative and regulatory framework, establishing strategic local partnerships, and managing supply chain risks
Taking early advice on these issues will enable international contractors operating in the market to align with CIDB standards, capitalise on local expertise and navigate the regional complexities to deliver impactful infrastructure and energy projects whilst absorbing the least amount of risk
Co-written by Prince Rampya of Pinsent Masons
