By George Parrott, commercial partner at King Price Insurance
Rotational loadshedding and unplanned power outages continue to exact a severe toll on South Africa’s economy. In 2023, the country lost around R2.8 trillion in output – a staggering impact, borne primarily by energy-intensive sectors. Even though conditions improved in 2024, with economic losses dropping to approximately R481 billion, thanks to a period of stable power supply, construction remains acutely vulnerable when outages happen.
For the construction sector, power interruptions cause two immediate harms:
- Equipment damage: Frequent on/off cycling wears down heavy machinery, electronic systems, and sensitive tech. Voltage spikes during switchovers can damage motors and control systems, while improper generator connections lead to liability risk and costly failures.
- Project delays and financial penalties: When power outages force work stoppages, project timelines slide. Costs escalate, not only from prolonged labour and site rental, and a reliance on diesel to power generators, but also from penalties if completion dates are missed.
Mitigation strategies
Plan ahead: As far as possible, stay on top of the loadshedding schedule and keep track of historic unplanned outages in the areas where you’ll be working. This will help you to build a buffer into project timelines, and to include contractual margins to account for likely downtime.
Install appropriate backup power: Where feasible, deploy industrial-grade generators or hybrid solar-plus-generator systems. Ensure professional installation and safe switching protocols to avoid damaging equipment.
Build protection and maintenance in: Use uninterrupted power supplies (UPS) and condition-monitoring systems (like IoT sensors). These allow controlled shutdowns, limit electronic damage, and help detect early faults. Maintain strict inspection schedules, especially for machinery used in frequent power switching areas, to ensure that they remain effective and insurable. Your insurer may ask for copies of your sensor reports and maintenance logs if you claim.
Train your team: Ensure that your staff know how to safely power down and restart equipment during outages. They should also keep an eye out for wear and tear issues between maintenance cycles. This lowers the risk of fire and equipment failure and also helps prevent operational injuries.
Insurance
When power disruptions cause damage or delays, insurance can help get your project back on track – provided you’ve chosen the right cover and done everything your insurer has asked you to do:
Plant all risk, and cover for transit: This is key cover for heavy machinery and portable generators. It’s advisable to check whether your cover includes loss and damage caused by power surges.
Machinery breakdown, and electronic equipment: These policies protect sensitive systems such as control panels, HVAC systems and compressors, as well as the tech in site offices, against failures.
Liability, including defective workmanship extension: If a misconnection or faulty installation of backup power causes damage to third-party property, liability cover, or specifically, a defective workmanship extension, may apply. It’s vital to clarify what scenarios are excluded (e.g. damage to property and assets under your custody and control) as well as those that are covered.
Think ahead, don’t react
Construction projects aren’t just tangible assets. They embody timelines, human effort, and reputation. In our challenging energy landscape, contingency planning and the right insurance approach offer a meaningful buffer against delay and damage, which frequently has the consequence of financial losses
However, insurance is only as good as the planning that precedes it. Thoughtful mitigation, like ensuring backup systems are properly installed and maintained, actively safeguards equipment and reduces your risk. Condition monitoring, preventive maintenance, and well-trained teams lower your risk profile and can lead to lower premiums.
Speak with your broker about your specific risks tied to power disruption. Together, you can tailor a solution that balances appropriate cover with project resilience, compliance, and continuity.
