The R3.2 trillion set aside for infrastructure – which includes 43 major projects – will not only drive economic change, but also have a positive impact on the growth of South Africa’s short-term insurance sector.
This is according to Adam Samie, CEO of Lion of Africa Insurance, who says improved infrastructure will mitigate risks from a disaster management perspective. “The need for improved infrastructure was highlighted by the recent flooding across South Africa which caused severe damage and hampered service delivery.”
Samie says that new infrastructure projects, both regional and national in scale, will require more public / private partnerships between government and insurers, which will have a positive impact on the short-term insurance sector.
“Improved infrastructure will have a spin-off effect on the insurance sector as a whole, which will be required to increasingly develop and put in place innovative risk solutions. For example, infrastructure expansion pertaining to our ports and railways or large scale construction projects will now require renewed expertise in marine and engineering insurance respectively.”
He adds that improved infrastructure funding will also have a positive effect at a municipal level as the majority of claims are often a result of insufficient maintenance. “Traditionally, this is not necessarily due to negligence on the part of municipalities, but simply infrastructure failure as a result of lack of maintenance.
“We welcome the announcement of the formation of the Municipal Infrastructure Support Agency in late 2012, which will focus on rural municipalities that lack planning capacity. This will ensure the ongoing maintenance and improvement in infrastructure and will also help to avoid paying for costly large-scale replacements. The fact is that maintenance is far cheaper than replacement and rural municipalities in particular will now pay cheaper insurance premiums due to proactive risk management.”
Samie also welcomes the measures that will be put in place to combat financial mismanagement by government departments and municipalities, as well as ensure effective infrastructure spending. “This will ensure value for money and also aid the development of local suppliers and support industries such as insurance.”
He says that overall, the insurance sector can be satisfied with the 2012 Budget Speech. “The expansion in infrastructure investment is one of the central priorities of this year’s budget and will not only improve the quality of life of people living in poorly maintained environments, but also aid other key challenges such as job creation and expanding our economy,” concludes Samie.
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