Infrastructure is the backbone of Africa’s growth story. Roads, power plants, housing projects, and transport systems are the foundations that enable trade, mobility, and opportunity. But every major project comes with one critical question: Can the contractor deliver on time, on budget, and to the required standard?
This is where performance guarantees — often called performance bonds — come in. They are not just paperwork; they are the invisible safety nets holding together Africa’s infrastructure journey.
What is a Performance Guarantee?
A performance guarantee is a financial instrument issued by an insurer or bank to assure the project owner (the employer) that the contractor will fulfil their obligations. If the contractor defaults — delays, underperforms, or fails to deliver — the guarantee ensures the project owner is compensated.
In simple terms:
- For the contractor, it’s a mark of credibility.
- For the project owner, it’s peace of mind.
- For Africa’s infrastructure, it’s a tool for accountability and trust.
Why They Matter in African Infrastructure Projects
Africa’s infrastructure gap is estimated at $130–170 billion per year (AfDB). With such high stakes, risk management tools like performance guarantees are essential.
- Investor confidence: International lenders and investors are more willing to fund projects when guarantees are in place.
- Government protection: Public funds are safeguarded against contractor failure.
- Contractor opportunity: Contractors with guarantees gain access to larger projects and stronger partnerships.
Real Impact: A Case Study from the Field
Consider a major road construction project in East Africa. The contractor, a mid-sized local firm, secured a performance guarantee through an insurance partner.
Halfway through, unexpected challenges arose — delayed supplies, fluctuating material costs, and tight deadlines. While the risks could have derailed the project, the performance guarantee provided the employer with confidence to continue funding and supporting the contractor.
The result?
- The project was completed close to schedule.
- The employer was assured of compensation if targets weren’t met.
- The contractor gained a strong reputation, opening doors for future projects.
This is the unseen role of performance guarantees: keeping critical infrastructure projects moving forward even in uncertainty.
Challenges and Opportunities
While powerful, performance guarantees face hurdles:
- Awareness gap: Many local contractors still don’t fully understand how to access and use them.
- Cost barriers: Smaller firms sometimes struggle with the collateral required.
- Policy alignment: Different markets in Africa apply different rules, creating complexity for cross-border projects.
Yet, the opportunities outweigh the challenges. With innovative insurers like Underwriting Africa tailoring solutions, performance guarantees are becoming more accessible — giving African contractors the tools they need to compete on a global stage.
The Bigger Picture: Driving Africa’s Growth
Performance guarantees are not just about protecting money. They’re about ensuring that roads are built, hospitals open their doors, and energy projects light up communities. They connect financial systems with tangible development outcomes.
For Africa to achieve its growth goals, especially under the African Continental Free Trade Area (AfCFTA), performance guarantees will continue to play a central role — unlocking infrastructure, boosting trust, and accelerating progress.