GUARANTEES


A Guarantee is a formalized document which assures the Beneficiary (holder of the guarantee) that certain conditions will be fulfilled. The Guarantee itself acts as security to a Beneficiary for the obligations of a Contractor or Debtor in the event of a default.

Guarantees were traditionally only done by the banks. The advantages of an Insurance guarantee through Apio Risk Solutions include:

  • Typically less collateral requirements (compared to the bank);
  • Faster turnaround times;
  • Dedicated experts and advice in this field of Insurance;

Our dedicated team will assist you in outlining the full process of setting up a Guarantee Facility, which includes:

      • Underwriting criteria;
      • Securities;
      • Premiums;
      • Collateral requirements;
      • Guarantee wordings;
      • Access to the top rated Guarantee Insurance companies in South Africa and Africa.

Who Requires Guarantees?

The Construction Industry:

Construction Companies require a variety of Guarantees when being awarded a construction project for major employers (large corporate and government entities). If done by your bank, these guarantees can severely impact a company’s ability to raise additional funding. Insurance Guarantees have become a fundamental requirement for most construction companies who need many types of guarantees, including (but not limited to):

  • Bid Bonds
  • Advanced payment Guarantees
  • Performance Guarantees
  • Retention Bonds

The Logistics Sector:

Companies operating in this sector require a combination of Guarantees and possible Credit insurance solutions to satisfy their specific requirements. Some of the guarantees required in this sector include:

  • Customs Guarantees (Deferments, Bonded Warehouse, Road Bonds, Temporary Imports);
  • Transnet (NPA, SAPO, TFR);
  • Airlines (SAA, Emirates).

Traditionally, these guarantees were always issued and supplied by the banks. However, Insurance Guarantees have become widely accepted and have become a valuable alternative in order for a company to free up cash from their existing banking facilities.

Bulk Users and Suppliers of Fuel:

Fuel is the lifeblood of many companies in South Africa and as such the requirement for fuel is an absolute priority. Choosing the right supplier is the first step, but being able to purchase the fuel has its own issues. Most Major fuel suppliers in the country insist on your funds up front before they are willing to supply you with fuel. In order to obtain terms from many Major suppliers, a Payment or Fuel Guarantee is a requirement.

The Payment or Fuel Guarantee gives the supplier financial comfort that the fuel supplied will be paid for and allows them to offer reasonable terms to the purchaser. Traditionally done by the banks, the use of Insurance Guarantees frees up much needed cash flow and gives the purchaser time to pay for the fuel supplied.

Mining Companies:

One of the major challenges that mining companies face with the Department of Mining Resources (DMR) is ensuring that their Environmental Rehabilitation requirements are met.

Satisfying the above requirements means finding a solution to meet the Mining Rehabilitation Guarantee requirements in a way that does not substantially impact your companies cashflow. There are a variety of options available depending on your company’s particular circumstances. Other Beneficiaries who may require guarantees include Transnet, Eskom and the Fuel Majors.

Renewable Energy:

While government has been quiet for the last two years regarding the awarding of major projects, recently there has been renewed optimism in this sector. As a requirement to begin with, Bid Bonds are required in order to properly tender for major projects. Once awarded, the successful bidder may require a variety of guarantees including:

  • Advanced Payment Guarantees;
  • Performance Guarantees;
  • Operations and Maintenance Guarantees (O and M).

The magnitude of these guarantees can be substantial and in order to properly meet the requirements, an Insurance Guarantee provider is a must have. There are several alternatives in finding the right provider and having the right partner through this process is crucial.

With a dedicated Guarantees team, Apio Risk Solutions is perfectly placed to offer you the best and most comprehensive advice on all aspects of Guarantees.  Please e-mail Francis Kingston at francisk@apio.co.za for any information.