Joint Ventures in Construction and Infrastructure Projects: Balancing Opportunity and Risk

11 September 2025 | Business Law

Joint ventures have become a defining feature of the construction and mining landscape in South Africa. They are used by contractors to pool skills, resources and capital in order to secure and deliver large projects that may be out of reach for a single contractor. At their core, joint ventures are a means of cooperation. They allow parties to align their interests for a common objective, while retaining their separate corporate identities. For this reason, they are particularly attractive in a sector where projects are capital-intensive, technically complex, and often subject to demanding timeframes and regulatory requirements.

Why contractors make use of joint ventures

The appeal of the joint venture lies in its flexibility. Two companies can come together for a single project without having to restructure their businesses or create a new corporate vehicle. This contractual form allows them to present a united front when tendering, to combine their technical capacity and to spread their risk. For foreign contractors, joint ventures are often the preferred vehicle for complying with local participation requirements or Black Economic Empowerment obligations while still accessing significant projects.

Joint ventures also offer softer but equally important benefits. They can be a way of forging longer-term commercial relationships, exposing parties to new markets and client networks. They enable skills transfer between partners, especially where one partner brings specialist engineering expertise and the other offers local knowledge or logistical capacity. They also enhance credibility in the eyes of funders and employers, as the combined financial and technical strength of the partners can be decisive in securing a tender.

The risks that lie beneath the surface

Yet, the same qualities that make joint ventures attractive also give rise to risk. Because an unincorporated joint venture does not have a separate legal personality, its rights and obligations attach directly to the participants. This creates several common pressure points.

The first is governance. A joint venture agreement may create a management committee, but it cannot insulate the venture from instability within a partner. If one partner experiences shareholder disputes, board changes, or loss of capacity, the joint venture itself can grind to a halt. Unlike a company, which has its own statutory governance regime, the joint venture only has the governance mechanisms its partners have agreed upon.

The second is financial management. Most joint venture agreements provide for dedicated bank accounts with dual signatories. This is meant to ensure transparency and prevent unilateral withdrawals. But where authority within one partner becomes contested, banks often respond to competing mandates by restricting or freezing accounts. The practical effect is immediate paralysis: salaries go unpaid, suppliers are left hanging, and the entire project can stall even though the partners may be in agreement on operational matters.

There are other risks, too. Liability is often joint and several, meaning that a third party can pursue either partner for the full debt of the venture. Without clear allocation provisions, disputes can arise over who shoulders the cost of delays, overruns or defects. Exit provisions are frequently neglected, leaving parties without a mechanism to unwind the relationship if the project falters or if one partner becomes unable or unwilling to perform. And, critically, disputes between partners can spill into the project itself, leaving employers and clients caught in the crossfire.

When risk becomes reality: the Imbani case

The recent case of Imbani Minerals (Pty) Ltd v Standard Bank of South Africa Ltd and Others (Johannesburg High Court, 22 August 2025) shows how quickly things can unravel in a joint venture when proper safeguards are not in place.

Imbani and Kilken Platinum had a joint venture to process mining tailings. Their agreement was straightforward: the JV would have dedicated bank accounts, and any payment had to be authorised by two signatories, one nominated by each partner. For more than ten years, this arrangement worked without difficulty.

The problem started within Kilken itself. Its shareholders fell into a bitter dispute and split into rival camps. Each camp claimed the right to appoint Kilken’s representative to sign on the JV account. Standard Bank was caught in the middle. Faced with conflicting instructions and the risk of being held liable if it allowed the wrong person to sign, the bank froze the JV account. From that moment, the JV could not pay salaries or suppliers. In practice, the project was paralysed even though the work on the ground had not stopped.

The dispute was complicated by earlier High Court orders made in separate litigation between Kilken’s shareholders. Those orders required both factions to nominate signatories to Kilken’s accounts so that neither side could act alone. The question before the Court was whether that safeguard also applied to the JV account. The Court held that it did. Because the JV was not a separate legal entity, its bank account was, in law, simply an account operated by its members. This meant that the same safeguard applied: the JV account could not be used without three signatures – one from Imbani and one from each Kilken faction.

The lesson from Imbani is simple but critical. A joint venture without its own legal personality has no protection against instability inside one of its members. If a partner becomes deadlocked or divided, the JV itself can be dragged down with it. The bank will always err on the side of caution. Unless the JV agreement makes provision for continuity, the account will be frozen, wages and suppliers will go unpaid, and the project will stall.

This risk could have been avoided if the JV agreement had anticipated what should happen if one partner became deadlocked. The parties might have agreed that if a venturer could not agree internally, an alternative representative would automatically step in. They could also have provided for an independent person to be a temporary co-signatory to allow essential payments, such as wages and certified subcontractor accounts, to continue while the dispute was resolved. Even a simple clause requiring each venturer to keep its internal resolutions up to date and to replace its signatory promptly would have made a difference.

Conclusion

Joint ventures remain an indispensable vehicle for delivering large and complex projects. They allow contractors to share risk, pool expertise and broaden their access to opportunities. But they must be approached with care. A joint venture agreement should not only allocate scope and profit shares, but also provide for governance stability, financial continuity, dispute resolution and exit mechanisms. Without these protections, as the Imbani matter shows, even a successful venture can be paralysed by disputes within one partner.

Contractors should therefore view joint ventures as both an opportunity and a risk. When properly structured, they unlock projects that could not be delivered alone. When carelessly managed, they can expose participants to uncertainty, liability and disruption. The key lies in recognising both sides of the equation, and in drafting agreements that anticipate difficulties before they arise.

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