ica’s Development Trajectory and Surety Market Outlook
By Stefan Ritzen | July 2025
Africa is poised for significant progress over the coming decade, driven by its youthful and dynamic workforce, expanding urban consumer markets, increasing economic integration, vast clean energy potential, and abundant natural resource wealth. This inherent growth potential directly correlates with the promising outlook for the global surety market.
The global surety market is projected to expand from $19.62 billion in 2024 to $21 billion in 2025, representing a robust compound annual growth (CAGR) of 7%. This growth trajectory is expected to continue, with the market reaching an estimated $27.31 billion by 2029 at a CAGR of 6.8%. Another forecast anticipates the global surety market to reach $24.4 billion by 2031. The primary drivers for this growth include increasing construction activities, heightened infrastructure development, growing private sector investments, real estate development, supportive government regulations, and the expansion of Small and Medium-sized Enterprises (SMEs). Within this market, the contract surety bond segment held over one-third of the global surety market share in 2021 and is projected to maintain its dominant position. The strong growth forecasts for the global surety market, propelled by construction and infrastructure development, directly align with Africa’s stated development trajectory. Surety bonds, particularly contract surety bonds, are more than just a financial product; they serve as a critical enabler of large-scale projects by providing essential financial guarantees against contractor default. In a continent where infrastructure development is vital but often faces challenges such as project delays and completion risks, the role of surety becomes paramount. This suggests that the expansion of the surety market in Africa will be intrinsically linked to the continent’s capacity to attract and successfully execute major construction and energy projects, effectively acting as a de-risking mechanism for both investors and governments.
Green Energy Projects and Surety’s Role
Africa possesses immense clean energy potential, a key factor in its future development. The “Mission 300 Africa Energy Summit” in January 2025 saw global partners pledge over USD 50 billion in support of increasing energy access across Africa, with 30 African leaders signing the Dar es Salaam Energy Declaration as a commitment to this goal. Green bonds, fixed-income financial instruments used to fund projects that have positive environmental benefits, are emerging as a significant financing mechanism for sustainable development across the continent. For instance, the African Development Bank (AfDB) issued USD 900 million in green bonds and USD 4.1 billion in social bonds in 2024. The AfDB’s green bond portfolio has already yielded substantial environmental benefits, including the avoidance of 43.2 million tonnes of Greenhouse Gas (GHG) emissions and the production of 1.6 million MWh of renewable energy. Similarly, Access Bank’s green bond contributed to a reduction of approximately 4,032 tonnes of CO2 emissions annually. While Africa’s green bond market has grown at a 20% CAGR over the past decade, it remains relatively slower compared to other regions. It currently accounts for less than 1% of global issuances, indicating significant untapped potential for growth.
Surety bonds are regularly employed in the renewable energy sector to ensure that a contractor fulfils its obligations under various agreements, such as development contracts, interconnection agreements, or power purchase agreements. Common types of surety bonds critical for these projects include performance bonds and advance payment guarantees, which guarantee the supply and installation of equipment like wind towers or solar panels; right-of-way bonds, required for work within public areas; and decommissioning bonds, which ensure the proper removal of facilities and land restoration at the end of a project’s life.
Furthermore, surety bond providers play a crucial role in contractor pre-qualification. They conduct thorough vetting of contractors’ financials, experience, and project backlogs, thereby minimizing the risk of financial loss or contractor default for project owners and investors.
Africa’s substantial green energy potential and the significant financial commitments to its development highlight both immense opportunity and inherent risks in large-scale, long-term projects. While green bonds provide the necessary capital, they do not directly guarantee project completion or contractor performance.
This is precisely where surety bonds become indispensable.
The various types of surety bonds demonstrate their specific utility in mitigating risks unique to renewable energy infrastructure, such as ensuring proper equipment installation, operational continuity, and environmental restoration.
The surety’s role in “contractor prequalification” offers an added layer of due diligence, making projects more attractive to investors by reducing the likelihood of default. This positions surety bonds as an indispensable tool for unlocking and safeguarding the vast green energy investments required for Africa’s sustainable development.
Practical Implications
Surety bonds provide a robust financial guarantee that instils confidence among project owners, lenders, and investors, ensuring project completion and fostering financial stability, particularly in complex and capital-intensive construction and energy ventures. Their integral role in prequalifying contractors significantly mitigates project risk, a critical factor in emerging markets where contractor reliability can often be a concern.
The interplay between green bonds (financing) and surety bonds (risk transfer) in Africa’s green energy sector illustrates a crucial synergistic relationship. Green bonds mobilize capital for sustainable projects, but these projects inherently carry construction and performance risks. Surety bonds then step in to mitigate these specific risks, making the green bond investments more secure and attractive.
This implies that for sustainable development goals to be met in Africa, a comprehensive financial ecosystem is required, where innovative financing instruments are complemented by robust risk transfer mechanisms. This presents a significant opportunity to expand surety offerings, focusing on the burgeoning green energy and infrastructure sectors in Africa, thereby supporting sustainable development while effectively managing associated risks.