Document background
The Retention Bank Guarantee is a crucial document in South African construction and development projects, designed to replace traditional cash retention mechanisms. It is typically used when a contractor seeks to improve their cash flow position while still providing the employer with necessary security. The guarantee amount usually represents 5-10% of the contract value, corresponding to the retention amount that would otherwise be held in cash. The document must comply with South African banking regulations, construction industry standards, and the Construction Industry Development Board (CIDB) guidelines. A Retention Bank Guarantee becomes particularly relevant during the defects liability period of construction projects and includes specific provisions for claim procedures, validity periods, and release conditions. This type of guarantee is widely recognized in the South African construction industry and is often preferred over cash retention by both contractors and employers.
