State intelligence and enforcement abilities, as well as the legislation, need to be bolstered to deter the construction mafia.
South African business leaders have urged the government to increase visible policing to levels last seen during the hosting of the Fifa 2010 World Cup, in order to stop the so-called construction mafia that is hitting the industry’s bottom line and threatening future investment.
MPs heatedly debated the problem in the National Assembly last week after police minister Senzo Mchunu said he was signing agreements with the City of Cape Town and Durban followed by similar agreements in other provinces to deal with the growing crisis that has spread from construction to other business sectors.
There needs to be a “step change” in policy to deal with the construction mafia who often demand to be paid up to 30% of the value of a construction project, without doing any work, South African Chamber of Commerce and Industry chief executive Alan Mukoki said.
“Some of them are just bands of gangsters, people who just take advantage of the fact that they can, and all of them are reflecting a deteriorating situation when it comes to safety and security because it’s very easy to intimidate people who are on the building site, because police visibility is still a problem. It’s not like we don’t know there are extorters around these sites,” he said.
“You can go to any city, New York, London and Tokyo and at almost every traffic light there are uniformed police there armed, and in their cars patrolling … We did it during the (Soccer) World Cup in 2010. You couldn’t go to any mall or major traffic intersection without the visibility of the cops.
“So, they know about it. Why do they not do it? I don’t understand. But when we go to big political rallies, we’ll find that there are enough cops there. We go to sporting events, there are lots and lots of cops. So, I think that we do need to change the attitude as it relates to police visibility and the prevention of crime.”
Site invasions in KwaZulu-Natal, the Eastern Cape and Western Cape were creating an “untenable situation”, said Pietermaritzburg and Midlands Chamber of Business chief executive and chairperson of the Association of South African Chambers, Melanie Veness.
“These invasions are driving up costs exponentially and discouraging investment. The site disruptions cause endless delays in building projects, which escalate costs, and the threat of invasion necessitates the factoring in of additional armed security for sites for the duration of projects, which comes at a hefty premium,” Veness said.
“This is unsustainable. The on-site threats of violence and targeting of individuals discourages the participation of professionals and is putting a damper on future development.”
She added that “harassment, violence, and extortion” are not the means to achieve transformation.
“This behaviour is criminal and it causes the affected areas extreme reputational damage, sabotaging the economy and costing jobs. The adoption of a zero-tolerance approach in KZN is appreciated, it is critical that this practice be stamped out as soon as possible to avoid additional economic fallout.”
Durban Chamber of Commerce and Industry CEO Palesa Phili said local businesses were most concerned about illegal business forums’ “growing disregard for the law” within the eThekwini metro.
“A lot of KwaZulu-Natal businesses are being held hostage by these groups. The expansion of extortion markets in KwaZulu-Natal has taken a different route from those in Gauteng,” Phili said.
“Instead of registering as security companies, extortion networks in KwaZulu-Natal began forming associations frequently referred to as ‘business forums’ to divert funds from government contracts and engage in extortion of construction companies,” she said.
The extortion demands appear to be linked to the Preferential Procurement Policy Framework Act of 2017 and its regulations that stipulated that 30% of public procurement contracts over the value of R30 million be subcontracted to designated groups such as small businesses.
However, these regulations were found to be unlawful by the constitutional court in 2022 and the rules have since changed, although there is still a requirement to subcontract work to the groups.
“Business forums have even extorted small and medium-sized enterprises, including black-owned companies, the very operations the 30% was intended to benefit,” Phili said.
“This modus operandi has the potential to lead to significant job losses, weakening of the construction value chain and disinvestment in KwaZulu-Natal due to an increase in its risk profile,” Phili said.
“The acts of so-called ‘construction mafias’ are creating unnecessary risks to legitimate businesses. Communities live in fear of extortion gangs, it creates a sense of hopelessness and a significant alienation from those government and municipal institutions that are supposed to look after the security and interests of ordinary citizens.”
Businesses ruined by extortion ranged from individual subsistence ones in townships to development projects worth millions that have been abandoned by international investors.
“This form of economic sabotage is leading to projects being delayed resulting in significant economic and financial losses. Such elements cannot be dealt with using a soft approach, the safety and security of business property, employees are constantly at risk from such groups. We encourage the provincial government to increase its efforts to eradicate such behaviour,” Phili said.
The Durban chamber has noted some of the steps the government has taken to confront the problem, including the establishment of a 24-hour hotline to report the crime in the Eastern Cape, and the formation of a task team in KwaZulu-Natal that is operating via the eThekwini Presidential Safety and Security Working Group.
The illegal forums are affecting every dimension — costs, quality and time schedule — of how a construction company’s performance and bottom line is measured, said Southern African Institute of Steel Construction chief executive Amanuel Gebremeskel said.
The forums are a “big problem” especially on construction sites that are not in affluent areas like Sandton but rather in economically depressed rural or semi-rural areas.
“It affects projects in all the dimensions that you can imagine that we use in construction for project management, which would be in terms of time, cost and quality,” Gebremeskel said, relating how companies would plan their equipment and staff ahead of time but then a group of people would turn up and demand jobs on the site or a portion of their revenue.
“That is very disruptive in terms of time because then your entire plan is essentially scuttled, but also in terms of the cost of the project, because now you don’t actually know how much this project is going to cost you to build, because you have these additional costs that were unplanned,” Gebremeskel said.
“And then finally, you have the issue of quality, which is, if you do have to hire people that you did not have in your plans ahead of time, then that probably means that they are not trained.”
In some cases companies, under duress, will train and employ a group of these workers who arrived “in large numbers, sometimes armed” or hire them for rudimentary jobs, only to be disrupted by a second group demanding jobs.
“The construction industry is starting to adjust to this awkward way of working, to employ some of them doing what would be relatively low-skilled work. It could be as simple as cleaning, but could be a bit more, maybe putting things in the right order, doing simple work that has nothing to do with assembling components,” he said. “So this is not simply a problem if you deal with one group and you’re done. It can be very complicated.”
In one case an international construction company packed up and fled in their vehicles when the construction mafia arrived on site but a local contractor eventually managed to mediate and get them to return to the project.
“The basic problem is that there’s not sufficient demand in the industry in general, to employ people, it’s a problem of poverty and lack of employment. So some of the groups of mafia groups that come to business forums are actually people who used to work for construction companies. Some of these industry guys actually know them,” Gebremeskel said.