{"id":796179,"date":"2024-10-24T07:00:00","date_gmt":"2024-10-24T05:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=796179"},"modified":"2024-10-23T14:19:44","modified_gmt":"2024-10-23T12:19:44","slug":"criminal-mafias-grip-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/government\/796179\/criminal-mafias-grip-south-africa\/","title":{"rendered":"Criminal mafias grip South Africa"},"content":{"rendered":"\n

While loud promises have been made to tackle issues in South Africa’s construction sector head-on, industry leaders say that the reality is that it will continue to face significant challenges from extortion groups.<\/p>\n\n\n\n

This threatens not only job security and investments in one of the country’s most critical sectors, but the safety of stakeholders.<\/p>\n\n\n\n

The new Minister of the Department Public Works and Infrastructure (DPWI), Dean Macpherson, has been crisscrossing the country, engaging with infrastructure investors to secure potential partnerships in hopes of turning “South Africa into one giant construction site.”<\/p>\n\n\n\n

Industry leaders said that these developments are encouraging to the critical industry, which has been battling severe headwinds for many years. <\/p>\n\n\n\n

There are over 1.2 million people were employed in the industry and by March 2024, StatsSA reported an annualised contribution of R109.5 billion to GDP in Q4 2023.<\/p>\n\n\n\n

Investment and development in the sector not only benefits the country through improved infrastructure, but creates much-needed jobs on sites and throughout the entire construction sector value chain. <\/p>\n\n\n\n

However, criminal extortion groups across the country targeting the sector threaten its stability.<\/p>\n\n\n\n

According to the State Investigating Unit (SIU), the \u201cconstruction mafia refers to extortion groups that typically seek to forcefully extract protection fees from local construction companies and contractors or extort a portion of the cost of an infrastructure project, or that specific individuals affiliated with the mafia are recruited to work on the site.\u201d<\/p>\n\n\n\n

Noting this, Mohau Mphomela, executive director at Master Builders Association (MBA) North, said that “even if government\u2019s long-promised focus on infrastructure development [and investment] does finally come to pass, the problem posed by the Construction Mafia on the ground remains a major stumbling block to any recovery of the industry \u2013 especially its ability to create more jobs.”<\/p>\n\n\n\n

\u201cThe Construction Mafia remains an ever-present threat to projects in both the public and private sectors \u2013 but there\u2019s a limit to what the industry can do.<\/p>\n\n\n\n

\u201cWe need to see a \u2018joined-up\u2019 approach from the state<\/strong>, which includes the Justice cluster, to ensure that these malefactors are brought to book and construction sites are protected [and] criminals need to be held accountable,\u201d said Mphomela.<\/p>\n\n\n\n

Gavin Morrow, CEO of construction company W3O and Vice-President of MBA North, agrees that a consolidated approach from government is important and added that the activities the so-called \u201cbusiness forums\u201d are driving up the cost of doing business and reducing the industry\u2019s margins.<\/p>\n\n\n\n

\u201cOur margins are already paper thin, and when a construction site is captured by these criminals, the full cost of the stoppage is borne by the contractor,\u201d said Morrow. <\/p>\n\n\n\n

\u201cIn some cases, this pushes businesses into distress. These events are also often very violent, and can be the final straw that convinces the owner that it is no longer worthwhile to keep the business open.\u201d<\/p>\n\n\n\n

In the past few years, several industry stalwarts and long-time members of MBA North have been forced into bankruptcy or business rescue because of this.<\/p>\n\n\n\n

\"\"<\/a><\/figure>\n\n\n\n

Misuse of procurement policies<\/strong><\/p>\n\n\n\n

A report by Jenni Irish-Qhobosheane for the Global Initiative Against Transnational Organised Crime<\/a> outlined that most mafias posing as legitimate \u201cbusiness forums\u201d demand 30% of the contract value of the project as \u201cprotection\u201d against violence and work stoppages.<\/p>\n\n\n\n

This is a rate that derives from misuse of a National Treasury regulation that seeks to encourage local involvement in all project procurements.<\/p>\n\n\n\n

\u201cWhile a lot of it happens under the mantra of radical economic transformation, extortionist behaviour has affected both black- and white-owned companies, which tells you it is all about the money,\u201d CEO of the South African Forum of Civil Engineering Contractors, Webster Mfebe previously said.<\/p>\n\n\n\n

Morrow identifies the lack of policy clarity as another issue that gives oxygen to the Construction Mafia. <\/p>\n\n\n\n

“The current Preferential Procurement Policy (PPP) does not properly define the 30% participation requirement and is thus used by so-called ‘community organisations’ to demand 30% of the total project value, rather than 30% of the work that falls within the remit of the main contractor,” said Morrow.<\/p>\n\n\n\n

“In addition, the 30% figure is wrongly applied to private projects, as the PPP pertains only to public contracts,” he added.<\/p>\n\n\n\n

Morrow\u2019s firm, W3O, encounters these dynamics at varying levels of intensity on the majority of the projects it undertakes. <\/p>\n\n\n\n

Jose Correia, managing director at Tiber Construction, agrees that this form of extortion is very prevalent and getting worse.<\/p>\n\n\n\n

Correia says that his company generally finds that local contractors often agree to take on any work on offer just to get a foot in the door, then demand more money down the line to pay staff, even though their shortfalls can typically be attributed to poor business practices.<\/p>\n\n\n\n

\u201cThe challenge is that expectations within the community are worlds apart from the reality of delivering work against tight deadlines and budgets,\u201d said Correia. <\/p>\n\n\n\n

\u201cIt seems there is always a new business forum claiming it is entitled to the work and there is never enough work to service all these extortionists.\u201d<\/p>\n\n\n\n

Be prepared<\/strong><\/p>\n\n\n\n

To minimise risks from the Construction Mafia, stakeholders need to be prepared.<\/p>\n\n\n\n

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Construction mafia here to stay in South Africa \u2013 be prepared<\/a><\/blockquote>