Mafia uses BEE in devastating extortion racket in South Africa

The BEE Chamber recently welcomed the progress made by the Department of Public Works and Infrastructure (DPWI) in taking on the so-called construction mafia.

These criminal groups use Broad-based Black Economic Empowerment (B-BBEE) legislation to their advantage by finding loopholes in relevant procurement policies.

The BEE Chamber recently said it welcomed the “decisive action” taken by the DPWI and the South African Police Service (SAPS), which has led to 240 arrests and the reporting of 745 extortion cases since November 2024.

The chamber’s chief support officer, Yuneal Padayachy, said their efforts demonstrate “a robust commitment to restoring integrity to South Africa’s construction sector and B-BBEE legislation”. 

Padayachy said the construction mafia has long exploited loopholes in procurement policies.

These “loopholes” refer to the misinterpretation of the Preferential Procurement Policy Framework Act that the construction mafia uses to their benefit.

Cliffe Dekker Hofmeyer’s Sentebale Makara previously explained that the construction mafia refers to groups, sometimes called ‘business forums’ or ‘local community interest groups’, who make various demands at construction sites.

These demands are often made through intimidation and sometimes disguised as job opportunities sought by communities at local construction sites.

Makara explained that these groups are a byproduct of the misinterpretation or the opportunistic interpretation of the Preferential Procurement Policy Framework Act.

This Act provides for 30% community involvement or benefits from construction projects that must be invested in local communities. 

“This has been the so-called loophole that some of these so-called business forums or mafia operatives have used to extort projects but, more importantly, also hold ransom many of the projects that have been plagued by such disruptions,” he said.

These forums frequently cite the 30% preferential procurement provisions as their justification, but Makara said their actions often go beyond lawful engagement.

Initially, these groups may seek subcontracting opportunities. However, their broader aim often involves bypassing established procurement protocols, disregarding requests for proposals (RFPs), and forcing their way into projects. 

They exploit existing laws on community engagement, misinterpreting or opportunistically interpreting them to assert influence over the project.

Efforts made

The construction mafia’s use of this loophole has been very costly to local construction companies and South Africa in general.

Since 2019, about 180 projects have been affected by this problem, which has resulted in an excess of R60 billion in lost projects due to extortion, violence, and sabotage.

The BEE Chamber said it stands firmly behind the DPWI’s efforts and recognised that they are crucial to ensuring that B-BBEE continues to serve its intended purpose.

“While the recent revelations about the misuse of the 30% local procurement rule, intended to empower designated groups such as black-owned businesses, youth, women, and people with disabilities, are concerning, they do not diminish the core value of B-BBEE,” Padayache said.

He said the construction mafia’s “loophole” highlights the need for stronger oversight and regulation to protect legitimate businesses from criminal exploitation. 

He added that B-BBEE remains a cornerstone of South Africa’s transformation agenda and has created opportunities for skills development, job creation, and sustainable growth in previously disadvantaged communities.

“This exploitation not only undermines the goals of B-BBEE but also harms the very businesses it aims to support,” he said.

“The BEE Chamber supports the DPWI’s proposed national facilitation framework to standardise social facilitation and community engagement in construction projects.” 

“By institutionalising a transparent and uniform approach, this framework can help ensure that B-BBEE initiatives benefit those they are intended to serve while preventing criminal interference.”

“The reported 80% decline in lost construction hours by companies like WBHO is a testament to the effectiveness of these interventions, reinforcing the viability of B-BBEE when implemented with integrity.”