One stipulation of the Preferential Procurement Policy Framework Act of 2000 has allowed construction mafias to rampage the sector for the past five years.
Construction mafias are organised crime groups targeting construction projects across South Africa.
They approach construction companies awarded government tenders or contracted for private construction projects under the guise of a “business forum”.
These “forums” approach the construction companies seemingly in the interest of the local community where the construction is taking place and demand a stake in the contract.
This stake can come in the form of workers on the project and a percentage of the value of the construction contract. If their demands are not met, the “forums” threaten the contractors and their employees and damage the construction projects.
Several projects have been delayed, billions have been lost, and construction companies have been forced to withdraw from projects due to these syndicates.
The Preferential Procurement Regulations of 2017, which form part of the Preferential Procurement Policy Framework Act, stipulate the requirements for subcontracting as a tender condition.
These regulations stipulate the following:
“When an organ of state decides to apply the sub-contracting provision as specified in Regulation 4(c), all tenders above the prescribed maximum threshold for quotations must be advertised through an open competitive bidding process subject to potential tenderers meeting the 30% minimum subcontracting requirement to EMEs or QSEs that are 51% owned by the following enterprises:
- (i) Black people
- (ii) Black people who are youth
- (iii) Black people who are women
- (iv) Black people with disabilities
- (v) Black people living in rural or underdeveloped areas or townships
- (vi) Cooperatives which are 51% owned by Black people
- (vii) Black people who are military veterans.”
In short, these regulations require bidders of projects to contract a portion of the development to small businesses in local communities – specifically, black-owned businesses. Therefore, 30% of projects worth over R30 million should go to local contractors.
This stipulation only applies to government projects, not the private sector. However, according to a 2020 Carte Blanche investigation, these regulations have been used as a justification by these construction mafias for their actions since at least 2020.
President of the Association of Construction Managers Anthony Afordofe recently told SABC that a conversation with the government about the 30% stipulation is needed.
He said the 30% stipulation has not been enough to avoid pushback from groups who demand further inclusion and equal opportunity in the sector. The government should, therefore, look into ways to create equal opportunity beyond the 30% stipulation.
“The government should come together with professional contractors so that we can sit around the table and really find long-lasting situations that eradicate this issue as soon as possible,” he said.