Construction mafias cost South Africa R68 billion

Construction mafias cost the South African economy around R68 billion by delaying and even preventing construction projects.

MDA Attorneys director Euan Massey defined construction mafias as organisations that go to construction sites and extort money from contractors, subcontractors, and developers.

They do so on the premise that there is a legislative requirement – set out in the Preferential Procurement Regulations – that 30% of public sector projects must be subcontracted to local participants.

Public Works and Infrastructure Minister Sihle Zikalala recently revealed that construction mafias cost the economy around R68 billion.

This is because these mafias delay construction projects, and, in some cases, companies have been forced to withdraw from projects.

However, Massey told CNBC Africa that several initiatives are afoot to address this issue. The first is the Public Procurement Bill, currently open for public comment. 

This legislation aims to address several issues, including the percentage of local participation and requiring organisations to do their due diligence on companies involved in construction, particularly in the subcontracting space.

Zikalala has also implemented two other initiatives:

1. Social facilitation unit: This unit assists with facilitating and communicating with local communities.
2. Specialised organised crime detective services unit: This unit investigates extortion, racketeering and similar crimes. 

While the industry’s response to these initiatives has been lukewarm, Massey said it is “good to finally have the government’s interest and participation in these pressing issues”.

He said MDA had been involved in these issues for the past 15 years, even before the promulgation of the Preferential Procurement Regulations.

“This is the first time that the upper spheres of government have taken some level of ownership to take the bull by the horns and tackle this problem head-on,” he said.

Massey said that over the past two years, around 600 investigations and cases related to the construction mafias have been opened.

However, it is uncertain how many cases have been closed and how many prosecutions have followed these investigations, but it seems to be a low number.

“Until that starts taking place, construction mafias will continue to plague and invade projects and cause disruption to this valuable sector of the economy.”