South Africa’s construction industry under siege

South Africa’s construction industry is being held ransom by the “construction mafia”, costing the country billions in revenue and jeopardising vital infrastructure development.

This is according to Cliffe Dekker Hofmeyr (CDH) Thobeka Dhlamini and Sentebale Makara, the director of dispute resolution, who explained that what began as isolated incidents of extortion on construction projects in early 2015 has now evolved into a nationwide threat. 

According to former Public Works and Infrastructure Minister Sihle Zikalala, the construction mafia costs the economy an estimated R68 billion through project delays or withdrawals. 

The government has made an effort to address the issue through the introduction of certain policies and legislation to curtail mafias in the construction sector. 

These include the Critical Infrastructure Protection Act, the National Infrastructure Plan, the Critical Infrastructure Programme and the Infrastructure Built Anti-Corruption Forum.

The Public Procurement Bill, which President Cyril Rampophosa recently signed into law, also aims to address several issues, which include requiring organisations to do their due diligence on companies involved in construction, particularly in subcontracting.

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

It is unclear 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,” he said. 

Roelof Viljoen, national project manager at Business Against Crime South Africa (BACSA), warned that construction firms need to plan for the worst, as construction mafias have become engrained in South Africa with no signs of reversing.

“Extortion in the construction sector has reached worryingly high levels, derailing and delaying projects worth billions of rands,” he said.   

How construction mafias operate

Makara and Dhlamini explained that whenever construction companies have a project they are likely to face interference on the construction site from a group of people usually posing as local business forums or community interest groups.

They will demand their “piece of the pie” without using the proper channels, like stakeholder engagement forums, to air grievances and encourage collaboration.

“Their demands range from employment opportunities to contract opportunities and even demands for cash,” they explained.

The groups 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.

“These ‘business forums’ are, more often than not, unregistered, and it is extremely difficult to track down any ‘members’ acting under the auspices of the said forums or interest groups,” they said.

Their extortion tactics often hide attempts to get work on projects without following proper procedures and laws. 

After approaching the site manager or another senior person to make their demands, they recruit local residents to stage protests and halt construction, forcing companies to meet their demands.

When this happens, companies often have to go to the High Court for an interdict against those involved. To hide their identities, the mafias use people from outside the community, making it harder to enforce any court orders.

To help prevent this, CDH suggests that construction companies appoint a paid community liaison officer (CLO) at the start of their project. 

“This should be a community leader who has influence in the community, and their responsibility is to function as a representative of the community, ensuring that the interests of the community are taken into consideration by the construction company,” they explained.  

These companies should also ensure that they engage with these communities throughout the duration of the project. 

“This can include consulting with the CLO to ensure that the local businesspeople and the relevant/affected community members are provided with business/employment opportunities within the project,” they said.

Subcontracting a fair share of the work to local businesses and providing jobs to local residents with the appropriate skills has also been shown to reduce project disruptions and prevent unlawful protests.

“Communities tend to protect what they believe belongs to the community. Therefore, it is important that construction companies and employers ensure that they incorporate their corporate social investment initiatives in the project’s budget,” they said. 

“This would allow communities to see that in protecting the project, they also stand to benefit from it.”

They advised that when the construction mafia disrupts a project, companies should seek legal action through proper channels. Interdicts have proven to be particularly effective, leading to arrests and stopping mafia activities.