Construction mafia has a new target in South Africa

The so-called construction mafia has begun spreading to other South African industries, particularly mining, threatening a growing portion of the country’s economy. 

Construction mafias gained prominence in 2014 and grew tremendously during state capture, where law enforcement agencies were hollowed out and steadily weakened. 

These criminal syndicates often operate under the guise of a local business forum to extort money from contractors 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.

While these organisations first established themselves in KwaZulu Natal, they have gradually expanded into Gauteng, the country’s economic hub. 

A project manager for Business Against Crime, Roelof Viljoen, explained that the rise of construction mafias has also been boosted by companies and individuals’ unwillingness to report crimes to the relevant authorities. 

In some cases, businesses choose to pay off the organisations to avoid going through the onerous process of reporting the crime and following legal processes. 

In effect, these companies see the opportunity to pay off construction mafias as a way to grease the wheels of their projects and keep the ball rolling. 

Viljoen said this just exacerbates the problem by making extortion a viable income stream for these entities. 

He also explained that this has ensured the continued growth of this criminal enterprise into different parts of the country and sectors of the economy. 

In particular, mining companies have begun flagging issues with local ‘mafias’ that extort payments from them in return for not disrupting their operations. 

Viljoen said that this is a different kind of crime, but it still has significant negative ramifications for the economy. 

Minerals Council South Africa, which represents miners, has reported issues to Business Against Crime regarding disruptions to production at mining operations. 

As a result, Viljoen fears this practice may infiltrate other sectors of the economy and destroy an increasing share of economic value in the country.

Alarm bells are ringing

“Whenever crime is involved, someone loses. It is similar to a war. You have to avoid being complicit in crime because it is the right thing to do,” Viljoen said. 

He urged businesses to stop paying off extortionists, as that has become a major driver of the growth of mafias in South Africa. 

In the long run, it is also unsustainable for companies to succumb to extortion as it inflates the cost of projects and threatens to make some industries no longer economically viable. 

WBHO chairman Louwtjie Nel said in the company’s latest annual report that the country’s construction sector has shrunk by around 44% in the past six years. 

“There is an urgent need for South Africa to prioritise upholding the rule of law. The adverse effects of not doing so are becoming increasingly obvious,” Nel said in his letter to the shareholders. 

“Crime and corruption function as significant deterrents to business and investor confidence, demanding swift and decisive action.”

“We strongly urge the government to combat the growing tide of criminal extortion and corruption that is affecting South African society, particularly within the construction sector.”

Nel mainly focussed on the “persistent challenge of ‘business forums’ that continue to disrupt projects”. 

“This issue requires immediate attention. Despite numerous initiatives, many in conjunction with the government, to address this scourge, it still persists,” Nel said. 

“The South African business community is willing to collaborate and has come together under organisations like Business for South Africa to work with the government in developing strategies to combat crime and corruption.”

The construction sector relies heavily on substantial public and private investment in infrastructure to enable real growth. 

Rising crime and corruption have deterred companies and the government from making significant, long-term investments, resulting in minimal growth for construction firms like WBHO.