South African businesses held ransom by criminal syndicates 

South African businesses, particularly in the informal economy, are being held to ransom by protection rackets and criminal syndicates such as the construction mafia. 

Major metropolitan areas have been battling organised crime for years, and several local and national policing strategies have failed to tackle the problem. 

Cape Town has been hard hit, with some of its businesses forced to close down as the syndicates exact an increasing toll on the local economy. 

Organised crime, in the form of protection rackets, first sprung up in the city’s CBD, specifically focused on offering nightlife businesses ‘protection for a fee. 

It has now spread across the city, and the focus has shifted towards foreign-owned businesses, particularly ‘big ticket’ items such as construction projects. 

Newzroom Afrika reported that it has even spread to other parts of the local economy, such as hawkers, schools, and even city officials, who have been told to pay a fee to enter certain areas of Cape Town. 

CEO of The Justice Fund, Lorenzeo Davis, explained that organised crime is merely a symptom of the underlying problem of poverty and unemployment. 

The increase in the number of extortion incidents has been closely correlated with declining economic performance, a rise in unemployment, and the failure of wages to keep up with inflation. 

Davis said that criminal activity is often the easiest way to make money and provide a livelihood for households and communities that lack other opportunities in the current economy. 

“This particular crime has become part of this so-called survivalist economy. People now live off of this. Entire households and communities survive on forcing other people to pay money to operate their businesses,” he said. 

Davis also explained that enhanced policing is not the solution to this problem, as it is much more of an economic issue than a lack of law enforcement. 

“This problem is not going to go away by simply policing it. It is a structural economic issue. It is here because there is no access to better opportunities in the economy.” 

“Once people know that they cannot access a loaf of bread or buy a piece of clothing, their next step is crime. Crime is the problem, but poverty is at the heart of this.”

Davis said that the police have failed to work with other state departments to tackle the central issue of poverty. The police should work far more closely with the department of trade and National Treasury to try tackle poverty alongside enforcing the law. 

These criminal syndicates are beginning to spread their reach into other areas of the economy, making it harder to police.

While the so-called ‘construction mafia’ is well-documented across South Africa, other mafias have targeted different sectors of the economy. 

The construction mafia remains the most influential, costing the South African economy an estimated R63 billion worth of construction projects. 

The real impact is likely much larger as the impact on lost economic activity is harder to quantify. 

Last year, the World Bank released a report estimating that the cost of crime in South Africa is equivalent to 9.6% of the country’s GDP.

This includes direct losses of 2.6% of GDP, 4.2% in expenditures such as security and insurance, and 2.8% in opportunity costs.

With the rise in water shortages across South Africa, a ‘water tanker mafia’ has emerged to benefit from the crisis. 

This mafia has its roots in KwaZulu Natal but is steadily growing its influence in other areas of the country. Gauteng is particularly attractive to it as the province is hit by sporadic water shortages. 

“It is difficult to tell how big the water mafia is. There are many reports about their activity, but it is hard to determine whether it is deliberate sabotage,” the Department of Water and Sanitation DG, Dr Sean Phillips, said. 

Phillips said the department had noticed a sharp uptick in the theft of metal parts used in water infrastructure. 

This is often attributed to the water tanker mafia, but it may also be due to criminal syndicates that steal metal parts and sell them as scrap metal. 

While the water tanker mafia steals or breaks infrastructure, it does not do it to sell metal parts but rather to ensure the normal water distribution system remains disrupted so it can secure extended contracts. 

In particular, the water tanker mafia targets electrical cables and equipment to ensure that pumping stations cannot get water to the end user. 

Phillips also said the water tanker mafia sometimes does not even have to steal or break municipal water infrastructure as it steals water from the supply system. 

He explained that, in some cases, the water tanker mafia would illegally connect to water supply systems to fill its tankers up for free and then sell this water in other areas at exorbitant prices.