Construction mafias, protection rackets stifle the economy

Oto ne SA of ’the s biggest threats economic stability, viability and infrastructure development is the untold destruction caused by the so-called construction mafias and protection rackets.

The latest Global Initiative Against Transnational Organised Crime report, “Extortion or Transformation?” has done some great work defining how these groups, widely referred to as construction mafias, have masterminded extortion under the guise of local business forums. Their modus operandi is identifying developments in the area and invading construction sites, demanding money or a stake in the projects.

According to the report, in 2019 at least 183 infrastructure and construction projects across SA worth more than R63bn were affected by these disruptions.

A serious study needs to be commissioned on how the state’s commitment to implementing economic policy reforms aimed at stimulating economic growth, boosting competitiveness and attracting investment following the Covid-19 pandemic is going to be realised in an environment where so-called construction mafias call the shots.

The situation has deteriorated to such an extent that some property developers have stopped developments because the demands made by these groupings are so ridiculous. A business associate who was involved in a project in KwaZulu-Natal told me the development of a mall was stopped after a traumatic experience involving a group that introduced itself as the local business forum and concerned residents.

BULLET

At the first meeting the “forum” placed a bullet on the boardroom table and started making demands, including that a “community liaison officer” be appointed from the ranks of the “forum”. This was ostensibly to give the community insight into the operations and to secure procurement from its selected companies.

Businesses that have succumbed to the demands of a construction mafia all have stories of project cost overruns and delays in subcontracting because the “forum” demands that nothing gets subcontracted to anyone but its own suppliers. But these subcontractors seldom meet minimum standards. Under such circumstances projects invariably run way over budget and deadlines.

The construction mafias are focused on short-term gains and disregard any longterm benefits the projects may bring to the communities they claim to represent. One JSElisted company decried how a R5bn project that would have created thousands of jobs was “torpedoed” because the foreign shareholders “ran for the hills” when invaders pitched up on site.

According to World Bank annual ratings, SA is ranked 84th out of 190 economies in ease of doing business, having deteriorated from 82nd in 2018. The ease of doing business index ranks countries based on whether the regulatory environment is conducive to business operation and how well property rights are protected, among other criteria.

The index measures several procedures, times and costs. It also sketches the prolonged process to secure construction permits; time and cost to get connected to the electrical grid; the reliability of the electricity supply and the transparency of tariffs. Clearly, if we want a competitive economy that can position itself as a prime investment destination we cannot afford to add more layers of red tape, uncertainty, chaos and violence.

Not much information is available to guide businesses and investors on how to deal with a construction mafia, but involving a ward councillor and local government from the beginning of the development is a good start.

SHOOTINGS

The construction mafias are not our only headache. There are reports from Khayelitsha, Cape Town, of gangsters who gave a salon owner two hours to raise R400 as a protection fee. There have been mass shootings in Cape Town nightclubs and taverns that apparently stemmed from owners refusing to pay protection fees.

If this trend is not nipped in the bid it will soon be impossible to conduct any business without obtaining and paying for permission from a protection racket. Larger companies that have the resources to resist might survive such an onslaught, but smaller players will struggle. This is the opposite of what real transformation and empowerment seek to achieve.

The Progressive Professionals Forum has called on the government’s security cluster to investigate and establish the factors that led to the emergence of the construction mafias, and to develop an action plan that deals decisively with the construction mafias and protection rackets. We have also called for a joint sitting of parliament to debate this scourge, which has the potential to undermine our democracy and efforts to rebuild the economy.