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Master builders say construction mafia is a barrier to growth
Dean Macpherson, the new Minister of Public Works and Infrastructure, has been in the UK meeting with investors to explore infrastructure partnerships. He aims to transform South Africa into a major construction hub, which is promising for the struggling construction industry. However, Mohau Mphomela from the Master Builders Association North warns that the ongoing issue with the Construction Mafia is still a significant obstacle to the industry's recovery and job creation.
Cape Town construction sites have been plagued by stoppages, but the construction mafia is highly active all over the country.
“The Construction Mafia remains an ever-present threat to projects in both the public and private sectors – but there’s a limit to what the industry can do,” he says.
“We need to see a ‘joined-up’ approach from the state, which includes the Justice cluster, to ensure that these malefactors are brought to book and construction sites are protected. Criminals need to be held accountable.”
Gavin Morrow, CEO of construction company W3O and VP of MBA North, agrees that a consolidated approach from government is important.
He says that the activities of these illegal, so-called “business forums” are driving up the cost of doing business and reducing the industry’s margins.
“Our margins are already paper thin, and when a construction site is captured by these criminals, the full cost of the stoppage is borne by the contractor,” he says.
“In some cases, this pushes businesses into distress.”
These events are also often very violent, and can be the final straw that convinces the owner that it is no longer worthwhile to keep the business open.
Industry stalwarts going under
In the past few years, several industry stalwarts and long-time members of MBA North have been forced into bankruptcy or business rescue.
Morrow identifies the lack of policy clarity as another issue that gives oxygen to the Construction Mafia.
The current Preferential Procurement Policy (PPP) does not properly define the 30% participation requirement and is thus used by so-called “community organisations” to demand 30% of the total project value, rather than 30% of the work that falls within the remit of the main contractor.
In addition, the 30% figure is wrongly applied to private projects, as the PPP pertains only to public contracts.
Projects plagued with challenges
Morrow’s firm, W3O, encounters these dynamics at varying levels of intensity on the majority of the projects it undertakes.
Jose Correia, managing director at Tiber Construction, agrees that this form of extortion is very prevalent and getting worse.
Correia says that his company generally finds that local contractors often agree to take on any work on offer just to get a foot in the door.
They then demand more money down the line to pay staff, even though their shortfalls can typically be attributed to poor business practices.
“The challenge is that expectations within the community are worlds apart from the reality of delivering work against tight deadlines and budgets,” Correia says.
It seems there is always a new business forum claiming it is entitled to the work and there is never enough work to service all these extortionists.
Contractors must be proactive
It is now broadly accepted that in order to minimise the risk posed by the Construction Mafia, contractors need to adopt a proactive approach, liaising with SAPS from the get-go and appointing a community liaison officer to ensure good communication with the local community.
All stakeholders should be shown the building and site plans, and a WhatsApp group can be created to ensure constant communication.
Entry to the site should be strictly controlled, with detailed records kept of everybody who enters it.
It's a good practice to erect a board at the entrance detailing what actions were taken to include the local community in the project.
However, says Morrow, these procedures cost money and, perhaps even more importantly, time – something that’s often in short supply on a building contract.
An industry ally
Business Against Crime South Africa (BACSA) is playing an active role in helping the industry coordinate an effective response to the challenge posed by the Construction Mafia.
Roelof Viljoen, national project manager at BACSA says that by following its guidelines, companies stand a better chance of minimising disruption.
Before construction commences, construction companies should make contact with BACSA, as well as the local SAPS.
“The SAPS has an obligation to protect against extortion, as with any other crime, so it makes sense to do everything possible to get them on board from the beginning,” he says.
The purpose of a pre-meeting with the SAPS is to prepare for all possible crime risks related to the work and establish an agreed communication protocol to use in the case of any crime related to the construction site.
f they fail to respond appropriately although duly informed of the crime committed, it’s worth knowing that the company has a service delivery claim against the SAPS.
However, the claim needs to be made before the end of the contract and witnesses need to be available.
SAPS may be compromised
“It’s worth remembering that the local police station might itself be infiltrated by the business forum – one should be ready to escalate if they are not doing what they should,” he says.
SAPS Provincial Organised Crime Investigations coordinate law enforcement activity against extortion.
Visible policing would be the most effective deterrent, but unfortunately resources are limited, Viljoen notes.
“The bottom line is that one can never give work in response to a threat,” he says.
