Treasury estimates economic cost of Construction Mafia at R63bn so far

Deputy finance minister Ashor Sarupen visited the National Construction Summit to deliver a R63bn Construction Mafia warning. Source: x.com

Sarupen spoke to the critical role of the construction industry, which contributes approximately 3% to GDP and employs over 1.3 million South Africans.

Infrastructure investment, he argued, is pivotal to the nation’s economic recovery, with the construction sector boasting the highest job creation multiplier across all industries.

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However, the escalating site disruptions by criminal groups threaten these gains, undermining efforts to transform South Africa into a vibrant construction hub.

“These disruptions are more than operational challenges; they are a stress test for our economic governance,” Sarupen said.

“They expose vulnerabilities in our institutional frameworks and socio-economic fractures within our communities.”

Government’s strategic response

To counter the menace, Sarupen outlined a three-pronged government strategy focusing on public procurement reform, public-private partnerships (PPPs), and infrastructure investment:

1. Public procurement reform: New regulations under the Public Procurement Act aim to bolster transparency and empower small contractors.

Direct payments to subcontractors and stricter subcontracting requirements are designed to curtail exploitation and delays.

2. Expanding PPPs: Simplified PPP regulations are expected to attract private sector expertise and investment.

Government is introducing innovative financing mechanisms, such as build-operate-transfer structures, to expedite project implementation.

3. Scaling infrastructure investment: With over R900bn earmarked for infrastructure projects over the next three years, government is prioritising urban development, transport, and housing, which are seen as transformative drivers for economic growth.

Socio-economic crisis

Sarupen acknowledged that the construction mafia’s activities reflect deeper socio-economic issues, including unemployment and poverty.

He called for a holistic response integrating law enforcement, governance reforms, and community engagement to address the root causes of site disruptions.

“These disruptions jeopardise not just businesses but the lives and livelihoods of millions of South Africans,” Sarupen concluded.

“The construction sector holds immense potential to drive our economic recovery, but it cannot achieve this alone.”

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Multifaceted operation

As Operation Vulindlela progresses, with initiatives targeting energy, water, digital communication, and transport reforms, the Treasury sees a need for stronger collaboration between the public and private sectors.

Sarupen’s keynote signals a decisive call for action to safeguard SA’s infrastructure projects and, ultimately, its economic future, with the hope of ensuring infrastructure development becomes a cornerstone of shared prosperity.