South Africa's so-called construction industry mafia is a complex brew. It represents a mix of inequality, corruption, criminality, copycat behaviour, inflated expectations, and weak policing, overshadowing legitimate grievances. Ultimately, it is costing the country a great deal, not only in delays to projects, with associated costs, inflated project costs and in some instances damages to both site equipment and public infrastructure but also in lost investment. Few foreign companies are likely to have the appetite to tackle large-scale projects in such a high-risk environment, and even local companies find the opportunity cost of doing business in this sector a disincentive to expansion.
There are ways to tackle the problem, but the solutions take understanding and patience.
Defining the indefinable
The construction mafia is not a uniform entity and it is not limited to construction, but what is common is the element of extortion and criminality. These organisations may be found in the transport sector, where certain bad actors pressure project developers to use their transport rather than in-house transport or allow employees to make their own transport arrangements. On construction sites, there may be mafias that seek to control the procurement of plant and materials – everything from aggregates to port-a-loos and yellow machinery - at exorbitant rates.
Construction mafias may also operate as labour organisers, putting pressure on developers or contractors to pay excessive rates or face protracted strike action, often coupled with the threat of damage to property and threats of violence to those who would otherwise wish to continue working. Then there are also mafias who provide no service but simply seek protection money to ensure they do not disrupt the project.
These activities are not confined to particular provinces or subsectors. In our experience, it has occurred everywhere from remote rural areas to downtown areas of major city centres, and afflicted everything from road works, the oil and gas sector, building projects and renewable energy projects. Probably most egregious, we have even seen underprivileged school development works affected!
There may be some information-sharing across different construction mafia groups, but there does not appear to be a coordinated national organisation – and therefore no single of the proverbial snake to remove and thereby bring the racket to an end. It is also important to acknowledge that not all business forums are mafia enablers, and not mafia conduct is conducted through business forums. Many business forums and other organised community bodies are legitimate businesspeople, while others, while very robust, fall short of actual extortionist conduct. However, some business forums are just vehicles for the construction mafia – and it can be hard to distinguish between the two at the start of a project.
Although local communities have legitimate grievances over construction procurement, with true beneficiation in construction projects being varied, it is important to draw a distinction between genuine protests and criminality. There is no justification for extortion and threats to life and property for economic gain. A down-tools protest by workers with a grievance over pay may occur within the bounds of the law. Construction mafia tactics range from instigated community action, with violent protests near sites, to direct pressure on parties, with threats to life. Members of the local community who attempt to resist the invasion of a construction mafia may also be coerced into cooperation through threats to their life or property.
Although it is possible for developers and their contractors to apply for court orders and interdicts against illegal actions instigated by the mafias, often these are inactive. The police are often reluctant to act and may themselves be threatened. One also, unfortunately, cannot overlook South Africa's issues of corruption, which further compounds difficulties in the policing and enforcement against these bad actors. And while special policing structures are being set up to combat the scourge, these will no doubt take time to gain traction and ultimately will face an enormous task in combatting this multiheaded hydra.
Employing private security on sites, including checking that only legitimate employees are allowed access, is a mitigation, but it is costly and ultimately not foolproof.
The construction mafia has undoubtedly focused attention on legitimate grievances, especially for large corporates who are becoming more aware of their sustainability and governance responsibilities. Most private sector developers have realised the only real way to fight this scourge is to try to prevent it from arising at the outset.
Real community engagement and local procurement of plant, materials and labour that yield real, tangible, benefits and are done through community leaders of good standing is the first line of defence. It is important that the contractors develop a level of co-operation with the community so the community becomes the first barrier to stop these construction mafias, by refusing to do business with them. Ultimately, securing a social licence to operate will put pay to the legitimate grievances and, hopefully, force out unscrupulous characters.
While certain projects are highly technology-driven, with equipment and specialist skills not abundantly available, in order to legitimise real value, the balance of traditional procurement and construction works should be made available for local participation. In particular, focus should be placed on local qualifying SMMEs, to ensure when the project is conceived and procurement occurs there are opportunities for the community. wherever possible, if immediately unavailable, parties should consider nurturing new businesses in the area to provide necessary services and pave a path for future opportunities, e.g., setting up a new fencing contractor if one does not exist already.
Early engagement is key. This can be through many forums, with community liaison officers often playing this role, but ultimately in order for real opportunities to be facilitated, and expectations managed, the individual or forum must be credible. Attention should be paid to regional nuances, with an understanding of particular local issues, constraints and even language barriers. This structure can facilitate proper engagements with the local community, convey information and manage expectations.
Managing expectations is critical, as sometimes expectations of the local benefits are completely disproportionate to what is actually available. Also, if a project requires bringing in certain specialist skills that are not locally available, this needs to be made clear. Ideally, in such situations, developers should consider whether opportunities can be made available within the community to develop these skills, even if this does not have a direct benefit to the project. But bringing in external labour and employing it at below prescribed minimum rates would generate a legitimate grievance among the local community and should be called out.
Timing is critical. It is too late when the board goes up and site is cleared, to give local communities the time to put structures in place but similarly consideration needs to be given to not create expectations prematurely. If there are delays or the project is cancelled, it may give rise to disappointment and anger.
One of the areas of misunderstanding, which has been exploited by the construction mafias, is a widespread misconception of the difference between government and private sector procurement. The Public Finance Management Act (PFMA) requires prescribed local expenditure by government entities, but this does not apply to private sector projects. The state is responsible through the Department of Public Works and National Treasury for how funds are allocated for state infrastructure, and the role of the Construction Industry Development Board (CIDB) is to build a capable construction industry that provides opportunities for women, youth, the disabled and black people in general. It is important that the State and the private sector are aligned in their messaging and approach, or face the risk that a divergent messaging and approach to this issue could be exploited.