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Excavator at a construction site.
The construction mafia has disrupted over 180 construction projects worth R63 billion since 2019, according to Finance Deputy Minister Ashor Sarupen.
On Wednesday, a National Construction Summit was held in Durban where a declaration was signed between the Public Works and Infrastructure Department and stakeholders involved in the fight against the construction mafia.
The Public Works and Infrastructure Department, police, National Treasury and the Construction Industry Development Board have agreed to work together to end criminal disruption at construction sites.
Sarupen says there’s a rise in armed gangs invading construction sites.
“They invade sites and generally demand 30% of payment from the contractors of the value of the project or prevent work from going on or halt active sites and extort the contractors and subcontractors on site to prevent anything from continuing. So, when you mean disruption, you basically mean extortion. What they do is weaponise an announcement that was made in the State of the Nation address in 2017 where then President Zuma said that 30% of a contract should be set aside for the local communities.”
Effect on GDP, SMMEs
Sarupen says that extortion in sectors including construction has a negative impact on the delivery of basic services.
He says the World Bank has put the cost of extortion in South Africa at 9.3% of the country’s Gross Domestic Product.
“2.7% just the actual act of extortion and the disruptions from that. What happens is firms have to pay for external security and that costs 4% of GDP. Then the spillover effect of not having the infrastructure completed or the project completed actually costs even more. Many of them are actually quite critical for communities, bridges – we have seen flooding in KwaZulu-Natal and bridges need to be rebuilt that cut communities off from the main city centres and so on. Community social infrastructure as well – and it also has a spillover effect of communities not getting services or houses as a result.”
Sarupen also says that the construction mafia has led to the closure of small, medium and micro enterprises, especially black-owned ones; and has a negative impact on the delivery of basic services.
“The companies basically have multiple problems. They either have to payout the construction mafia, or they’ve got to obviously report to the police. Many firms don’t unfortunately because it just becomes impossible. But what then happens is, the subcontractors, especially the small emerging firms and black businesses, they have stoppage time. They can’t afford that stoppage time because they’re operating within razor-thin margins, and it has put some of these firms out of business.”
Meanwhile, Minister of Public works and Infrastructure, Dean Macpherson, says that lawlessness will no longer be tolerated and that decisive action is underway to dismantle criminal syndicates disrupting critical projects in the country.
