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How the construction ‘mafia’ business model jumped to other sectors

They prefer to be called business forums.

They started off invading construction sites in KwaZulu-Natal (KZN), demanding 30% of the contract work. Then it spread to Gauteng, and has now gone countrywide. The tactic is working, and many contractors simply pay off the gangs rather than have building work disrupted. Sometimes they employ the locals, often at extortionate rates.

They became known as the construction mafia, though they prefer to be called business forums. The business model is so successful that it is being replicated across the country in different sectors of the economy, as local community groups now move in on recently completed shopping and business centres, demanding to be employed in various roles.

Many of the gangs are armed and threatening, demanding that new businesses employ locals rather than trained personnel from outside the area.

All of this stems from new regulations to the Preferential Procurement Policy Framework Act, which allows 30% of all contract value on state construction contracts to be allocated to certain designated groups, including black-owned SMEs (small and medium-sized enterprises).

The regulations do not apply to private sector construction contracts, but this has not deterred the local forums.

Virtually every major construction site in Kzn has reportedly been affected by the forums.

Read: Engineers leave SA due to ‘construction mafia’

Peter Barnard, a partner at Cox Yeats Attorneys, has been involved in about 40 cases involving business forums and, when asked by clients, has gone to court and won interdicts against more than 30 of them, preventing them from disrupting site activities.

What is alarming, he says, is that the business forum model has spread to other sectors. “It’s no longer happening just in construction. It’s happening across the country and in many different sectors of the economy. I handled one case in the Eastern Cape last week where a major state-run project has been stopped for over a month by local groups demanding to be employed on the site.

“All that happens is the local community, which would benefit from the hospital, ultimately suffers.

“What has made the situation worse is that managers of the construction sites that have been targeted often end up paying off the business forums to make them go away, or hiring some of their members under duress, which only serves to encourage this kind of extortion.”

These groups are now demanding to be employed as refuse collectors, or as tellers in new shopping centres.

Barnard says broadly four groupings are involved:

  • MK Veteran associations
  • Taxi associations,
  • Business forums, and
  • Local communities.

He says the solution is for more proactive policing and greater clarity from parliament around regulations over the 30% set aside for SMMEs, as well as a unified approach and front from contractors and business owners.

Things got heated last week at the Master Builders Congress at Emperors Palace near OR Tambo International Airport, when representatives of the construction sector accused the police of doing little to solve the spread of crime on building sites. Gregory Mofokeng, CEO of the Black Business Council in the Built Environment, says contractors need to absorb as many South Africans as possible. “If not, the youth will create chaos here, not in Mozambique or Zimbabwe.”

‘We were not getting attention from our leaders’

Malusi Zondi, president of the Forum for Radical Economic Transformation, says forums are not a new development in the economic life of the country. “We formed business forums five years back because we were not getting attention from our leaders. We formed these forums not because we are criminals, but because government is failing in not enforcing contract obligations.”

Zondi admitted that business forums had done wrong, but added that they are not the enemy.

Sector Education Training Authorities are returning money to Treasury every year rather than training youth, as government has sworn to do.

Contractors are abiding by the regulations (requiring 30% sub-contracting to SMEs), but still their construction sites are being disrupted by rogue elements. “Where there are disruptions, the police don’t act. I’ve not heard of one case of prosecution of illegal disruptions. We expect arrests.”

German Mphahlele of the Construction Industry Development Board, told the congress that site invasions are exacerbated by a shrinking economy and rising unemployment. The problem is further aggravated by a misrepresentation of who qualifies for state sub-contracting work. “Some people are trying to say it is for locals. That’s not the case. It’s national.”

‘Some’ success

Aubrey Tshalata, president of the National African Federation for the Building Industry, pointed to some successful engagements between the public sector, companies and local business forums. One such engagement in Port Edward in Kzn resulted in a practical solution, with an agreement to train local youth and prepare them for work in the formal construction sector.

Lieutenant-General Nhlanhla Mkhwanazi of the SA Police Services said the police are constitutionally mandated to prevent crime, but that they can’t do it alone. “In construction, especially in KwaZulu-Natal, we ask if cases have been reported to the police. We have taken a number of cases to court for prosecution.”

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Oy, so legislation (in the form of the PPPFA) propelled this gangsterism?!!!

Only in SA. Only in SA.

And, best is, the corrupt ANC Government approves of this.

Of course they will ‘cos MK Veteran associations is a beneficiary … all in the name of bringing down apartheid

off course …..because it also goes by the other name…..state capture.

With the construction industry in the doldrums this sort of criminal behavior is going to encourage construction companies and engineers to ply their trade in a less threatening environment. They will of course be replaced with entitled individuals who wants a job, but neither have the skills or work ethic to make a meaningful economic contribution

It is most probably instigated by the mafia government we have. Why else will they do nothing about it?

It’s forced transformation just like the land grab’s in Zimbabwe and in the end will have the same result.

What makes it a bit of a laugh though is most construction companies these day’s are owned by the previously disadvantaged so why is the transformation thing even an issue any longer?

All just to facilitate corruption.

missing one of my clients due to this in the engineering profession – now the 3rd month that he just disappeared off earth – was promised large engineering jobs – but along with it came commission (and it was paid) claim from people in RBay area who issued a R1 500 000 commission invoiced for allocating the job to him / his cc (strangely by claiming R1 500 000 for one “allocation” the commission charger should surely be registered for vat – even the spelling on the “invoice” was deplorable) till today not even his wife heard anything from him / cell phone & email does not work and he has 4 other staff waiting in agony and pain for their salaries. the real new south africa – the couch potato that always want something for doing nothing

Well, the tactic has spread to trucking as here the so-called union wants R350 per person the company employs per month. You also have to train some of the people they provide although many people have training.

Moreover, it seems to be a tactic that is employed against Uber drivers in some places (Gautrain stations, King Shaka Airport) and in the Taxi industry generally where groups fight over routes and pay protection money.

While I do not have much information there are also some signs of this in the security industry. (Well the lower end like car guards – for years now – but it is moving to higher-income opportunities such as building guards.)

It seems to be a way of getting an income in industries that find it difficult to protect themselves. (Lonely guards, drivers, new and empty construction sites etc.)

great article! thanks

Come to think of it, this is a display of entrepreneurship, really. An entrepreneur is a person who exploits the legal environment to monetize his position of relative power. The ability and willingness to carry a gun and light a match is the only power they have, but the legal environment creates a distinct advantage for people like them. For these acts of what we call criminality, we cannot blame the “entreperneurs”, we should blame it on the impotence of the criminal justice system rather.

You see, the disintegration of law and order under socialist rule opens up entirely new avenues for entrepreneurship. The system itself punishes formal businesses and incentivises criminality. What is the BE status of the construction mafia or the zamma-zamma industry? That is my point.

The profit-margins widen because of the chaos, and in the end, the consumer ends up paying for it all.

The common thread with this, service delivery, truck burning, looting and killing,gang shooting, VBS, EFF, BFL, farm murders etc is the Zupta link.

Created long ago to divert attention from the 800 fraud charge specialist to anywhere but him. It buys him time.

Add Eskom-supported and enforced personnel transport regimes at power station projects – all things that adds up to horrendous cost to execute projects – and in the end a form of looting no different from medieval wars, where victor could take what was wanted and levy taxes on the loser. Dark ages.

Time to get together, think out of the box and come up with mutually beneficial plans.

How about this is developed as an alternative to the current union thinking?
You formalise the concept so that a project hires locals and the Cosatu type unions are banned from specific projects. You negotiate locally and there is no centralised union to consider.

Logical and civilised alternatives are desirable, but the situation is being “managed” with stones, burning tyres and guns, including AK-47s. We need a change of government and fast. Contractor dares transporting his own crew with own minibus – it get’s stoned and the workers has to flee for their safety. Then pay the extortionate Eskom-supported taxi rates to the power station or go out of business. And then you pay for the power station project’s soaring costs.

I have a friend that works in construction – until I read this article I didn’t understand why his company has been battling to get work done. Apart-hate isn’t dead, it’s just under new management.

The ANC should have T-shirts made with the words: don’t steal, the government doesn’t like competition. The rot in SA seems to be spreading an exponential rate and Cyril is attending funerals and giving pointless speeches.

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