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‘Construction mafias’ are holding a key South Afric...

Business Maverick

INDUSTRY UNDERWORLD OP-ED

‘Construction mafias’ are holding a key South African economic sector to ransom

(Photo: Gallo Images / Media 24 / Herman Verwey)

At one construction site, a group of men gave the owner of the company an AK-47 bullet and said, ‘This bullet was worth R17. That is the cost of your life if you do not comply with us.’

South Africa’s construction industry is in crisis: as the Bargaining Council for the Civil Engineering Industry (BCCEI) stated in April 2022, “the problem of intimidation, extortion and violence on construction sites has reached crisis levels”. The “construction mafias” – as they have been dubbed – who are responsible for this intimidation have become widespread since their first appearance in KwaZulu-Natal.

Today, these groups have become deeply entrenched in the construction sector. In 2020, the South African Forum of Civil Engineering Contractors (Safcec) estimated losses due to these disruptions amounted to R40.7-billion nationally.

In the absence of any effective legal recourse and facing the threat of violence, many businesses have had to concede to these mafias’ demands, legitimising and solidifying their role in the industry. This could have disastrous economic effects in the long term for a sector that is already under strain.

The origins of a crisis

The emergence of construction mafias became noticeable around 2015, when site invasions began in KZN. These groups initially fashioned themselves as “local business forums”, often operating under the banner of “radical economic transformation”. The professed purpose of these forums was to ensure local communities a stake in development projects therein. The stake referred to most often includes employment of members of the forum, a portion of the contract value for “services”, and/or direct payment of “protection fees”.

Commonly, these groups demand that 30% of the contract value be allocated to business forum members.

Often armed with automatic and semi-automatic weapons, the leaders of these armed groups made their demands known in an intimidatory fashion, often with their firearms displayed. As one construction manager described it:   

“Each of the men has their own Pty [company] and tells you that you must employ four skilled and four unskilled workers from them. On top of that, you must give each of them R5,000 a fortnight to ensure there are no disruptions. That money is nothing but protection fees… At one construction site, a group of men gave the owner of the company an AK-47 bullet and said, ‘This bullet was worth R17. That is the cost of your life if you do not comply with us’.”

The most prominent of these initial groups included the Delangokubona Business Forum and the KwaMashu Youth in Action Movement, which sprouted from Umlazi and KwaMashu townships respectively. Their operations were initially confined to these townships but soon spread. In 2016, the two groups merged to form the Federation for Radical Economic Transformation (FFRET) and began invading construction sites throughout KZN.

Increasing number of construction companies and developers are now taking the option of accommodating business forums rather than face the consequences of refusing to cooperate

From 2018 on, the practice of invading construction sites and extortion of contractors had spread to the rest of the country, perpetrated by splinter groups from the FFRET and others emulating them. They remain active in KZN: following the July 2021 unrest which broke out in KZN and Gauteng in response to the incarceration of Jacob Zuma, some of these groups disrupted rebuilding efforts, demanding payment before business could resume, inhibiting the economic and livelihood recovery in affected areas.

Commonly, these groups demand that 30% of the contract value be allocated to business forum members. This originally derived from a National Treasury regulation which mandated that 30% of contract value for projects exceeding R50-million be allocated to local “content”. This only applies to tenders for government contracts but the misreading (or “re-framing”) of this provision, whether deliberate or otherwise, gives an illusion of legitimate claims by these forums.

Through these 30% claims, the extortion groups frame themselves through the ideology of “radical economic transformation”, claiming to represent the interest of local communities, promoting employment of local people of colour, and lobbying for local business forums to be included in the project work.

This creates a veneer of legitimacy for the existence and actions of groups like the “Black Businesses Federation” (BBF), as the FFRET has since rebranded itself, ostensibly to distance itself from association with the “radical economic transformation” faction of the ANC, and to emphasise its role as furthering the interests of black people in the sector.

However, these groups are often transformative in name only, as many projects run by black-owned companies also experience disruption in addition to intimidation and violence against their personnel.

Speaking about the demands of the business forums, Safcec CEO Webster Mfebe said:        

“No one can discount the desire of communities to be part of the mainstream economy, but these construction mafia gangs use extortion methods to demand to be included in the contract. We’ve explained to them that the local subcontractors do not have to be members of their group.”

The financial burden of paying protection money has contributed to the demise of certain companies and driven others to the brink of bankruptcy.

Resistance and acquiescence – construction industry responses

Companies have fought back against the mafias by taking to the courts. Over 51 court interdicts were granted between 2016 and 2019 against business forums and their members to prevent disruption of construction sites. However, these interdicts seem not to have deterred business forums involved in mafia-style activities.

In reality, an increasing number of construction companies and developers are now taking the option of accommodating business forums rather than face the consequences of refusing to cooperate. “Eventually, the amounts businesses are paying forums becomes a line item in their budgets,” said Dominic Collett, chairperson of the KwaZulu-Natal Business Chambers Council.

Yet there are serious implications to taking this approach. While conceding to the demands may reduce the threat of violence (and actual incidents of extortion-related violence at construction sites have declined since 2019), it emboldens and legitimises the extortion groups. Studies of extortion in other countries have often found that the reduction of violence is often symptomatic of the acceptance of extortion as a price of doing business.

At the same time, “business forums” can then portray themselves as representing legitimate community interests. As Collett explains, “negotiating with [the business forums] means recognising them, which means legitimising them. This is like slowly boiling a frog. Eventually, it will explode, and business will disappear because of it. Businesses can’t afford to part with 30%, especially if they aren’t getting any value.”

Even where businesses negotiate with these groups, they can still become the target of threats and intimidation. For example, in December 2017, Safcec started to engage the FFRET and, eventually, the two bodies agreed to work together to find a solution. According to Mfebe, immediately following these engagements the FFRET made attempts to prevent its members from disrupting sites, and there was a decline in the number of site disruptions. However, subsequently, splinter groups who were not associated with the FFRET emerged and engaged in the same mafia-style tactics.

The financial burden of paying protection money has contributed to the demise of certain companies and driven others to the brink of bankruptcy. According to Mfebe, while some of the larger construction companies have been able to survive by seeking work outside South Africa’s borders, many of the smaller companies have been forced to close.

In 2020, the construction sector employed over 1.3 million people, providing 8.3% of total employment in the South African economy. Over the past few years, the industry has experienced a decline, due in part to a reduction in government spending on infrastructure and compounded by the hard lockdown imposed during the Covid-19 pandemic. The additional burden of extortion groups is unsustainable, something many businesses can little afford.

In dealing with this type of extortion, it is also important to acknowledge that there are socioeconomic and political dimensions to the construction mafia. Economically excluded and depressed communities not only provide fertile ground for recruitment into mafia-type organisations like the construction mafia, but also the conditions to “justify” extortion activities from local business forums. Dealing with extortion in the South African construction sector therefore also requires a holistic response to address the conditions giving rise to this type of extortion.

Until such intervention is made, businesses will have little alternative but to continue negotiating with extortion rackets to prevent disruptions and violence. This affords further legitimacy to these groups and contributes to the normalisation of extortion in South Africa’s construction industry, something which is ultimately unsustainable in the long term. DM

This article draws on research in ‘Extortion or Transformation? The construction mafia in South Africa’, a new report by Jenni Irish-Qhobosheane for the Global Initiative Against Transnational Organized Crime. The full report is available here: https://globalinitiative.net/analysis/extortion-construction-mafia-south-africa/

The Global Initiative is a network of more than 500 experts on organised crime drawn from law enforcement, academia, conservation, technology, media, the private sector and development agencies. It publishes research and analysis on emerging criminal threats and works to develop innovative strategies to counter organised crime globally. To receive monthly Risk Bulletin updates, please sign up here.

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All Comments 8

  • Where are the police, Hawks and intelligence services in this scenario? MIA. SARS can also investigate these forums. Another crisis looming. Poor people who needs jobs are used and who foots the bill for this extortion? The customer – you and I pay higher prices because property companies recoup that cost through rental and sale prices. The most corrupt parts of Italy are also the most undeveloped. There’s a lesson in there.

    • If the believe is the government is willing to deal with this issue after being totally ineffective since 2015 ? Only one way out convince voters one by one to vote & for change

  • Those whom the Gods wish to destroy, they first make mad is an ancient Greek saying which applies here. As a retired professional civil engineer with 60 years experience and a previous head of national roads in this country I can only say that it is impossible to conform to the 30% local content requirement on sophisticated projects such as very large interchange construction or bridges across the large gorges on the E Cape section of N2 without introducing very dangerous construction conditions as well as possible failure of the projects. BUT this is what I gather the SANRAL board, with reputedly little technical expertise is asking from its engineers, who understandably are unhappy with the decision of the Board.

  • Thank you Jenny Irish- Qhobosheane for this nuanced piece. As I understand protection rackets are rife all over the country – and dangerous. Probably the most important sentence is “Dealing with extortion in the South African construction sector therefore also requires a holistic response to address the conditions giving rise to this type of extortion” -business leadership maybe stepping up, but we need political leadership to do the same.

  • I run an old family firm in the construction industry. Over the last 3 years, we have had to deal with the bankruptcy of a major client resulting a seven figure loss, Covid-more than a month with no turnover but overheads still steaming along-another seven figures, the looting last year and the floods this year. We have nothing left either in cash or fight to embark on a battle with these okes, so if they come to me I will close the company and **** off somewhere. I would rather sweep the streets.
    PS..and as a btw-could we have a more useless,USELESS in every respect government than what we have at present?

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