South Africa’s Construction Mafia – Building a Legacy of Corruption

For over 200 years, Sicily’s notorious mafia has struck fear into the hearts of Italians and the world. Even today, although their numbers have thinned thanks to large scale convictions of senior officials, and defections by members who turned government witness, they are still heavily involved in nefarious activities such as extortion, corruption of public officials, labour racketeering, tax fraud, loan sharking, and stock manipulation. There are even rumours of human trafficking.

I find it ironic that Italy’s mafia originally evolved from small private armies, or mafie, hired by absentee landlords to protect their estates from the bandits who thrived in Sicily’s largely lawless conditions. Ironic because, although they started out as small units reliant on payment from others, they quickly became so big and so powerful they bit the hand that once fed them, turning on the landowners and extorting more and more money from them.

It’s not a dissimilar tale to the mafia-style groups plaguing South Africa right now.

I’ve written previously about the electricity and water mafias, who capitalise on the chronic problems with our essential infrastructure and hold local communities and service providers to ransom, often deliberately sabotaging facilities to gain more business.

Sadly, the story doesn’t end there, and there are now increasing reports of a new mafia tightening its grip on South Africa’s construction industry.

The State Investigating Unit (SIU) describes the construction mafia as “extortion groups that typically seek to forcefully extract protection fees from local construction companies and contractors, or extort a portion of the cost of an infrastructure project, or that specific individuals affiliated with the mafia are recruited to work on the site.”

Backlogs and interruptions on construction sites due to mafias have so far cost the South African economy more than R68 billion across 186 projects – and the problem is getting worse.

In Cape Town, for example, at least seven major urban mobility projects have been stopped because of concerns about site safety.

“We have had several instances that have resulted in major setbacks in big public transport projects,” said Cape Town’s Urban Mobility MMC, Rob Quintas, adding that new reports of extortion come in regularly.

“This has scared off contractors from completing and doing business in the City, and rightly so,” he said.

“Extortion in the construction sector has reached worryingly high levels,” says Roelof Viljoen, the national project manager of Business Against Crime South Africa (BACSA). “[It is] derailing and delaying projects worth billions of rands… [but] with no signs of this trend reversing, construction firms should build extortion preparation and best practices into their planning ahead of every project.”

He believes that “construction firms need to plan for the worst,” and is not the only one saying so. Mohau Mphomela, the executive director at Masters Builders Association North, believes the extortion is so pervasive construction firms simply view it as yet another routine challenge – and yet another cost of doing business in South Africa.

One of the biggest issues is, as with so many similar problems in our country, any action by law enforcement is hampered by the fact that many of the syndicates are extremely well organised and linked either to legitimate businesses, or well-connected individuals, or both. This makes taking any action against them challenging to say the least.

The SAPS has said, however, that tackling extortion in the Western Cape is a top priority. On a national scale, they have, to date, had 712 cases referred for investigation that have resulted in 722 arrests and 52 convictions.

It’s an encouraging start, but a less than 10% conviction rate essentially means the mafia is free to continue with business as usual. Stuck between a rock and a hard place, many construction companies end up paying extortionists to leave them alone to run their businesses. Until, that is, until the next pay day rolls around.

Unfortunately, paying for peace is only ever going to be a Band Aid – and it creates a dangerous precedent that risks future demands and implies company complicity.

Compounding the problem is a legislative loophole originally designed to protect the interests of the very people the mafia is now hurting with their illegal and extortive activities.

An article by De Rebus explains that the issue stems from the Preferential Procurement Regulation of 2017, which provides that 30% of a construction development project has to benefit the community where it is allocated by way of employment.

This opens the door for members of the mafia to approach the developer and demand money equal to that 30%. If these demands are not met, retaliation in the form of kidnapping, assault, murder, threats, racketeering, torture, embezzlement, and public violence, occur.

So, what’s the alternative? What can businesses do to protect themselves, their people and their projects if they refuse to pay up?

“The key is to identify a possible incident before it starts escalating,” explains Roelof Viljoen.

BACSA has developed guidelines to help, which include:

Create and document safety procedures for extortion attempts

For private projects, display a notice stating that preferential procurement regulations do not apply.
For public projects, show compliance with these regulations and keep verification documentation on-site
Prioritise hiring local subcontractors to involve the community
Deny Business Forums access to the site for preferential procurement discussions
Make sure everyone understands that on-site personnel cannot make procurement decisions
Stress the illegality of subcontracting without following a bidding and tender process
Establish a safe area for employees, preferably away from entrances, and ensure an alternative exit is available
Install CCTV if possible and use cell phones to record any unscheduled interactions as evidence of potential crimes
Report all extortion incidents to BACSA and the SAPS
Follow BAC guidelines for prosecuting extortion cases in court.

Another option is to employ private security on sites, who can, among other duties, ensure that only legitimate employees have access. Unfortunately, this is both expensive and not foolproof.

Obtaining community support is clearly key. Using local suppliers for materials and hiring local labour offers real, tangible, benefits, because when you have buy-in from the community, they’re less likely to do business with the mafia.

“Whenever crime is involved, someone loses. It is similar to a war. You have to avoid being complicit in crime, because it is the right thing to do,” said Viljoen, adding that paying off extortionists is a major driver of the growth of mafias in South Africa.

It is also, of course, unsustainable in the long run, as it ultimately increases the cost of projects, which could potentially make them unviable economically.

Chairman of International award-winning construction company WBHO, Louwtjie Nel, wrote in the company’s latest annual report that the country’s construction sector has shrunk by around 44% in the past six years.

“There is an urgent need for South Africa to prioritise upholding the rule of law,” he said. “The adverse effects of not doing so are becoming increasingly obvious.”

While not wanting to understate the very real threat these mafias pose to businesses and people, I believe that, ultimately, they are essentially a gang of bullies who think nothing of exploiting the fear of others. The hope is that, most bullies, they are likely to back down when faced with real resistance.

The question is, does South Africa’s construction industry have the resources and, more importantly, the energy and resolve, to provide it?