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

They prefer to be called business forums, but have reportedly affected virtually every major construction site in KZN.

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. 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.” Brought to you by Moneyweb


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