GETTING TO GRIPS WITH EXTORTION IN THE CONSTRUCTION INDUSTRY PART 1

Often-violent ‘business forums’ are holding the construction industry to ransom. The real danger is that, in true Mzanzi style, business just adapts to it. Companies must put plans in place. This is Part 1 of a two-part series.

Business forums emerged in Umlazi in 2014/5 when groups began invading construction sites, demanding a share of the project or that the company employ specific people or companies. The practice spread and by 2018-9 had emerged in other provinces. These business forums, popularly known as construction mafia, often tout heavy calibre weapons.

A similar model of extortion has spread to other industries, most notably mining.

Much of the violence has subsided in KZN, says Jenni Irish-Qhobosheane, a researcher at the Global Initiative Against Transnational Organised Crime, who delivered a keynote at a recent Human Sciences Research Council event. But, she goes on to say, this isn’t a sign that extortion is not still happening but signals that extortion has become normalised, a cost of doing business – and with the threat of violence always present, actual violence becomes less necessary.

Speaking at the Human Sciences Research Council event, Ayabonga Cawe, Chief Commissioner at the International Trade Administration, made the point that extortion is compromising government’s vital infrastructure rollout, which in turn affects the whole economy.

Nevertheless, he cautions that such conflicts arise when there are different interpretations of what regulations actually mean. “The problem lies in how preferential procurement has unfolded, and this opens up the way for opportunistic criminals,” he says.

Irish-Qhobosheane agrees, adding. “We do need to recognise that economic exclusion and a lack of economic transformation creates a fertile ground for extortion in construction. However, it is important to distinguish between genuine community concerns and criminals involved in extortion for their own gain.”

Business forums typically demand 30% of the contract value be allocated to business forum members or direct to the forum itself. This figure appears to derive from National Treasury’s Preferential Procurement Policy Framework Act,39. It states that 30% of public procurement contracts should be contracted to designated groups, as provided for in the Preferential Procurement Regulations. Sometimes an even bigger percentage is demanded. The aim is clearly to give the demands a respectable veneer of transformation.

National Treasury has strongly condemned this practice as both illegal and a blow to government’s attempts to advance the interests of historically disadvantaged individuals and SMEs.

It can hardly be emphasised enough that construction companies, and business more generally, put in place comprehensive directives for dealing with extortion attempts, argues Musa Shangase, director at Corobrik.

“The first principle should be to afford the business forum the opportunity for dialogue, to present their demands. I advise sharing with them the terms of the contract and what the obligations for advancing transformation goals are,” he says. “They need to be informed whether the project is a public or private one, and what the implications are in each case.”

He also advises companies to request a database of the business forum’s constituents, and to employ a community liaison officer who can act as a mediator between the community and the company. The duties of the community liaison officer include negotiating with others, developing and fostering relationships and getting people to understand others’ points of view.

In public sector projects, the community liaison officer acts as the link between the main contractor and the business forum. In the case of private sector projects, if business forums insist on participation, Shangase says to report the matter to the police.

Read on in Part 2…

Read the full guidelines from BAC.