The rise of the construction mafia in South Africa: impact on developments and the real estate sector

Origin and rise of the construction mafia

The construction mafia, also known as ‘business forums’, started to gain prominence around 2015. These groups often justify their actions by claiming to represent local communities seeking a share in the economic benefits of construction projects.

Initially, these groups focused on smaller projects, but their reach has since expanded to include large infrastructure developments, residential complexes and commercial real estate. Their modus operandi typically involves demanding a 30% share of contracts, and when developers refuse to comply, these groups resort to violent tactics, including site invasions and equipment sabotage.

Impact on developments and the real estate sector

The activities of the construction mafia have far-reaching consequences for the real estate and construction sectors, including:

1. Project delays and higher costs: One of the most direct consequences of the construction mafia is the delay of projects. Developers are forced to halt construction when sites are invaded or when contractors refuse to work under threat. These interruptions result in significant cost overruns, as delays can result in fines, higher labor costs and the need for increased safety measures.
2. Investor confidence: The presence of the construction mafia has shaken investor confidence in the South African property market. Both local and international investors are reluctant to spend money on projects that could be subject to extortion or disruption. This hesitation affects the availability of capital for new developments and could slow the growth of the sector.
3. Legal and compliance challenges: Developers find themselves caught between the demands of these groups and the legal requirements of their contracts. While some may feel pressured to accede to the mafia’s demands, this can lead to breaches of contractual and legal obligations, exposing developers to further risks and possible legal action.
4. Impact on local communities: Ironically, the very communities that the construction mafia claims to represent are often hit hardest. Projects that are postponed or canceled due to mafia activity can lead to missed opportunities for local employment and development. Furthermore, the association of violence with community demands can tarnish the reputation of genuine local businesses and entrepreneurs in the area.
5. Government and law enforcement response: The South African government has recognized the threat of the construction mafia and has taken steps to address the problem. The Special Investigations Unit (SIU) is charged with investigating cases of extortion and corruption in the construction industry. However, enforcement remains inconsistent and many developers continue to face threats without recourse to effective legal protection.

The way forward

Tackling the rise of the construction mafia requires a multifaceted approach. This includes:

1. Strengthening Law Enforcement: There is an urgent need for more robust law enforcement to deter criminal activity in the construction industry. This includes not only prosecuting those involved in extortion and violence, but also protecting developers and contractors who oppose these groups.
2. Community involvement: Developers must work more effectively with local communities to ensure legitimate issues are addressed. By fostering true partnerships with local businesses and workers, developers can reduce the influence of criminal elements that exploit community grievances.
3. Policy and regulatory reforms: The government should consider policy reforms that make it easier for developers to meet local participation requirements in a way that benefits both the community and the project. Clearer guidelines on community involvement in construction projects could help prevent the manipulation of these processes by criminal groups.
4. Public awareness and advocacy: Increasing public awareness about the destructive impact of the construction mafia is crucial. Stakeholders in the real estate and construction sectors, along with government and civil society, must work together to advocate for stronger protections against extortion and violence.

Conclusion

The rise of the construction mafia in South Africa poses a significant threat to the real estate and construction industries. By driving up costs, delaying projects and deterring investment, these criminal groups undermine the potential for growth and development in the country. It will take a concerted effort from both the public and private sectors to combat this scourge and restore confidence in the industry. Only through a combination of law enforcement, community engagement and policy reforms can the construction mafia be effectively tackled, ensuring a safer and more prosperous future for the South African real estate sector.