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.
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 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 SMMEs.
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.
Business Against Crime’s useful guidelines
Business Against Crime South Africa (BACSA) has, as part of the work of the National Priority Committee on Extortion and Violence at Economic sites, authored a Guideline in the public domain to help companies bring this problem under control. Roelof Viljoen, National Project Manager at BACSA, says that it’s important for companies and their employees to understand what extortion actually is, so that they can identify it when it occurs, and report it. Mounting successful prosecutions is key to reducing extortion.
Extortion as a crime requires two elements to be present: the demand for a benefit, such as money, work or a contract that would not normally accrue to the demander or his or her beneficiaries, as well as a threat of damage should the demand not be met.
The threat must be serious enough to cause a reasonable person to experience fear, and may be made in person or via telephone, letter or e-mail. For example, if damage or harm is caused without a threat being made, or a demand is made with no threat uttered, then extortion as defined in law has not occurred.
BACSA advises companies to prepare properly so that they are well positioned to resist extortion threats. A key point is that uninvited visitors should not be allowed onto the site for discussion as this might create the impression that the desired reward is in reach.
On the contrary, effort should be made to advertise the low chance of receiving any benefit. Business forums often use legal terminology to give their demands credibility, so posting information at the entrance to the site showing there is no basis for extortion makes good sense. For example, an official notice on a government project should indicate that preferential procurement regulations have been followed; a private project should state that fact, noting that these regulations are not applicable. Documentary proof in the former case should be held on site as well.
Of course, being able to add that local contractors have been granted a certain percentage of work, or that none were found, would also be helpful. Local communities expect to benefit from work carried out in their area. Despite there being no legally enforceable requirement, it makes sense for them to attempt to create opportunities for locals and to engage continuously with them. This undercuts the business forums’ typical claim to represent the local community.
Business forums are frequently ignorant of the rules of business. It can be helpful to explain to them that on-site personnel are not empowered to make decisions regarding the allocation of work. It is also worth pointing out that it is illegal to sub-contract without following a fair bidding and tender process, and that deviating from this principle could lead to the tender being cancelled, ensuring the work opportunity is lost for everybody.
Other precautionary measures include ensuring there is a safe area for employees on site, as well as an alternative exist. Recording equipment such as CCTV is important, as are primary and secondary communication options. Everything related to any attempt at extortion must be meticulously recorded, and if a disruption occurs, a set of outlined safety procedures must be followed. The incident should be logged with BACSA for inclusion into the National Priority Committee discussions and reported to the police.
The guideline also details the procedures to be followed in successfully prosecuting a case of extortion in the courts. It has also implemented the Eyes and Ears (E2) initiative aimed at better collaboration between the police and the private security industry, supported by BACSA, Security companies deployed at construction sites and participating in E2 have an approved operational channel to the SAPS operational command centre (OCC).
Steps to address extortion
Irish-Qhobosheane argues that strong partnerships are the key to addressing the challenge and normalisation of extortion. The State needs to develop a comprehensive strategy to address systemic extortion and must include a more proactive response from the criminal justice system. Victims must feel safe enough to talk about and report extortion. The practice has become so prevalent that victims aren’t talking about it, are fearful of speaking out because of the ever-present threat of violence and are accommodating extortion practices by working it into the budget. The State, police, communities and local government must be involved in drafting a strategy to address these problems.
Business forums and their unreasonable demands are placing yet more strain on an industry that is already fragile. In so doing, they are not only affecting big companies, but in the process are closing down the smaller, empowered companies that work alongside them.
Mohau Mphomela, Executive Director at MBA North says that extortion must never be allowed to become routine: “Our industry has been battling severe headwinds for many years, and this extortion continues to put vital contracts at risk. Business Against Crime is to be commended for coming up with these guidelines, and we urge all members of the industry to use them to put us back on a solid footing.”
About the Master Builders Association North
The Master Builders Association North is the amalgamation of the former Master Builders Associations of Johannesburg (founded in 1894) and Pretoria (founded in 1903). The organisations
merged to form the Gauteng Mast Builders Association in 1996, and was renamed Master Builders Association North, representing four regions: Gauteng, North West, Mpumalanga and Limpopo. It is a chapter of the Master Builders Association South Africa.
Based in Halfway House, the Master Builders Association North represents the interests of employers in the building and allied trade industries in the above mentioned four regions. It aims to serve its members by facilitating best practice within its membership and the building industry as a whole.
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