Construction sector declines by 20% as a result of industry lawlessness

Taking their cue from former Eskom CEO, André de Ruyter, who blew the whistle on mafia-like structures within the power industry, the construction industry has also raised its hand to bring attention to the mafia-like set-ups within the sector.

According to director and chief economist at Econometrics, Dr Azar Jammine, who was speaking at this year’s AfriSam budget breakdown session held in Parktown on 24 February 2023, the construction industry has shrunk by 20% since 2010, with some major names closing shop over the past decade and a bit.

These names include Group Five, Basil Read, and the likes, with companies like Stefanutti seriously downsizing.

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Jammine said that there were a number of reasons for this, but one of the most prevalent one was the presence of a mafia-like structure that was operating within the industry, imposing their ideologies and crippling businesses across the board.  

“There are obviously a vast number of factors that has contributed to the decline in industry, but it is the decline in law and order where we have seen the inability of the police to block criminal activity brought on by certain mafia forums, who form as a result of an obsession with an ideology, that affects the industry the most.

“As a result of this, we have seen a decline in international investment in construction in South Africa and a mass exodus of persons with the jobs skills needed in the industry, particularly that of civil engineers,” he said.

No choice but to leave SA

One such civil engineer, who spoke out on grounds of anonymity, told The Citizen that he had no choice but to close up shop and take his construction company out of South Africa.

“These mafia-like individuals would arrive on your construction site, armed but not pointing a firearm, and demand to speak to the project manager. They would then start negotiating, trying attain 50% of the contract work for themselves. If you refuse, they threaten your workers and stop your operations,” he explained.

“The identify themselves as an emerging business forum. And then they start with their negotiations. They are very political connected, so even if you report them, nothing gets done about it.

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“It got to a point where we were making major losses on the down time these men would take to negotiate. That was when I decided enough was enough and left the country,” he said.

He was not the only one to reason in this way.

Systematic levels of extortion equivalent to Italy

The Bargaining Council for the Civil Engineering Industry’s Lindie Fourie, in a media interview, likened it to the structure of the mafia groups in Italy.

She said: “It is getting more blatant even though it has been an issue for a number of years… There is reference that we’ve reached systemic levels of extortion that is equivalent to what Italy experienced with the mafia on their side. We have seen extremely violent incidents on site, where contractors are threatened – they are sometimes abducted and even held hostage. This is happening to the extent where some of the contractors feel they have no choice but to work with some of these entities”.

As such, international investors have been deterred by the political situation and have pulled back investments.  

Jammine confirmed that the construction company has been the worst-performing sector in the economy, driven by a lack of investment and the departure of companies.  

“This is really unfortunate, as the construction industry is the most employment-intensive sector in the economy. But as a result of the lack on investment, we are seeing employment levels are lagging, affecting the overall GDP,” he said.

Jammine said that De Ruyter’s interview, where he has spoken out about the mafia-like structures now draws the battle line against certain ideologies that have long stifled the growth of the economy.

“Hopefully, the De Ruyter interview will highlight an issue that these sectors have been battling with for the past decade or so, and something can be done about it, where we will see the economy grow again,” he said.

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