Following several reports of the so-called construction mafia that has been disrupting construction projects countrywide, demanding that 30% of the project value should be awarded to local companies, President Cyril Ramaphosa has slammed this conduct and called for consequences in situations where individuals “disrupt work projects demanding a 30% stake”.

In some instances the groups, calling themselves business forums, seek control of the full 30%, with the aim of distributing jobs and contracts among local workers and business people themselves. While these incidents started in KwaZulu-Natal, with the Delangokubona Business Forum playing a prominent role, they are now prevalent in several other provinces.

Moneyweb has reported that the South African National Roads Agency (Sanral) road building projects countrywide have come to a virtual standstill due to the violent conduct of these groups. In fact, Johannesburg Stock Exchange (JSE)-listed Wilson Bayly Holmes-Ovcon (WBHO) chief executive, Louwtjie Nel, has told Moneyweb that hardly any projects get started without being disrupted by these groups, which he says are not bona fide business forums.

The business news site also reported that virtually every major construction project in KwaZulu-Natal has been similarly affected due to threats of violence, and that law firm Cox Yeats Attorneys has won about 30 court interdicts against such groups in the province.

The root of the misunderstanding
Sanral engineering executive Louw Kannemeyer said the situation had arisen due to local communities misunderstanding a National Treasury regulation about subcontracting that was implemented in April last year. In June the National Treasury denied this, saying there was no evidence of such a link.

In August, however, the National Treasury issued a statement saying it had received complaints in certain provinces and at municipalities about abuse of the requirement that 30% of public procurement contracts should be subcontracted to designated groups, as required by the preferential procurement regulations. According to the National Treasury, groups in some instances demand the 30% stake in cash.

The National Treasury warned that organs of state that are using procurement preferences not provided for in the regulatory framework – including ring-fencing contracts for service providers and suppliers who live in a certain geographical area – are non-compliant and that such expenditure will be classified as having been irregularly incurred.

The president’s reaction
On 8 September, President Ramaphosa was addressing business leaders in Pietermaritzburg as part of his Thuma Mina Campaign (about the ANC reconnecting with the people through activities that improve people’s lives and solve the problems they face).

The SABC reported that he covered the economy, land reform and radical economic transformation, and referred to people who are hijacking policies and distorting radical economic transformation by disrupting sites and demanding 30% of the value of projects, describing these practices as “radical economic robbery” and calling for consequences.

The business forum’s point of view
Malusi Zondi, newly-elected president of the Federation for Radical Economic Transformation (Ffret), earlier rejected the idea that the 30% subcontracting requirement is not geographically defined.

Ffret currently represents 37 business forums, including the infamous Delangokubona Business Forum, which reportedly has more than 3 000 members. Zondi apparently acknowledged to Moneyweb that most of these members are former criminals.

He says Ffret is working to professionalise them and is organising itself in all provinces, adding that members shut down construction sites because they were robbed of their “fair share” (by contractors). Ffret has also engaged with state-owned companies such as Transnet and Eskom. According to Zondi, it is branching out into other sectors too, such as mining.

Zondi says Ffret will “radically engage” with the National Treasury, which he says is “controlled from somewhere”, to influence its unacceptable stance against ring-fencing 30% of the value of contracts for local communities.

Source: Moneyweb
The original article, “Ramaphosa slams ‘construction mafia’”, was written by Antoinette Slabbert and first published on on 10 September 2018.
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