R63 billion rands worth of projects have been affected by the Construction Mafia, and in this interview with BizNews, Deputy Finance Minister Ashor Sarupen states that the biggest obstacle in dealing with it has been how it was created. “And that was when former President Jacob Zuma said in Parliament that there will be a 30% set aside for local communities, because too many people thought that this means that I must personally get 30% of the value of that project. And it gave rise to all of these Construction Mafias. So we must be blunt and honest and say it was a problem created by President Zuma and towards the tail end of his term pushing this populist message out. And now we’ve got to fix that.” The Deputy Minister goes on to detail the strategy put together for government at this week’s National Construction Summit on Site Disruptions. He also gives an update on Operation Vulindlela. “There are new focus areas coming in Operation Vulindlela and that will be focused on local government in particular because we can’t continue with our towns and cities falling apart.”
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Extended transcript of the interview  ___STEADY_PAYWALL___
Chris Steyn (00:02.73)
The government has identified infrastructure development as the cornerstone of South Africa’s economic recovery. However, it is facing huge challenges with the Construction Mafia and site disruptions. We speak to Deputy Finance Minister Ashor Sarupen. Welcome, Sir.
Ashor Sarupen (00:23.271)
Thank you very much for having me.
Chris Steyn (00:26.656)
Firstly, to what extent has economic damage been caused by the Construction Mafia over the past few years?
Ashor Sarupen (00:36.191)
Yeah, well, since 2019, the National Treasury has identified that 63 billion rands worth of projects have been affected by the Construction Mafia. And this has also cost the economy quite substantially. The World Bank did a report on what extortion costs the economy and found that obviously while you can attribute amounts lost to the disruption in sites, you’ve also got the knock on effects of the infrastructure not being delivered, the cost of security and so on. And they estimate that extortion is costing South Africa 9.7 % of its GDP, both in terms of costs, as well as in terms of its concomitant effects. So we’ve got an extortion racket across South Africa that’s really damaging the economy in a big and fundamental way.
Chris Steyn (01:27.83)
Please tell us about your strategy to deal with this.
Ashor Sarupen (01:31.829)
Yes. what we did on Tuesday is we had a national summit and I know everybody rolls their eyes when you hear it’s government’s having a summit because people are just so tired of talk shops.
So what we did is put together a strategy for government on Tuesday in conjunction with critical stakeholders, small businesses in the construction industry, bigger firms, people have been affected by the Construction Mafia, industry associations and so on, as well as SAPS.
And the focus is really on a series of targets that’ll strengthen law enforcement in the space, encourage reporting as well, because too many firms regrettably think that it is easier to pay off the Construction Mafia rather than report the crime. Deal with that.
And we’ve put in a series of targets, but also put more work into social facilitation so that communities both understand what things mean when they say Local Beneficiation means something. It doesn’t mean people get to hijack a site and take it over and demand things for themselves and add no value. But doing the proper social facilitation to say, these are the kinds of jobs that can be done through local labour, but also making sure that you strengthen that so people understand when you have highly technical construction projects, you’ve got to have highly skilled people. You can’t threaten them. You can’t push them off site. You can’t demand that someone that I know gets the job as well. So that’s all the social facilitation function is improved.
But also on the regulatory side, making sure that legitimate businesses aren’t disadvantaged, that there’s proper regulation of firms operating in the space so we don’t get hijacked by people claiming to be business forums and don’t create unnecessary space for firms that are not legitimate to come and demand access to these projects and effectively extort from these projects without adding a single cent of value.
Chris Steyn (03:29.161)
What have been the biggest obstacles in dealing with the construction mafia?
Ashor Sarupen (03:37.143)
So I think, look, if I can be blunt, the biggest obstacle has been how it was created. And that was when former President Jacob Zuma said in Parliament that there will be a 30% set aside for local communities, because too many people thought that this means that I must personally get 30% of the value of that project. And it gave rise to all of these Construction Mafias. So we must be blunt and honest and say it was a problem created by President Zuma and towards the tail end of his term pushing this populist message out. And now we’ve got to fix that.
I think that the biggest challenge, of course, has been both on the law enforcement side and the regulatory side. And law enforcement, I think every South African is and has bad experiences of law enforcement in the past, of poor law enforcement, and so on. And that’s been a challenge. But I think what we’re beginning to see in the last few months with the new minister in place as well and a stronger focus on the enforcement side of law enforcement that we are seeing improvement there.
And also just that the State hasn’t given it the kind of focus it deserves. And just having politicians say that we will not tolerate this and start changing the behaviour of actors, including the government itself, to take a zero tolerance approach rather than an accommodative approach has helped because the barriers either when you ignore something or you try to accommodate something that is criminal, you end up with acceleration of the criminal elements and more and more people taking advantage of it.
So I think the change in attitude, the improvement in law enforcement and the industry itself now stepping up and saying we’re not going to tolerate this anymore, along with the energy from the Minister of Public Works and tackling this has changed that quite substantially.
Chris Steyn (05:22.294)
Can you please give us an update on Operation Vulindlela?
Ashor Sarupen (05:28.052)
So the next phase of Operation Vulindlela will be announced next year. What it’s focusing on at the moment is some of the key things that are disabling economic activity. Of course, energy was the big one and it remains a big risk for the economy. The key issues in energy, of course, is that we now need to move to the next phase.
So Transnet has been vertically unbundled, but we now need to create a competitive energy market. And that’s the next phase on energy for Vulindlela. And I’m sure that when people hear the announcements made in phase two of Vulindlela, I think it’s going to be quite an exciting time.
The next step, of course, is dealing with our port and freight rail logistics challenges. It is the second biggest hindrance and blockage in the economy after energy. And with port and freight rail logistics, the series of reforms concessioning out of ports, bringing private sector participation in.
Those things are going to be quite critical and really leveraging both the skills, capital expertise, management of the private sector, treating the private sector as a partner, not hostile. It’s quite important.
One of the key successes of Vulindlela and just letting the private sector run things is critically important for us to succeed there. So that’s where we are.
There are new focus areas coming in Operation Vulindlela and that will be focused on local government in particular because we can’t continue with our towns and cities falling apart. And those measures will be announced in February. So I can’t preempt the government announcements, of course. But I think that there are some exciting things coming up, both in terms of private sector participation in critical network industries, as well as major reform to local governments that will begin to unlock the short and the medium term barriers to growth.
Chris Steyn (07:17.45)
Thank you. That was Deputy Finance Minister, Ashor Sarupen speaking to BizNews about measures government is taking to deal with the Construction Mafia and site disruptions so that infrastructure projects could aid economic recovery. Thank you very much,
Sir. And I’m Chris Steyn
Ashor Sarupen (07:36.727)
Thank you very much.
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