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National Treasury tackles the ‘building mafia’

FILE PHOTO: Man works at a construction site.

FILE PHOTO: Man works at a construction site.

Published Aug 8, 2018


JOHANNESBURG - Treasury has stepped in to address the abuse by the so-called “construction mafia” of the 30 percent sub-contracting requirements provided for in the preferential procurement regulations.

Spokesperson Ntsakisi Ramunasi said yesterday that National Treasury had received complaints about the abuse in certain provinces and municipalities of the requirement that 30percent of public procurement contracts be subcontracted to designated groups, as provided for in the Preferential Procurement Regulations of 2017.

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Ramunasi said some people were allegedly demanding they be paid, in cash, 30percent of the value of each contract awarded in these provinces or municipalities instead of them being sub-contractors.

If their demands were not met, they threaten contractors, interrupt or stop the implementation of projects, she said.

“Such practices are not only illegal, but defeat the government objective of transforming the South African economy through equal opportunities for all and the advancement of historically disadvantaged individuals and small, medium and micro enterprises,” she said.


Ramunasi confirmed the threats currently were within the construction sector where the contract values were more than R30million, a threshold that was mandatory for subcontracting.

She said National Treasury was only aware of threats and intimidation being used in the construction sector.

In other sectors, the regulations were used to exclude suppliers from other provinces, she said.

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Ramunasi said National Treasury was aware of the Cato Ridge case in KwaZulu-Natal, which had been brought to their attention by the SA National Roads Agency (Sanral).

It was reported in February this year that the Delangokubona Business Forum had brought construction at the Hammarsdale interchange near Cato Ridge to a halt for the past two months, with Sanral appealing to the provincial authorities to intervene.

The forum is notorious for using force to take stakes from companies contracted in government projects as a form of radical economic transformation. The R276.45m Hammarsdale project commenced in April 2016. Sanral confirmed in February their completion deadline would not be met, because of the stoppages caused by Delangokubona.

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Roy Mnisi, the executive director of Master Builders South Africa, told Business Report in June the mafia-style business forums first emerged on construction sites in KwaZulu-Natal and thereafter in the Eastern Cape, but had now expanded into Gauteng and Mpumalanga.

Mnisi said these business forums largely based their demands on misinterpreted rhetoric about radical economic transformation and procurement regulations.

Ramunasi said section 217 of the Constitution demanded that when an organ of state in the national, provincial or local sphere of government procured goods and services, it must do so in accordance with a system that was fair, equitable, transparent, competitive and cost-effective.

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“Demanding that one be paid in cash 30percent of the value of every contract runs counter to this Constitutional requirement,” she said.

Ramunasi said National Treasury had also noted that some organs of state were using procurement preferences that were not provided for in the current regulatory framework.


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