NEWS: Take a tougher stand against construction mafias

Business Live editorial believes it’s time SA’s law enforcement agencies take a stand against criminals, who are masquerading as community representatives and threatening not only the lives of engineers but also the country’s economic revival plans.

When he unveiled a plan to boost the economy ravaged by the Covid-19 pandemic in October 2020, President Cyril Ramaphosa put private sector-led infrastructure spending at the heart of the recovery effort.

It goes without saying then that the environment should be sufficiently conducive for business leaders to persuade shareholders to build a mine or put in tenders to construct bridges or dams.

Ramaphosa may look at recent comments from infrastructure giants such as WBHO, mining house Sibanye-Stillwater, and most recently the record order book from roads builder Raubex as evidence that his ambition to turn SA into a construction site over the next few years is bearing fruit.

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In March, WBHO gave upbeat comments about infrastructure work that is starting to roll in after a slump that took with it industry stalwarts such as Group Five and Basil Read. Its order book from SA was the fastest-growing compared with regions in the rest of Africa, Australia and the UK.

On Monday Raubex told investors its order book swelled by more than two-thirds in 2020 as it benefited from the road infrastructure projects through the SA National Roads Agency, which oversees the national road network.

Mining companies from Anglo American Platinum to Sibanye-Stillwater have also unveiled plans to pour billions of rand into capital expenditure while demand for renewable energy has kept the construction sector, which had been running on fumes for much of the past decade, in business.

It’s encouraging. Like Ramaphosa, we would like to see more private sector players, especially mining houses, pouring money into new shafts, exploration and other growth projects, and pick up the slack on the expenditure side of the economy as the government and consumer finances are too weak to drive growth.

Typically, lower interest rates, a supersonic rally in platinum group metals such as rhodium, which is used by car companies under pressure to meet tightening emission regulations, together with record profits would create a perfect environment for companies to plough money into growth projects.

True, some companies have delayed or cancelled capital expenditure to build cash buffers to navigate challenges posed by the pandemic. But we have seen others opting to reward shareholders with billions of rand in dividend payouts, especially in the mining sector.

There is huge scope for companies to lift investment. The latest Stats SA data showed gross fixed capital formation — a macroeconomic concept that shows private sector spending on fixed assets such as buildings and machinery — rose just 12% on a quarterly basis in the quarter to the end of December.

According to the World Bank, domestic capital spending has barely changed since the late 1980s, languishing at 15%-20% of GDP. In comparison, emerging countries in East Asia have seen a steady increase in investment over the same period from 25% of GDP to almost 40%.

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For the president, the last thing he would want to see in newspaper headlines are comments by CEOs about criminals taking over construction sites, demanding protection money and disrupting operations.

Last week, Orion Minerals, which has put in R5bn to restart a zinc and copper mine in the Northern Cape that was mothballed in the 1990s, launched a blistering attack on the government, accusing the police of standing idly by when a group of people intimidatingly demanded contracts to provide services to the mine.

Orion Minerals is not alone. For the past four to five years, construction companies across the country have suffered violent disruptions at their sites from groups of criminals aptly dubbed “construction mafias”.

Giuricich Brothers Construction, the oldest privately owned builder in SA having been formed in 1940, has had run-ins with the groups at its sites in Cape Town, forcing it to hire security consultants, which added an additional layer of costs just so it does not miss project completion deadlines.

The problem is acknowledged by Ramaphosa, who has promised to set up a specialised team comprising police members and prosecutors in 2020, but judging by comments from the CEOs, it would be hard to say anything concrete has been done.

Source: Business Live