The disruption of the Bridge City project in KwaMashu in KwaZulu-Natal by the so-called construction mafia 18 months ago led to the closure of the site for six months and contributed to Calgro M3’s decision to exit the province.
Wikus Lategan, CEO of the JSE-listed property and private memorial parks developer, stressed on Tuesday its decision was not only based on the activities of the construction mafia but “lots of issues that impacted various activities”.
“It’s a balanced decision on where we can operate and where we want to operate.
“From a private developer perspective, and also looking after the DFI [development finance institutions], banks, asset managers and shareholders’ money, we feel it’s not fair to anyone to take these risks when we can make such a big difference in other places.”
Calgro M3’s announcement that it was exiting KwaZulu-Natal coincided with reports that the construction sector has been hit by a new surge of site disruptions by the construction mafia.
Master Builders South Africa (MBSA) executive director Roy Mnisi said site disruptions had declined but have recently sprung up again.
“It’s very, very bad and [has] actually reached very alarming and concerning levels. We get reports of those [disruptions] almost on a daily basis now,” he said.
However, SA Forum of Civil Engineering Contractors (Safcec) CEO Webster Mfebe said Safcec has managed to reduce construction site disruption through its constructive engagement strategy with the business forums, but it is unable to intervene if it is not made aware of these incidents.
“To get projects going [again], we need to find out who these people are and have reached a ‘no site disruption agreement’ with the Black Business Federation, whose members were previously very active in the disruption of sites,” he said.
An MBA North member, who did not want to be named, stressed that contractors and subcontractors should resist tender mafia extortion.
“You should refrain from paying the money, no matter what. If you pay it, you’ll never stop paying.
“You pay one group, and the next day another group will claim you’ve paid the ‘bad guys’, saying they are the ‘good guys’ who should be paid to look after the project,” he said.
Lategan said there has been a lot more focus on the activities of the construction mafia and disruptions have “quietened down” compared with 18 months ago.
Hopefully these disruptions will clear up in five to 10 years’ time and Calgro M3 can go back into KwaZulu-Natal, he said.
Lategan said Calgro M3 is now effectively only working in Johannesburg and Cape Town and the two cities’ surrounding areas.
“We are working in places where we really can work with the community to build houses for them,” he said.
Lategan said the modus operandi of the construction mafia is to extort the labour force through violence and intimidation to disrupt construction sites.
He said the construction mafia wants to bring in third parties, take a portion of everyone’s wage and control the taxis that drive onto sites.
Lategan said the Bridge City project site was closed for six months after they informed the construction mafia they were not going to comply with their “requests”.
He said the site was ultimately reopened after the intervention of the deputy city manager, the police and law enforcement “but they are still extorting our contracting staff”.
“Through that, you just don’t create a ‘lekker’ work environment. We work with the community and want a good working relationship and a good environment for people to work in,” he said.
Lategan added that more than 80% of the workers on Calgro M3 sites are from the local community, which it defines as being within a 5km radius of the site. Once Calgro M3 completes Bridge City, comprising 356 residential units for a turnkey client, “we are done and only have one further land parcel” in KwaZulu-Natal.
He said Calgro M3 will consider selling this land parcel if it finds a buyer, otherwise it will develop it, sell the houses and trade it.
Lategan stressed there are not any job losses because of its decision to exit KwaZulu-Natal because it sub-contracts the full project.
This follows Calgro M3’s decision in May 2020 to close its construction division following a risk versus cost benefits analysis.
Lategan said there are also no current financial impacts to Calgro M3 from the closure of the Bridge City site because it happened 18 months ago and any effects were included the company’s income statement last year or in the previous year.
Restructuring pays off
Calgro M3 on Monday reported a 5% increase in revenue to R607 million in the six months to end August 2022 from R576 million in the previous corresponding period.
Headline earnings per share grew by 33.2% to 57 cents from 42.79 cents.
Lategan said this proves the restructuring it did before and during Covid-19 is paying off.
He said Calgro M3 handed over 1 195 units in the first six months and plans to hand over at least half of the 3 900 units under construction in the next six months.
“A lot of those are already completed and already in the transfer phase so we are quite confident about the next six months.
“Because we will only hand over half of the 3 900 units, there is quite a bit that gets rolled over to the next financial year.
“For the next 18 months, I think financially the group is looking very good,” he said.
Shares in Calgro M3 declined by 9.54% on Tuesday to close at R2.75 per share.
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