[Opinion] Can South Africa seize its construction opportunity?

Policy and legislative reforms and getting the wider economic climate right (and attractive for the substantive levels of capital formation necessary for new construction projects), are crucial for the pro-growth goals of the Government of National Unity.

The challenges ahead – not least of which is the proliferation of so-called ‘construction mafias,’ are substantial.

The National Development Plan (NDP) sets South Africa’s 2030 target of total Gross Fixed Capital Formation (GFCF) as a percentage of GDP at 30%. Public sector GFCF is expected to reach the 10%.

Over the past 15 years discouraging policy signals and choices – not least of which, centred on expropriation without compensation – ensured that substantive capital formation (whether from domestic or international sources) had to clear a substantial bar in terms of confidence and certainty regarding future security (never mind future ROI (return on investment)).

Capital, much like water, flows best along the path of least resistance. When government legislation and policy choices are antagonist towards capital, sectors such as manufacturing and construction tend to suffer more than some others.

In the South African context, an additional barrier to construction activity (at least in the last few years) is the proliferation of construction mafias – some more concentrated in KwaZulu-Natal, but others also taking root in the country’s most important economic province, Gauteng.

According to Mac- pherson the construction mafia has “disrupted the construction sector and eroded investor confidence.”

He added, “The 30% local procurement rule, intended to empower local communities, has unfortunately been hijacked by criminal syndicates. We are committed to policy changes that will protect legitimate construction businesses and ensure that infrastructure projects proceed without interference.”

Construction mafias will operate differently in KZN, versus in Gauteng, versus those in the Western Cape.

For national and local governments, one area of focus could be their relationships with local communities; what are their concerns, how can their buy-in and then protection of new, legitimate investments and projects be sought, and where can they be convinced to not fall for the false promises (and know they can push back against outright intimidation and violence) on the part of the mafias?

Confronting mafias – and thereby encouraging investments and activity in the construction space – can only be made easier by a more effective South African Police Service.

The opportunities for new working arrangements between national and city police forces are many. On 27 August deputy police minister Cassel Mathale announced in the National Council of Provinces that the national police department had entered into an agreement with the Western Cape provincial government – and the Cape Town city council.

The aim of the agreement is to combine crime fighting resources. Police Minister Senzo Mchunu’s spokesperson Kamogelo Mogotsi said, “The parties will co-operate, among others, in the undertaking of research, development, procurement and commissioning of technological infrastructure, sharing of data, physical resources and skills and in establishing a programme to address sexual offences and related gender based violence and femicide.”

This agreement could be replicated across other metros and provinces.

In the week of 26 August Minister Macpherson announced that a national summit – with the aim of abolishing criminal syndicates in the construction sector – will be convened.
Such a summit would provide an incredible opportunity for the GNU, and business and society more broadly, to really tackle construction mafias head on (with broad buy-in by those involved). As has been the case with government plans in South Africa in the past, much hinges on actual implementation.