Unpublished May Essays Pt. 10
The State is letting Extortion Gangs destroy the construction industry
Back in May, I worked for a now-defunct Taxpayers’ Union organisation for two weeks. I wrote several articles for them which were never published. I feel they are still relevant today, and hope you find them interesting.
The Afrimat Construction Index, which measures the economic performance of the construction sector, has released its new report, boasting in glowing terms that the recovery from the coronavirus lockdown measures is healthy and vigorous. But in the graphic representation of the past several years’ performance, even if last year’s economic crash is taken out of the equation, the trend is decidedly downward – something to be taken seriously, since construction accounts for over 4% of the economy.
This general decline, while it can be attributed to many factors, like high labour casts and overbearing regulation and taxation, one factor stands out above all others – criminal racketeering. What has been termed the “construction mafia” is a generalised pattern of behaviour all across the country beginning in KZN in 2016, where local criminals band together to use intimidation and violence to extract “restitution” from construction projects, and prevent operations on building sites until they get their demands or are chased off.
Many even use the same ideological justifications for their actions, where up to 50% of a project’s value may be demanded. They often refer to themselves as “agents of radical economic transformation”. Liberal commentators insist this is a valid call for the local community to be “engaged as partners”, meaning that the mob intimidation is treated as a legitimate democratic demand by some of our mainstream outlets.
The losses incurred by these violent crews numbers in the billions of Rands, and the decay of the industry is leading to a brain drain, as hundreds of skilled engineers leave for brighter prospects in more stable environments overseas.
Meanwhile, the state has been vastly inadequate to the task of providing security. A public partnership with the South African Forum for Engineering (SAFE) to combat the problem was announced in April of 2020, only two years after the issue became big enough to force the president to pass public comment. But since then, little has changed. The spread of the phenomenon to Cape Town has left local administrators exasperated and weighs heavily on local businesses.
According to an anonymous construction entrepreneur I contacted in the Cape Town area, it is commonplace for construction companies around the country to employ private security or even informal militia to drive off this threat. But quite often, the threat cannot be neutralised, and many large and often necessary infrastructural projects go unrealised because of this generalised criminal behaviour, which the ANC and the police do nothing to stop. As Master Builders South Africa reports, the standard demand of 30% of the building project’s value continues to be demanded, and has become a permanent feature of doing business.
While some analysts are optimistic as a result of low interest rates, which make loans cheaper for the industry (commercial loans being the standard means by which construction projects are financed), and the Rand’s relative stabilisation against the dollar this past year, which makes imports cheaper, the reality is that high inflation continues unabated, and the price of materials and labour will be significantly affected.
The appearance of a strong Rand is only due to the fact that the United States has been printing dollars at a historically unprecedented rate. This means that the Rand is simply inflating at the roughly same rate as the dollar. The difference is, that the dollar is the world’s reserve currency, meaning that the dollars printed by the Federal Reserve devalue the dollar reserves of every nation in the world and repatriate their value to American companies, whereas the Rand’s devaluation is being used to service massive foreign debt and trade deficits.
Reports prior to the pandemic pinned their hopes of an industry recovery on government expenditure, inferring that the industry in general is dependent on tax dollars to stay afloat. But aside from a few truly massive projects, like the planned port expansion projects, state construction is just as disrupted by the construction mafia, with a significant number of major national road, bridge and housing projects completely halted due to the disruptions.
As long as nothing changes, the construction industry will be increasingly dependent on state projects and business will continue to leave the country. The downward trend we have seen since 2016 will end with the same conditions as the rest of the continent, where nothing can get done without private militia clearing the path for state-funded vanity projects staffed by sub-standard engineers incapable of finding employment elsewhere.