RONNIE SIPHIKA: This is how to eliminate SA’s construction mafia

The 30% local procurement rule, introduced under former president Jacob Zuma, was designed to empower local communities by mandating that 30% of procurement spending on public projects above R30m be allocated to subcontractors in local areas.

While this policy was intended to promote inclusivity and stimulate local economic development, its abuse by criminal syndicates has exposed critical flaws in its implementation. Public works & infrastructure minister Dean Macpherson has called for a frank discussion about the rule’s efficacy, citing the construction mafia’s extortion schemes as a significant barrier to achieving its goals. 

However, neither abandoning the policy nor continuing with business-as-usual are viable options. The solution lies not in scrapping the 30% rule but in rethinking how projects are conceptualised, procured and delivered. Adopting integrated project delivery (IPD) and alliance contracting, which shift the focus from transactional relationships to enterprise partnerships, offers a compelling alternative.

These models, supported by insights from the Institution of Civil Engineers, could help address systemic issues in the construction industry while achieving the 30% rule’s original goals. 

The traditional procurement methods widely used in SA are inherently transactional. Contractors are engaged on the basis of bids, and subcontractors, such as those mandated by the 30% rule, are often brought in through ad hoc arrangements. This approach has several shortcomings: transactional models create silos between clients, contractors and subcontractors, leading to poor communication, inefficient work flows and vulnerability to external interference such as from criminal syndicates.

Criminal groups exploit the lack of co-ordination in project delivery, using coercion to demand their “cut” of the project budget or to install unqualified workers under the guise of community benefit. Transactional relationships prioritise cost and time savings over long-term value creation, undermining the development of sustainable community enterprises. These flaws have allowed the 30% rule to become a tool of corruption rather than empowerment. Legitimate local businesses are often excluded, and the intended economic benefits fail to materialise.

Integrated project delivery offers an alternative approach that can mitigate these challenges. Unlike traditional models, it emphasises collaboration, shared risk and shared reward among all stakeholders, including clients, contractors, subcontractors and the community.

The key feature of this approach is that it fosters early stakeholder engagement in which all parties, including community representatives, are involved from the project’s inception. This ensures that local needs and opportunities are clearly understood and integrated into project plans. Unlike transactional models, the Integrated project delivery contracts incentivise collaboration by tying payment to overall project outcomes rather than individual milestones. 

In essence this means that by integrating local subcontractors into a unified project team integrated project delivery eliminates the fragmented relationships syndicates exploit. Local suppliers and workers are treated as essential members of the enterprise rather than external entities to be negotiated with. It further ensures empowerment of legitimate businesses under the approach’s merit-based and collaborative framework, which prioritises capacity building over tokenistic compliance. It ensures accountability through transparency mechanisms to ensure funds reach their intended beneficiaries and that the community receives tangible benefits. 

Alliance contracting, another progressive procurement strategy, takes integrated project delivery principles further by fostering long-term enterprise partnerships rather than short-term transactional relationships. Under this model all stakeholders — clients, contractors, subcontractors and community representatives — enter into a collective agreement to share risks, responsibilities and rewards. 

Shared objectives

The key elements of this alliance contracting are such that there are shared objectives in which all parties work towards common goals, such as timely project delivery, cost efficiency and community upliftment. There is greater scope for joint decision-making in which decisions are made collectively, ensuring that local voices are not only heard but also acted upon. The framework ensures that payments are tied into positive outcomes of the project, including achievement of community empowerment goals. 

Alliance contracting eliminates exploitation by removing the need for intermediaries, ensuring that funds flow directly to legitimate local enterprises. By prioritising enterprise partnerships over one-off transactions, this model builds lasting economic capacity in local communities. The collaborative nature of alliance contracting creates multiple layers of accountability, making it harder for criminal syndicates to infiltrate projects. 

While the benefits of integrated project delivery and alliance contracting are clear, implementing these models in SA would require overcoming certain challenges such as local contractors and subcontractors may lack the skills to participate fully in integrated project delivery or alliance contracts. Targeted training programmes would be essential.

Resistance

The Construction Industry Development Board and department of public works & infrastructure must ensure that the legislative and regulatory framework is adapted to support collaborative procurement models. Resistance from entrenched interests, including those who benefit from the current system, could hinder adoption. Strong political will and public advocacy would be necessary to drive change. 

Adopting integrated project delivery and alliance contracting would fundamentally transform how public infrastructure projects are delivered in SA. These models align perfectly with the spirit of the 30% rule, ensuring that local communities benefit meaningfully while addressing the systemic issues that have allowed the construction mafia to thrive.

By moving away from transactional procurement and embracing enterprise partnerships, SA can achieve genuine empowerment of local businesses and a reduction in project delays caused by criminal interference. Furthermore, greater accountability and transparency in public spending and long-term community development of municipalities in which these projects take place. 

SA must seize this opportunity to change the construction industry and reclaim the transformative potential of the 30% local procurement rule. With integrated project delivery and alliance contracting the country can move from exploitation to empowerment, from fragmentation to collaboration, and from short-term fixes to sustainable solutions. 

• Siphika is CEO of the Construction Management Foundation.