AYABONGA CAWE: Politics of entry, rather than mafias, behind extortion

The word “mafia” is thrown around a lot in SA nowadays. The definition of the noun in the Oxford Dictionary makes reference to a few things: a Sicilian secret criminal society or a group of people within a community who use their power to gain advantage for themselves. Implied in this definition is that a “mafia” is not only engaged in illicit and criminal activities but is a co-ordinated group with a strict code using their power to gain “advantage” in the criminal underworld, in politics or in the economy.

Viewed in this way, the collapsing of the activities of groups diverse in their activities — spanning from protection rackets, agitation for participation, extortion of 30% of contract value to “enforcement” of subcontracting and procurement policy provisions related to small business development — into the catch-all nouns of the “construction mafia” or “mining mafia” is misleading and takes us down a path towards incomplete policy solutions.

Widely used in the media, the “mafia” tag fails to confront that such activities are seldom co-ordinated behind a strict code, command structure and clear modus operandi. Nor are they confined to the construction or mining sectors, or even solely focused on public procurement.

Rather the forums that undertake extortion, intimidation and violence, far from being a “mafia”, are diverse organisational vehicles engaged in a “politics of entry”, as I argue in a recently published Unu-Wider paper — a politics of entry that uses the perceived threat of violence and intimidation (alongside some legitimate avenues) as operative mechanisms to facilitate entry into “economic rent” distribution networks at multiple levels.

Here, economic rents are the “surplus returns”, enabled by political mechanisms and that limit entry to certain markets, enable monopoly profits, subsidies, protective tariffs or licences to specific companies or groups. Here economic rents are enabled at a policy level by informal interpretation of “subcontracting” provisions set out in schedule 9 of the 2017 preferential procurement regulations, which many business forums and related groups have claimed as the basis to their “right” (as black business people or “local stakeholders”) to project level cash flows. It is much like a “local participation tax” or better an “inequality premium”, that contractors are increasingly factoring into the transaction costs of building infrastructure or operating a nightclub or even a funeral parlour.

Carry guns

This “inequality premium” is only credible in the eyes of opportunity-starved aspirant entrepreneurs due to persistent features of the postapartheid political economy. These include inequality of opportunity on racial, gender and spatial lines, alongside limitations in the ability of the state to exercise a monopoly on violence, disunity in the elite coalition and declining economic rent opportunities, especially in capital spending on infrastructure.

As Malusi Zondi of the Black Business Federation (BBF), an umbrella body for business forums, suggested on Metro FM Talk last week, consultation with “stakeholders” is sometimes not enough, as others “will sometimes carry guns to undermine those who have [legitimately] received an opportunity”. Zondi added that because “opportunities are scarce”, the tensions even among and between business forums are becoming more fractious.

Zondi’s suggestion that groups like the BBF, which he leads, have now “graduated” from the observed tactics of intimidation and extortion, is also linked to his suggestion that the “regulation” of business forums may not only position BBF as a clearing and screening house for these forums, but also create a functional separation in the rent distribution framework between the “peaceful and legitimate” and the “violent and illegitimate”.

While dialogue and law enforcement are necessary, they might not be a “sufficient intervention” without procurement reform or redesign of local value distribution mechanisms to encourage strategic rather than piecemeal contracting or partnerships enabling middlemen of different shades and persuasions.

Without this and a wider conception of how to distribute “opportunity” within the infrastructure-led recovery envisaged, the “politics of entry” will remain seductive to the well intentioned and the capable and ostensibly to the opportunistic and criminal. With it, so too will the “inequality premium” demanded by motley sets of groups who far from resembling a mafia are engaged in inter- and intra-class conflicts over rents. 

• Cawe, a development economist, is MD of Xesibe Holdings and hosts ‘Metro FM Talk’ on Metro FM.