Cement sector strains against ‘toxic cocktail’ of issues

Industry body Cement & Concrete South Africa (CCSA) says the entire local sector is in crisis, due to a “toxic cocktail of factors” including the construction mafia threat.

“The fact is that it [the construction mafia] is having an effect on the construction industry.

Tenders are purposefully being delayed; projects are also being delayed or halted as a result,” CCSA CEO Bryan Perrie said.

“When tenders or projects are delayed or halted, the service providers – in our case, the cement and concrete sector – suffers significantly.

“Many plants are located in deep rural areas and that means because the work has been delayed, workers and their families are affected.”

Chartered accountant and analyst Khaya Sithole explained that the construction mafia, who present themselves as members of the communities they operate in, requires 30% of the economic value of contracts from small, medium and micro enterprises (SMMEs).

He said the entities have been legitimised by communities and (unofficially) through the 30% state procurement preferential procurement regulation introduced in 2015.

“This mafia has been existing before 2017.

“It has been traced back to Inanda and KwaMashu, as seen with the Bridge City shopping centre and road upgrade issues,” Sithole added.

“Whoever wins the tender must pay 30% of the contract’s value in order to be protected by said mafia groups.

“If a business wants to operate without interruption, that 30% must be paid.”

Meanwhile, South African National Roads Agency (Sanral) on Wednesday said the opinion of foreign companies coming into the country to do construction work because “it is almost impossible” for South African contractors to work in the country due the construction mafia, is not helpful.

This follows Sanral awarding the bulk of four contracts valued at R17.4 billion, that it had cancelled earlier this year, to foreign companies – specifically Chinese firms.

Sanral further noted that in the last financial year, it provided over 1 000 SMMEs with work on construction, rehabilitation, and maintenance projects.

It said the total amount earned through these contracts was over R2.3 billion.

Meanwhile, the CCSA warned that the cement and concrete industry was being threatened by other challenges, including those of economic decline, cheap imports, and environmental issues.

“In addition to the general economic downturn and decline in investor confidence, the sector was hit hard by the Covid lockdown.”

The association added that local cement production, which is usually around 20 million tons, has dropped to 12 million tons.

Overall, this crisis threatens 35 000 local jobs in the sector, along with billions of rands in investments in value chains, according to Cement & Concrete South Africa.