News24: John Dludlu | Construction Mafia: Time to regulate business forums

Ordinarily, we would never advocate for regulation of business or organisations representing legitimate businesses – especially by the state or government. However, time has arrived for order to be restored if we are serious about improving the growth and investment environment to tackle poverty and hunger, unemployment and inequality in our country.

For years now, businesses – both formal and informal, and large and small – have endured a reign of terror at the hands of so-called “business forums”. These forums, which are effectively gatekeepers, have mushroomed in the past decade or so.

Their rise has been fuelled by a number of factors. Amongst other causes, the forums tend to spring up to fill a void left by the collapse of legitimate and lawful business chambers or business associations and weak, out-of-touch local councillors; and the rise of these forums has been occasioned by public procurement policies.

Since government decided that tenders should include a certain percentage of local participation, some opportunists – at times with no business experience or background of running business enterprises – have grabbed the chance to organise communities and youths to participate in the tender contracts.

That the policy is unclear about what constitutes local – is it participation by those coming from a ward, township or town, region or province – hasn’t helped. So, once a tender is awarded to a qualifying company, handpicked “local” people are inserted into the project regardless of whether they have the requisite skills to contribute to the project implementation.

This is a perverse way of implementing local participation. The right way ought to be the inclusion of local skills during the procurement process as part of the bidding and tender evaluation exercise, not after the award of the contract. Put differently, bidders should be expected to include local participation as part of their tender documents or consortiums. And the evaluation criteria ought to include a weighting of the strength of local participation.

This would obviate the need for business forums to impose their own locals into projects at implementation stage.

Unlike business forums, legitimate town and city-level business chambers work hand in hand with local authorities in facilitating the smooth functioning of the affairs of the towns and cities’ economies. They don’t interfere in supply chain processes like business forums. Where legitimate chambers are weak or non-existent, the business forums fill that void.

Also, in instances where local councillors are weak or not in touch with communities, business forums take over.

In worst instances, business forums run protection rackets by charging business owners protection fees disguised as stakeholder relations costs. Faced with the dilemma of losing out a lucrative contract by failing to executive and threat of disruptions, companies resort to paying these so-called consultancy costs.

The lack of clarity about what constitutes local participation creates an opportunity for creative interpretation and introduces subjectivity.

Unlike business chambers, which are registered with appropriate authorities such as the SA Revenue Service and the Companies and Intellectual Property Commission (formerly the registrar of companies), business forums largely operate outside these formalities and sometimes don’t even have constitutions to govern their affairs.

Chambers also tend to belong to well-recognised apex or national organised business organisations such as Business Unity SA or the Black Business Council which have codes of ethics and conduct that members are expected to adhere to.

The proliferation of the rogue business forums is likely to complicate SA’s efforts to attract much-needed investment to create growth, jobs and tax revenues to build schools, clinics, hospitals and police stations.

What needs to be done?

It is fair to say not all business forums are dodgy.

For their own reputation, they need to clean up their act by calling out those who are terrorising business owners.

Like business chambers, they need to subscribe to a minimum sets of standards including constitutions. Regulators such as the CIPC should clamp down on the illegal ones.

Business owners especially big business should refuse to deal with these illegal forums, and definitely they should report rent-seeking and demands for bribes.

Law enforcement authorities need to clamp down on these groupings which are taking over construction sites and other projects especially when governments prepares to roll out the multi-billion infrastructure programme to rehabilitate bridges, dams and make our roads fit for all weather conditions.

An economic neighbourhood watch – including all spheres of government, business, communities and labour – should be organised to face down on the perpetrators of the reign of terror.

If we are serious about attracting investments, we need to stop the lawlessness and disorder.

The author is CEO of the Small Business Institute.

by News24 –

John Dludlu