As much as 2022, it has been estimated that as much as R63 billion in mining tasks have been delayed or cancelled due to mafioso actions. (Michele Spatari/Bloomberg through Getty Photographs)
It’s a standard public opinion that the development mafia — additionally referred to as the procurement mafia — is related to the constructed setting, however their affect stretches to any trade the place a legal component can extort a 3rd get together to both stop acts of violence or for his or her items and companies for use as an alternative of others.
The mining sector is not any exception. Techniques reminiscent of damaging mining infrastructure, sabotaging shipments en path to port and taking workers hostage to demand jobs are among the many strategies employed. The behaviour and techniques of mafias within the mining sector have advanced since they emerged in KwaZulu-Natal within the mid-2010s.
As much as 2022, it has been estimated that as much as R63 billion in mining tasks have been delayed or cancelled due to mafioso actions. Though the mining trade has turn into more and more organised to cease mafia exercise and arrests have elevated, in 2023, South Africa was ranked seventh worst out of 193 international locations in International Initiative’s organised crime index. It continues to be such an issue that the Minerals Council of South Africa has said that “huge monetary losses” have been incurred due to mafia exercise.
EPCMs and the development mafia in a unique guise
Though the time period “building mafia” has its origins in South Africa, queries and suggestions from our shoppers within the mining trade point out that the techniques utilized by the development mafia are discovered throughout the continent.
Past direct transactional relationships between companies and native building mafia teams, South African mining corporations have confronted issues when leveraging the companies of engineering procurement building administration (EPCM) suppliers.
The EPCMs are sometimes chargeable for designing, establishing and managing key procurement contract relationships, and building administration, together with budgeting, venture execution and contract administration. Organisationally, EPCMs have dotted-line administration relationships with contractors employed immediately by the consumer.
The first benefit of utilizing an EPCM is {that a} consumer can change the scope of a venture already beneath method, along with leveraging extremely expert professionals who can improve productiveness and decrease prices. For mining corporations working in Africa, EPCMs can present useful abilities in markets the place none may be discovered, and native information and context are invaluable for a mine operator needing to leverage native suppliers and provide chains to help their operations.
For the EPCMs to be efficient, they should be empowered with vital and particular authority. However, as noticed in an investigation Webber Wentzel is conducting in relation to a mining operation in North Africa, extreme issues can emerge on the EPCM stage if the accountable events don’t perceive who they’re entering into enterprise with.
A sample of conduct has been famous whereby the operator of a mine enters a working association with the EPCM supplier, which has vital authority to conduct enterprise on the mine proprietor’s behalf. Over time, the EPCM beneficial properties such management of the mine’s procurement processes that the mine proprietor is alienated from key selections, in impact changing into the de facto supervisor of the mine. The EPCMs have the potential to create a self-reinforcing net of corrupt exercise, demanding kickbacks for appointing particular native contractors.
The abuse perpetrated by the EPCM echoes the crimes dedicated by the development mafia and the instability that may grip a mining operation with out vital oversight. In South Africa, past building mafia exercise, mine house owners should concentrate on developments throughout the organised labour motion, with current hostage-taking incidents highlighting a contest between rival unions that has a destructive impact on operations.
The perfect defence for a mine proprietor’s enterprise towards the mining mafia and different types of criminal activity by third events is due diligence, vetting and analysis. High quality findings that come up from such processes give mining operators the complete context of who they might be selecting to work with, the dangers that exist and, crucially, what relationships a specific provider might have with these they select or suggest for contracting. Criminality has a behavior of discovering weaknesses in methods and processes that vetting can uncover.
Equally essential is the defence of getting skilled forensic investigations undertaken when irregularities are reported. It will allow corporations to swiftly react and help in mitigating the consequences that the mining mafia might have on any operations. This will even allow the organisation to set an enough tone for each inner and exterior role-players.
The quantity a mining firm spends on proactive and reactive measures represents an upfront funding. Skilled professionals will guarantee the required steps and compliance are completed referring to consequential authorized processes, reminiscent of the Prevention and Combatting of Corrupt Actions Act or the Prevention of Organised Crime Act.
Proactive and reactive measures must be assessed on an ongoing foundation outdoors of a venture’s starting in order that adjustments in the established order are detected and accounted for.
The 2025 Mining Indaba theme, Futureproofing African Mining, In the present day, serves as a name to motion for the trade to strengthen its resilience towards these threats.
Lionel van Tonder is a director and Aaqilah Nagdee a senior affiliate at Webber Wentzel.