Construction is among public sector ‘hotspots’ for corruption

The construction sector has been identified as one of the “hotspots for corruption in the public sector” by Corruption Watch, which lists eight such hotspots in its 2022 Analysis of Corruption Trends report.

The top two spots are held by policing (11% of all corruption) and basic education (9%).

The construction sector, state-owned enterprises (SOEs), and traffic and licensing are in joint third place (6% each), followed by healthcare and higher education (bith at 4%) and housing (3%).

Elsie Snyman, CEO of construction market intelligence firm Industry Insight, says corruption remains rife in the sector, and although there are more and more positive outcomes, prosecution remains slow and infestation widespread.

The Corruption Watch report says 48% of construction sector corruption complaints relate to procurement irregularities, 18% to maladministration and 18% to misappropriation of resources.

Of 1 037 whistleblower reports received in the six months to end-June, 62% were in the public sector, with 5% emanating from the construction sector.

Procurement irregularities, a major headache in the construction arena, accounted for 15% of the whistleblower reports received. This type of corruption is listed as the most prevalent type experienced in the Eastern Cape, Free State, Mpumalanga and North West, and among the top five types in Limpopo and the Northern Cape.

Snyman says the Special Investigation Unit (SIU) is still working to recover R1.3 billion linked to corruption at the Department of Public Works and Infrastructure – a process that started in 2010.

“Close to 7 000 cases were referred to the SIU, with around 5% or 355 cases still outstanding,” she says. “Out of 292 criminal cases referred to the National Prosecuting Authority (NPA), only 6% or 18 have been finalised.”

Snyman says the Construction Industry Development Board (CIDB) has a hotline for the reporting of suspected fraudulent and corrupt practices.

The number is 0800 112 432 (toll-free and anonymous)

The CIDB says all reported cases are thoroughly investigated by independent forensic investigators; more details are available here.

Snyman says through this hotline and other controls, the CIDB reported 161 cases where investigations of non-compliance with the CIDB Code of Conduct were conducted in the 2020/21 financial year.

“Most of these related to fraudulent registrations on the contractor’s register, including submission of fraudulent tax clearance certificates, falsified track records, misrepresentation of financial statements, fraudulent bank statements, and employer non-compliance.”

Perspective

Snyman says given the seriousness of the broad-based collapse of infrastructure, and the fact corruption has serious consequences, one would have imagined the prevalence of the construction industry in the Corruption Watch report to be higher.

However, reporting depends on whistleblowers who, in many regards, require a certain amount of bravery to act, she says. It is therefore important that vulnerable whistleblowers are protected to encourage higher levels of reporting.

Snyman relates the example of a female engineer and director who exposed corruption involving a housing tender in the City of Cape Town – the engineer requested protection from the state but was reportedly told she did not need it, yet in her words: ‘As whistleblowers, our lives are in danger’.

“There clearly needs to be greater support for whistleblowers by the state and other investigative parties or the reporting of incidents will continue to decline for the wrong reasons,” says Snyman.

Snyman says frustrated stakeholders launched the Built Anti-Corruption Forum in 2021 with the aim of commiting participants in the construction and infrastructure sector to detect, prevent, investigate, and resolve corruption cases.

It is represented by various industry bodies but is reportedly only really represented by Consulting Engineers South Africa (Cesa) and the South African Council for Architectural Profession (Sacap).

Snyman says other representatives include the NPA, SIU, Hawks, South African Black Technical and Allied Careers Organisation (Sabtaco), SA Bureau of Standards (SABS), Business Unity SA (Busa) and the Human Sciences Research Council (HSRC).

She says the Bargaining Council for the Civil Engineering Industry (BCCEI) in September this year called on all affected parties to be part of this forum to make a more concerted effort to tackle higher incidences of site disruptions by the construction mafias.