The practice of legislation-justified extortion and its effects on effective management of formal businesses

Abstract

Globally, the practice of extortion and its interaction with business is given adequate research attention. This is because extortion is criminal, hence protected so that there is scarcity of information that can be freely used to explore the phenomenon. Therefore, this qualitative study’s aim was to explore the concept of extortion and its effects on the formal South African construction businesses. Thus, the study fills the research knowledge paucity on extortion by focusing on two major provinces: Gauteng and KwaZulu Natal. The study was motivated by the prevalent acts of extortion that the construction sector has been grappling with for many years. Semi-structured interviews were conducted with three different groups which were: contractors of different sizes, government officials and members of construction statutory and voluntary associations. A total of 17 participants formed part of this study. The findings of this study led to a development of a model which explains how extortion takes place in the South African constriction sector. The study frames extortion as legislation-justified extortion which is a form of systemic extortion that is defended through the use of the national legislation. The study argues that there are enablers that contribute to the formation and subsistence of legislation-justified extortion. Legislative-justified extortion does not affect all construction businesses the same: major businesses are targeted the most compared to small businesses while small business are mostly impacted. Legislation-justified extortion was found to have adverse effects on the profitability of targeted businesses. It also imposed detrimental operational and sustainability risks to formal construction businesses. This study has recommended enhancement of the new public procurement Act that is currently before the national legislature. It has also called for a robust stakeholder engagements on the new public procurement bill once enacted. The study has also recommended a number of measures to improve law enforcement.