The Cost of Crime

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Recently released statistics on South Africa's crime rates have put additional pressure on the government to address a problem that has long plagued society as well as the country's economy.

On July 3, the South African Police Service (SAPS) issued its report on crime rates and trends for the 2006-07 financial year. For many, it made grim reading, with 19,202 murders committed in the 12 months ending March 31, an increase of 2.4%, and robbery with violence up 4.6%.

There was also a sharp jump in the number of bank hold ups, which were up 118%, while robberies at businesses were up 52.5%.

On the positive side, there was an overall decrease of 3.4% in crimes reported to police over the past year, with the incidence of common assault falling by 8.7% and robbery without violence falling by 5.8%. Authorities have cited the decline as proof that policies to put more officers on the street, in addition to boosting the police and judicial budget, have had an effect.

However, any way the figures are looked at, the high crime rate is harming both the nation and the country's economy. The government has announced it will provide $6bn annually for the next three years for domestic safety and security, double the amount in the 2002 budget.

The SAPS will use part of this extra funding to recruit an additional 30,000 officers, taking the total number in uniform to 190,000, with a further 100,000 reserve officers added to the books. Part of the increased allocation will go to boosting prison services and the judiciary.

The costs of crime go far beyond the additional funds needed for law enforcement. The World Bank's Investment Climate Survey this year reported that crime costs South African businesses about 1.1% of sales and 3% of net value.

Private security has become a big business in South Africa, with some 5000 firms employing up to 270,000 staff competing to win a slice of the increasingly lucrative market, estimated to be worth $2bn annually.

Another area that registered an increase was vehicle theft, with truck hijackings rising by 7.6% and car heists by 6%. Around one third of the $143m in automotive insurance claims lodged annually in South Africa are theft related.

While it is fairly easy to calculate the direct cost of crime for businesses and the drain on the budget, it is much more difficult to estimate the cost of issues such as reduced productivity and the value of losing tens of thousands of people from the workforce due to crime-related deaths and injuries.

A July 3 statement issued by the human rights group AfriForum said the types of crime that had increased resulted in, "all South Africans being caught up in a culture of fear,0 which holds back business activities, encourages emigration and causes a deteriorating quality of life in the country".

In late March, Finance Minister Trevor Manuel said it was almost as important to lower the crime rates to protect the economy as it was to give South Africa's people the security they deserved.

"No one can precisely say how great a drag on economic growth our present levels of crime are," Manuel said on March 28. "It is not unreasonable, however, to think that the effects are big enough for the minister of finance to worry about and to take seriously."

There are also fears the country's high crime rate will deter overseas investors. The government's concern that the crime figures would affect foreign investment were strong enough that Charles Nqakula, minister of safety and security, visited the UK in late April to give assurances that lawlessness was being brought under control.

An advisor to the minister, Leslie Xinwa, said the visit, which included meetings with fund managers from Old Mutual, Merrill Lynch and JP Morgan, was intended to highlight the efforts being made in the battle against crime.

While violent crime made the headlines with the SAPS report, South Africa is also facing an increase in the levels of white-collar crime with fraud, corruption and computer-related crime costing the economy around $5.7bn a year. One report said that up to 30% of all business failures are due to white-collar crime.

The high crime rate was one of the reasons South Africa dropped six places in the 2007 Africa Competitiveness Report, issued on June 13.

"The business cost of crime and violence and the unreliability of police services to protect from crime are highlighted as particular concerns," said the report, jointly prepared by the World Economic Forum, the World Bank and the African Development Bank.

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