Addressing the impact of crime on economy

Estimated read time 6 min read

Understanding the effects of crime on economic activity, is extremely important. A major reason for this is because when the economy grows, criminals also seek greater opportunities for theft. In other cases, it is the same criminals who limit progress in economic growth. In fact, a study undertaken by the World Bank, which was published last year, revealed that the impact of criminal activity on South Africa’s economy is as much as 9.6% of total economic activity (GDP), each year.

Of this 9.6%; 0.3% was attributed to losses of personal property and assets, 1.3% was ascribed to personal (household) spending on insurance and security services, 1.5% pertained to loss of businesses’ stock and missed sales and productive opportunities due to crime, 0.7% entailed extortion of businesses by gangs, 0.1% represented the theft of infrastructure (railway cables, electricity infrastructure, etc)

2.9% (of GDP) was spent on businesses’ security services, 1.1% represented loss in tourist arrivals as a result of crime, 0.3% comprised higher transport costs as businesses sought the services of private security to secure their cash-in-transit and raw materials, 1% represented excessive government expenditure (when compared to peer countries) associated with supporting the criminal justice system (police, public prosecutors and other judicial officers), whilst 0.4% represented missed opportunities as the funds used for security could have been profitably invested elsewhere.

The murder rate is currently the highest in 20 years, whilst vehicle hijackings have doubled and kidnappings for extortion, have increased three-times over, between 2012/13 and 2021/22.

Understanding such figures can help to highlight the urgency of adequately responding to the challenge,before it deteriorates even further.

Crime makes an economy inefficient or uncompetitive. Domestic businesses and wealthy citizens intending to expand their investments, may eventually choose to assign their capital in safer countries, since they would not incur costs such as extortion, expensive private security subscriptions or high insurance premiums, in foreign lands. This is the same for foreign investors. Instead of choosing to assign their funds to SA, the terrible crime statistics may drive them to carefully consider other destinations (countries) which have better conditions and competitiveness.


The authorities in charge of domestic security services already have various national crime strategies in operation. Nevertheless, providing additional ideas, to support  their existing policies, would likely result in more robust crime response systems.

Firstly, the government’s security policy should ideally enable private security officers (detectives and guards, etc) to carry out duties similar to those executed by the police. If possible, the private security can be permitted to execute even more responsibilities than SAPS. The genius in this would be that, it would be akin (similar) to outsourcing SAPS duties to a more-resourced and plentiful private security labour force. The outsourcing will also come at zero cost to government. In order to maintain order, the government will then need to strengthen its oversight and regulation over the sector (private security).

In other words, private security firms should be encouraged to identify and report criminal activity in a manner which leads to convictions. In that regard, if possible, the government should create mechanisms which enable the private officers to be rewarded for any criminal convictions realized from their service. This will be crucial since private security firms already have more personnel (more headcount) than the police. Figures from the Private Security Industry Regulatory Authority (PSIRA), reveal that SA has more  than 580,000 active private security guards, making them more than the police and army, combined.

By and large, their efforts will not only serve the communities within which they serve but will work wonders for the overall economy, through reducing national crime statistics. This will make the country more attractive to investors, affluent citizens and tourists. It will also enable local businesses to be more competitive and have more breathing space to expand their enterprises.

Secondly, the current police-to-civilian ratio in SA, of about 1 police officer to 430 civilians, compares reasonably well with countries within the region (SADC for example). However, since SA is subject to “world class” levels of crime, more officers might need to be recruited. Sadly, the National Treasury may not be able to fund such crucial agendas, due to the overwhelming demand for government finances, by other departments,  apart from the police. Therefore, innovative measures will prove essential, if the barrier of the Treasury’s financial limitation is to be broken.

To address the lack of resources, a wealth tax, which charges 0.1% (a tenth of one percent) on the estimated value of properties in urban areas (or business revenue), may be charged by the government on households and businesses, with the aim of financing the expansion of the police force and the overall criminal justice system. The collection of the tax can be streamlined by enabling it to reflect on household’s and businesses’ utility bills, each month. The tax receipts can then be used to improve systems used in fighting criminal activity and also promoting civility in the country’s major CBDs (Central Business Districts).

Although fighting crime might seem an expensive and complicated exercise, it remains a low-hanging-fruit for significantly reviving SA’s economy. Its benefits are likely to outweigh any amount of investment in crime management. Moreover, if crime management is bundled with addressing corruption, the benefits to the economy would be exponential.

Thirdly, intelligence services (state security) should continually monitor the police and judicial officers at all levels, to ensure that any act of corruption or unprofessional conduct is rewarded its commensurate dues (conviction and legal punishment). By ensuring that rogue police and judicial officers are indicted (charged at law) and convicted, the whole criminal justice system would be revitalized for the overall good of the economy. That would likely result in a drastic decline of incidences where rogue SAPS officers collude with criminals, for instance.

Finally, there will also be the need to address inequality and poverty as these are the root causes of most criminal activity. This may include the provision of counselling, sporting and entertainment activities for students in lower income communities. This should positively affect their lifestyle, thinking and behaviours, until its impact is felt through a reduction in criminal activity, in the long term. A mandatory educational course on the negative effects of crime may also be provided to students, from primary to university level.

Overally, vibrant long-term economic growth, will do much to reduce some extreme inequalities which still persist in society. That (vibrant economic growth) would be one of the most effective ways to nurture a civil and law abiding population.

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