Crime curbing economic growth

Study finds correlation between inefficient policing and the high cost of crime for business is significant.

According to WEF, SA’s police is ranked as the 20th most inefficient, with the cost of crime for business the world’s fifth highest.

Government is targeting infrastructure investment to promote growth through its stimulus package, yet it’s silent on the high crime levels that are a major cause of divestment. Without getting crime down to tolerable levels, economic growth will remain at best stunted.

Economic growth can be considered essential if poverty is to be reduced; crime levels would then also decline.

No recent commentator who considered poverty in South Africa as the root cause for the high criminality, paid any attention to really poor countries with far lower crime rates.

Tanzanians are significantly poorer, but on the Word Economic Forum (WEF) Global Competitiveness Index the country ranks 36 positions better than South Africa on the cost of crime.

No definite correlation

A recent World Bank-funded study on the socioeconomic determinants of crime in South Africa did not detect “any relationship between inequality and violent crime, nor between unemployment and any crime type”.

While correlations do not prove causality, the study is essential to understand criminality in South Africa.

The correlation between inefficient policing and a high cost of crime for business is so significant, one can confidently predict that when policing efficiency improves, crimes against business decrease.

In 2017, according to WEF, South Africa’s police ranked as the 20th most inefficient, with the cost of business crime as the world’s fifth highest – a signal that investment in South Africa is too risky.

Free economies

Combining WEF’s cost of business crime data with the Fraser Institute’s Economic Freedom rankings, a correlation emerges – businesses in the most free economies have the lowest cost of crime. South Africa is sliding towards the cliff-edge.

Without economic growth these systemic symptoms can’t be addressed.

SA’s high crime prevents investment

The crime rate already prevents local investment and dissuades South Africans from embarking on business ventures.

StatsSA’s Victims of Crime 2015 report puts the percentage of persons refraining from establishing a home business out of fear of crime at 11.8%.

A stimulus package that would really get the economy growing should entail:

Effective, efficient policing, with a different skills mix and institutional accountability. The strategy should start with a reformed police service where remuneration and promotion is linked to independent assessments, performance monitoring in crime prevention, detective work success rates, and prosecution;

Stopping the rot in state-owned enterprises;

Outsourcing maths, physics and chemistry education to independent service providers; and

Shedding all civil service positions not linked to outcomes.

More efficient policing isn’t enough to get crime levels down to tolerable levels: economic growth, efficient service delivery, and nurturing a modern societal ethos and accountability also have a role.

However, the type of investment and economic growth we need cannot kick in at the current extraordinary high and debilitating cost of crime. Lower crime levels must be ensured – which requires accountable, efficient policing.

Johannes Wessels is director at Enterprise Observatory of SA. This is a condensed version of two articles on eosa.org.za/blog