Economic issues frequently override the fear of crime for prospective investors in South Africa, writes Madeleine Wackernagel
Contrary to popular wisdom, South Africa’s high crime rate is not a significant deterrent to foreign investment, according to a new survey.
Professor Robin Lee, who collated the research for the Nedcor Project, was somewhat surprised at the result, having expected crime to play a more important role in foreign investment decisions. In many respects, the conclusions are predictable: issues of competitiveness and economics come first, social factors second.
But local investors and foreign companies already operating here are being hit — hard. According to Lee, other research done by the Nedcor Project shows that investment plans are being postponed or, in some cases, shelved completely.
Indeed, a survey by the American Chamber of Commerce (AmCham) released this week shows that 48% of respondents — mostly companies with more than 200 employees — had suffered a delivery vehicle hijacking and 24% a car hijacking in the past 12 months. A total 27% had experienced the assault of an employee, and 48% had been victims of burglary or a break-in.
The problem is particularly acute in Gauteng. Dr Ben van Rensburg of the South African Chamber of Business (Sacob) says: “In Sacob’s experience, crime is definitely a high-profile issue. Many of our members have been subjected to some sort of personal attack, especially in Gauteng.”
Staffing problems are an issue, even for the big multinationals. Van Rensburg quotes a visiting Danish executive as saying he would never want to live behind barbed wire,
in constant fear for his personal safety.
Smaller and medium-sized businesses are more likely to be put off by crime than the bigger corporations, says Klaus Schuurman of the South African-German Chamber of Commerce, because the impact on their investment of hijacking, personal safety, etcetera, is more immediate.
The AmCham report highlights that the cost of security protection to combat the unusually high levels of crime was an additional inhibiting factor to investment. Almost two- thirds of respondents said business confidence was affected somewhat by prevailing crime rates; 28% said they were not affected.
An overwhelming majority (86%) felt the levels of appropriate police resources were inadequate to handle the crime level, with another 80% saying they felt the service levels of the police were poor. The most serious risks to business were hijacking (27%), theft and shrinkage (17%) and threats to people (10%).
Is the government doing enough? The problem, says Graham Simpson, director of the Centre for the Study of Violence and Reconciliation, is one of co-ordination at inter-governmental level. There are no quick fixes; government should seek a co-ordinated approach, encompassing all departments from education to the prisons service and social welfare.
Most of the companies surveyed by Lee made the distinction between the transitional and permanent nature of a high crime “culture” — – if the latter were to develop here, it would put South Africa in the same category as Nigeria, which is not a popular investment destination. But at the same time they did not think private intervention was necessary; it was more important for government to produce cohesive crime prevention strategies.
In addition to the above factors, for many multinationals, crime is relative. Russia and Colombia, for example, present far greater problems for companies’ operations.
Said one interviewee: “What we have found to be a problem is ‘opportunistic violence’. But South Africa is not Russia, where you have to hire bodyguards for visiting executives.”
A more important indicator of investor sentiment is that political and social stability scored very high, coming second after product opportunities. The years of isolation and disinvestment experienced by South Africa during the apartheid era are testimony to the belief that social upheaval is a far greater threat to investment than so- called opportunistic crime.
Latin America is a case in point. Years of political upheaval and government instability have taken their toll on investment plans, but relative to the rest of Africa, South Africa still fares well.
A survey of investment risk ratings, ranking countries from nought to 20, puts South Africa second, after Botswana, at 16,33. Rwanda scores 000, with Mozambique at two, Zimbabwe 12,67 and Nigeria 5,32.
Thus it would seem that foreign investors draw a distinction between political violence — which has dropped by more than 50% since the elections in 1994 — and general crime. But should “ordinary” crime rates escalate further — and South Africa is still the most violent country in the world — foreigners may interpret this as indicating a lack of effective government.
Such a situation could well spiral. Says Lee: “Foreign investment could suffer in any one of three scenarios: the public taking the law into their own hands as regards ‘ordinary crime’; corruption in government at the local level; and high levels of public discontent with government’s failure to control crime.
“In these scenarios, crime or its consequences threaten political stability and go straight to the top of any foreign investor’s agenda.”
But, he adds, the long-awaited National Crime Prevention Strategy, due to go before the Cabinet this month, should go some way to allay foreign and local investor fears. The key is strategic direction from government. While the problem is of a long-term nature, there are short-term measures to be taken that would at least send the right signals in terms of government intent.