Crime in Africa was repelling foreign direct investment, despite rates of return being much higher on the continent than anywhere else, the United Nations Office on Drugs and Crime said on Tuesday.
”People are afraid to invest in Africa,” it states in a report on how fighting crime could aid the continent’s development.
The report puts the rate of return on investment in Africa at 25,3%, compared to 16,2% for Asia and the Pacific, 14% for ”all developing countries”, and 12,5% for Latin America and the Caribbean.
”The gap between the economic fundamentals and investor confidence is puzzling,” it says. ”It has been attributed to the perception among investors that the rule of law does not prevail in Africa.”
Crime increased the costs of doing business, whether through the direct loss of goods or the costs of taking precautions.
Corruption was also a major concern for investors, the report states, with some firms losing between two and nine percent of their total sales to bribes in Africa.
”It is almost impossible to estimate the impact of bribery on the economy because it can kill business ventures before they are even born.”
In South Africa, for example, 12% of businesses polled said they had refrained from making a major investment for fear of being required to pay excessive bribes, the report says.
Apart from driving away business and tourists, crime also destroyed Africa’s social and human capital.
It was, for example, hard to imagine starting a business if that increased the entrepreneur’s chances of becoming a crime victim, or of having his capital pillaged.
”In a national victim survey conducted in South Africa, over a quarter of respondents (26%) said they felt that crime prevented them from starting their own business,” the report states.
”Another quarter said they could not use public transport for fear of crime. Thus, fear of crime has paralysed the economic development of many South Africans, both victims and non-victims.”
Crime also contributed to a huge African ”brain drain”, with some 80 000 highly qualified people leaving the continent every year to work overseas.
The report notes a ”classic vicious circle” between crime and under-development in Africa.
”Developing countries may manifest high levels of crime, which themselves derail further development,” it says. ”This is another kind of ‘poverty trap’ wherein developing countries do not seem to be able to muster sufficient momentum in development to overcome the challenges that hold them back.”
The report recommends that crime prevention be at the forefront of African development planning.
”Crime prevention efforts could do more than just reducing victimisation, as important a goal as that is. They could also catalyse the whole process of social development.”
The first step in addressing crime, the report says, was to generate knowledge — making crime figures part of the scorecard against which governments measure themselves. Also, the international community should provide further assistance in translating an African will to fight crime into effective interventions.
However, donor aid should not become part of the problem of corruption, the report warns.
”Anti-corruption provisions should be built into all development projects.”
There was also a focus on the role the business sector could play. To date, some businesses have contributed to the crime problem by funding resource wars and fuelling corruption.
”It is essential that the relationship between African states and international businesses be repaired and that partnerships are formed to ensure that Africa is seen as a safe and profitable place to invest human and material resources,” the report states.
Contributions to crime prevention should not be seen as charity, but as helping to nurture a profitable business environment.
The report says foreign businesses operating in Africa should adhere to the same standards of conduct they would in their home countries.
”Arguably, the greatest assistance the developed world can give in reducing African corruption is simply to stop participating in it.” – Sapa