Deputy President Phumzile Mlambo-Ngcuka told parliamentarians recently that, while fighting crime was a priority, she did not feel it should be an objective of government’s growth initiative, Asgisa. However crime is analysed, the truth is that business growth has been sharply constrained by crime levels.
A Grant Thornton survey, published in January, found that the majority of medium to large private companies — 84% — said they, their staff or family members of staff had been the victims of personal contact crime. This substantially impacted on employers. Nearly 90% of companies have had to fund increased security costs, with 65% saying crime had decreased productivity and motivation. Forty-one percent said crime had decreased creativity, ingenuity and resourcefulness, 32% said their companies had lost staff members to crime and 18% said they had lost customers, according to Grant Thornton’s International Business Report.
The researchers also noted lower levels of business confidence, despite the economic boom, which they attributed to high crime levels. At the same time, expectations for growth in key areas such as turnover, profitability and employment were higher than ever before.
Though violent crime has received the most attention, white-collar crime — fraud, corruption and computer-related crime — is also a serious concern. In August last year, Business Against Crime said these types of crime cost South Africa about R40-billion annually. White-collar crime may account for as much as 30% of all business failures and consume between 2% and 5% of a Âcompany’s turnover.
Business Against Crime has also previously said relatively high crime rates raised business costs, with fewer jobs being created and smaller businesses finding it dif-ficult to enter the market.
For some time now, there has also been evidence of widespread corruption. According to the 2003 National Victims of Crime survey carried out by the Institute for Security Studies, petty corruption is the second most common crime after housebreaking in South Africa. These respondents said they had been asked for a bribe, favour or gift by a government official. This was reported by 5,6% of the respondents, compared to 7,5% for housebreaking and 4,7% for theft of personal property.
In 2002, the United Nations found that 15% of businesses had been asked to pay a bribe, with 7% of those approached having paid one. A majority, 62%, of businesses interviewed claimed bribery was becoming an accepted business practice. Whether or not that assertion is grounded in experience rather than perception is not known, but it would have contributed to a climate of negativity.
The same survey said that 75% of bribes were paid to clear goods through customs and procure goods for government as well as, to some extent, private companies.
Even when business is not directly affected by crime, security costs are incurred: electric fencing, alarm systems, secure parking areas and armed guards, often around the clock.
Data from the World Bank’s Investment Climate Survey 2005 showed that crime was a significant concern for South African businesses. Of the 800 businesses surveyed, 30% rated crime as a major or very severe problem. South Africa’s situation was better than many Latin American countries, where security is a major constraint on growth. But the survey found that, compared to other middle-income countries such as Brazil, Indonesia, Poland, Russia, Turkey and the Ukraine, security issues harm competitiveness and make the country a less attractive foreign investment destination.
The direct costs associated with crime and security issues, said the survey, was a median figure of 1,1% of sales or 3% of net value added and 5% of labour costs. This rose to 3% of sales in severe examples. The costs of crime in South Africa are similar for Brazil, Russia, the Philippines and Peru, but higher than Morocco, Turkey, China, the Ukraine and Poland.
Compared to businesses in Turkey and Morocco, South African firms faced a cost disadvantage of about 5% of labour costs.