The World Bank released a new study this week, revealing that criminal activities cost South Africa nearly 10% of its annual GDP.

South Africa is ranked among the top five nations globally for homicide rates, impacting its economy significantly, with other consequences including property loss, increased security expenses, and lost economic opportunities.

The country has faced real GDP contraction since 2015, with high unemployment and poverty rates, and low GDP growth rates are expected until at least 2026, with a meager 0.7% GDP growth in 2023, outpaced by inflation, which is currently at 6%.

Critical structural reforms are emphasized to address rising homicide rates and organized crime, vital for improving socio-economic outcomes. The World Bank report recommends increasing police attention to priority crimes such as armed robbery, increasing the independence of the National Prosecuting Authority, and recruiting skilled specialists to the Hawks organised crime unit.

As the statistics quoted in the report indicate, crime in South Africa cannot be blamed in inequality alone - South Africa shows a high homicide rate even for its level of inequality, and the correlation is relatively weak to begin with.

With a homicide rate in 2021 of 41.9 per 100,000 people, South Africa is consistently ranked among the five countries with the highest homicide rates. South Africa also ranked seventh out of 193 countries on the Global Organized Crime Index in 2023.

The report also emphasises the wastefulness of government spending, which has less impact on crime per dollar than in other nations, and the density of police deployed does not match the requirements given our high rate of violent crime.

The economic impact of crime penalizes households, businesses, and the state, representing a high "tax" on the economy.

If businesses could invest security spending in productive ventures, growth potential could increase by at least 1 percentage point.

Crime severely affects businesses, leading to higher operating costs and constraining economic activity. Theft of key public and private infrastructure networks damages the country, reducing service delivery and economic activity.

Losses from the effects of crime in South Africa are higher than in most upper-middle-income and high-income countries, and are about 30% higher than the average in Indonesia, Morocco, and even Nigeria; up to six times higher than in the average first-world country.

In the formal sector, larger firms are relatively more affected, meaning there is no economy of scale with regard to preparing for the impacts of crime. About 21% of large firms affected by crime compared to 11% of small and medium ones.

Services firms and exporters are more vulnerable than most sectors, with construction facing extortion problems linked to organized mafias, and road freight facing more truck hijackings.

At least 10% of informal businesses exposed to economic crime every year, with the cost of crime for informal microbusinesses estimated at 20% of their annual revenue.

All major infrastructure networks affected by theft, and the direct costs of replacing stolen assets or repairing damaged ones are high. Financial losses from copper theft for just three SOEs (Eskom, PRASA, and Telkom) could reach R7 billion per year.

Length of railway cable stolen increased sixfold between fiscal years 2017/18 and 2022/23 (from 120 to 1,100 km), while security-related incidents have increased by 179 percent over the last five years. More than 2,000 batteries were stolen per month at the main operators in 2020, and in 2022, 3,226 incidents of conductor, cabling, and related equipment theft occurred.

At the household level, crime’s effects are particularly severe, with one in five households being victims of crime every year. Theft, housebreaking, and robberies are the most common economic crimes against households, with more concentrated effects in metro areas.

The costs of crime on households alone is estimated at around 2% of GDP, with close to 70% of the richest households spending money on crime protection compared to 5%  of the poorest, who cannot afford the protection services.

Private security still vastly outnumbers police.

While attempts to wrestle control of police from the corrupt central government continue, the state is expected to further strip local autonomy from metropolitan police forces in order to appease elements in the Western Cape SAPS hierarchy who are frustrated by the demands placed on them by their more efficient colleagues in the City of Cape Town.

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