Impact of Crime on South African Economy

Over the past few years, South Africa has been facing rising levels of violent crime. It is now a known fact that violence has just become a way of life in South Africa. It is an issue that is commonly faced by all citizens, regardless of what their economic status is. The South African newspapers are full of reports related to violent crimes. These reports mention incidents of violence in the suburbs as well as in the upscale neighbourhoods of the country.

There have been several attempts made to understand the cause of escalating violence in South Africa. However, until now, it has not been possible to zero down on a particular root cause. In this article, we will not concentrate much on the causes. In fact, we will focus on the economic effects to understand why it is urgent to fix this problem.

How Violence Affects South Africa?

According to the Global Peace Index, South Africa has been ranked as the tenth most unsafe place in the world! This index also estimates that violent crime consumes as much as 19% of the country’s GDP. This means that the South African government has to spend close to $67 billion per annum only to contain violence! If this number is adjusted in purchasing power parity terms, the equivalent cost for the United States would be a whopping $125 billion.

According to the survey, South Africa stands out in many categories such as easy access to weapons, number of murders and even rising number of violent protests. It would be apt to say that the country’s performance has been dismal since it only ranks ahead of war-torn countries like Syria, Iraq, and Afghanistan, etc.

These observations are not limited to the Global Peace Index. Several such observations have already been made by the World Economic Forum and even the World Health Organization.

The Economic Effects of Crime

The prevalence of a high crime rate ensures the wastage of money from an economic point of view. Some of the most obvious costs of crime have been listed down in this article.

Cost of Running Prisons: Since South Africa has a lot of violent crime, it also has a lot of people who are incarcerated. This is a double whammy for the government. An incarcerated person is not productive. As such he/she does not earn for the nation and for the economy. On the other hand, the government has to pay for an incarcerated person. Hence, there is lost revenue, and then there are out of pocket expenses as well!

The South African government spends close to $9 billion on incarceration every year. However, even after spending this huge sum of money it creates more problem than it solves. It is a known fact that the South African system is handling at least 20% to 30% more prisoners than it is supposed to. This leads to overcrowding which causes problems such as violence and the spread of infectious diseases amongst criminals. The healthcare cost further adds to the expenses making prisons unviable.

Cost of Law Enforcement

South Africa needs a bigger police force in order to prevent violent crimes from happening. Also, the number of courts and judges have to be more because more cases related to violent crime have to be tried. Hiring all these civil servants is expensive. Also, more expenditure on crime prevention doesn’t add any value to society.

The police and other law enforcement agencies also get the bulk of the taxpayer’s money. For instance, the department of science receives one of the highest monetary grants from the South African government. However, it needs to be understood that most of this money is spent on science related to the prevention and redressal of violent crime.

The South African police have to continually spend money in order to upgrade itself in the area of forensics so that more criminals can be brought to justice. At the present moment, the South African government spends twice as much on science related to crime as it does on science related to education or science related to health!

Since more money is being spent on prevention of criminal activities, the education, as well as the healthcare system in South Africa, is backward. In the long run, this again affects productivity.

Loss of Business

There is a lot of international capital which is flowing around the world looking for a new home. Countries like India have been able to capitalize on this opportunity and hence are developing their economy with money received from investors.

However, because of South Africa’s perception as a nation infested with violent crime, investors are not willing to back this country. It needs to be understood that South Africa has a fully functional legal system. The contracts are enforced within a reasonable time frame. Also, property rights are protected in most parts of the country. It is just the perception of violence that keeps expats and immigrants out of the country. Since multinationals are not able to move their talent freely when they invest in South Africa, they choose to ignore the country altogether. The socio-economic effects of this are felt all across the nation as development takes place at a much slower rate than it ideally should.

To sum it up, violence costs South Africa a lot of money. It is dragging down the entire economy. As such it is no surprise that most South Africans consider it to be the number one problem in their country.

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