The PIC and Zondo Commissions, official enquiries, AG reports and media reports have highlighted the staggering costs of corruption in the public and private sectors. Spectacular as the amounts involved are they pale into insignificance when compared to the cost of crime in general.
A recent report by the Institute for Economics and Peace (IEP) estimates that the cost to South Africa of violent crime alone amounts to over R600-billion each year. Their estimate of the cost of violence includes expenditure on policing, private and state security, incarceration as well the indirect costs of imprisonment and the economic cost of murder and assault.
The IEP indicates that their estimates are conservative as they exclude items like expenditure on the judicial system, costs incurred by business, domestic violence and household out-of-pocket spending on safety. According to the IEP the economic cost of violence is certainly higher than the R600-billion indicated.
The IEP indicates that violent crime in South Africa amounts to 13 percent of Gross Domestic Product (GDP). South Africa’s high rates of violent crime ensures that the total cost of violence tends to be higher than in other countries.
On average violent crime costs countries 8.8% of GDP.
In terms of GDP lost violence costs the economy almost 50% more than the global average. Of the 163 countries examined by the IEP South Africa has the 26th highest cost of violence relative to GDP.
The interactive graphic below rates the countries in terms of the cost of violence on economic activity.
Unfortunately violence has a multiplier effect on social and economic development. For example expenditure on security reduces expenditure on education and health services. This means that the economic cost of violence extends well beyond the direct costs incurred.
Once this ‘multiplier’ effect is factored into the equation the cost of violent crime in South Africa rises to R970-billion per annum (20% of GDP).
Even if the cost of is relatively insignificant when compared to that of violence its impact should not be under-estimated. At this stage we can only guess as to the total amount involved in corrupt deals and the direct impact in terms of services not provided, lost investment opportunity and cost of inquiries etc.
The resultant protests, lost economic development ensure that the impact of corruption is also subject to a multiplier effect and will impact on South Africans well beyond the missing billions we already know of.