Crime is wreaking havoc on South Africa’s economy, costing a staggering $40 billion annually, according to the World Bank. With murders soaring and organized crime infiltrating various sectors, including retail, mining, and construction, the nation faces a pivotal election where crime and corruption are key concerns for voters. Despite efforts to combat crime, such as business-government partnerships, the challenge persists, threatening economic growth and public trust in law enforcement.
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By Antony Sguazzin and Janice Kew
In November, as a Shoprite Holdings Ltd. store in a working-class area of Cape Town prepared to open, gunmen stormed in, held staff hostage and then escaped with cigarettes and cash—the umpteenth such violent robbery for Africa’s biggest retailer. In February, an executive of Rand Water, addressing a group of schoolchildren on the outskirts of Johannesburg, was shot dead by an armed man firing at close range. An up-and-coming soccer star was gunned down in April in a carjacking near Johannesburg.
The African continent’s most developed nation has long been saddled by one of the highest crime rates in the world. The number of murders was just under 27,500 last year, up about one-third from 2019. The World Bank estimates that criminal activity shaves a whopping 10%, or $40 billion a year, from the gross domestic product.
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The brazenness and violence of attacks has intensified to such a point that crime has become a major issue in what promises to be South Africa’s tightest election since the end of apartheid, with the ruling African National Congress likely to be forced into a coalition government for the first time. A survey by Ipsos released on April 26 put ANC support at 40.2%, well below the 57.5% of the vote the party won in the 2019 election.
In a country where a third of the working-age population is jobless, crime and corruption together rank ahead of unemployment as a key concern for South African voters in the May 29 ballot, according to a survey by the Social Research Foundation. A poll of South Africans ages 18 to 24 released on May 7 by the Ichikowitz Family Foundation showed 85% of respondents concerned about corruption, up from 64% in 2022—and a bigger share than those who said joblessness was their No. 1 worry.
“We are reaching a tipping point, and we need to deal with it or it’s going to be a downhill battle,” says Jenni Irish-Qhobosheane, a researcher at the Global Initiative Against Transnational Organized Crime, or GI-TOC. “Whoever the new administration is, they will have to put both hands around it.”
The GI-TOC last year ranked South Africa seventh out of 193 countries in the infiltration of organized crime into the economy, up from 19th two years prior. That puts the nation in the same basket as Colombia, Myanmar and Nigeria. Although South Africa’s department of justice highlights that GI-TOC assigns the country a high score for what it terms “resilience”—the strength of its judicial, law enforcement, banking and civil society institutions—that’s of little comfort to businesses grappling with the problem.
No sector of the economy has been spared. Retailers and manufacturers are victims of looting and heists of their delivery trucks. Gold producers face an influx of heavily armed illegal miners. State-owned rail lines that haul minerals are plagued by cable theft and sabotage of the tracks, with criminals seeking contracts to fix the damage. Construction companies are extorted to hand over a portion of project costs to local groups known as business forums that offer little by way of services.
South Africa has also been placed on a global dirty money monitoring list by the Paris-based Financial Action Task Force, significantly raising costs for those who transact with the country’s businesses.
“We lose product, we lose infrastructure,” says Abraham Nelson, executive head of the Crime Risk Initiative at the Consumers Goods Council of South Africa, which has more than 9,000 companies as members. “Insurance is another killer, because every time you get hit it goes up.”
Companies are spending millions to protect themselves. Coal miners pay for drones and security teams to limit theft of the fuel. Banks employ private armies to contend with gangs that lie in wait on national highways to block and rob trucks transporting cash to automated teller machines or branches.
Shoprite has created a command center that tracks thefts and other criminal incidents across its network of more than 3,500 stores across the country and shares its information with the police and prosecutors. The company says the cooperation has resulted in a combined 1,448 years in prison terms over the last five years, including 24 life sentences.
The high incidence of crime has been good for one sector of the economy. According to the Private Security Industry Regulatory Authority, there are more than 2.7 million registered private security officers in South Africa, making its security industry one of the largest in the world. That compares with about 150,000 police officers in the country.
Coming on top of all the infrastructure challenges confronting South Africa—recurrent power outages, poor roads, a dysfunctional freight rail and port network—crime has added yet another layer of complexity to doing business.
“The three big impediments to growth in South Africa are energy, logistics and crime and corruption,” says Mike Brown, chief executive officer of Nedbank Group Ltd., South Africa’s fourth-biggest bank by revenue. “It does put an extraordinary cost pressure into our business.”
The ANC-led government, which has in the past been reluctant to work with the private sector, has reached out to business for help. The leaders of some of the country’s biggest miners, retailers and banks—such as Sibanye Stillwater Ltd., Pick N Pay Stores Ltd. and Standard Bank Group Ltd.—now sit on the board of a group called Business Against Crime South Africa (BACSA). As part of the effort, businesses share information collected by their security teams with police and provide resources to train law enforcement officers and those at agencies involved in prosecuting crimes.
“The prime purpose of this intervention is to really leverage the skills and resources within business that government has not got,” says BACSA CEO Graham Wright.
The government decided to partner with business because of the impact crime and corruption were having on the lives of ordinary South Africans and on business confidence, according to a statement from President Cyril Ramaphosa’s office in response to questions from Bloomberg News.
Under Ramaphosa, who has been in office since 2019, the government has assembled 20 specialized teams to help address illegal mining, construction site extortions, cable theft and vandalism to economic infrastructure, according to the statement, which noted that by November 2023 there had been more than 4,000 arrests for damage to critical infrastructure and 3,000 for illegal mining.
Businesspeople say some government policies have unwittingly incentivized criminal activity. The Preferential Procurement Regulations passed in 2017, for instance, were meant to help small, mostly Black businesses get a leg up, by decreeing that government projects should allocate 30% of procurement spending to local businesses. But the policy has spawned a cottage industry of extortion rackets as so-called business forums target private projects for similar allocations, hitting the construction industry particularly hard.
The hastily formed groups, which claim to be made up of local businesses but often include criminal elements, are demanding contracts, and failure to comply is met with sabotage, arson and protests. Projects can be brought to a halt for weeks. Sihle Zikalala, South Africa’s public works minister, puts the cost at billions of rand.
“We bear the brunt of the fact that it’s business forums that find contractors on construction sites and not the owners and developers of the project,” says Mohau Mphomela, executive director of Master Builders Association North, which represents construction companies in four of South Africa’s nine provinces. “It’s dire.”
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Of course, not just businesses are being targeted. Nischal Mewalall, CEO of the South African Banking Risk Information Centre, says the country has seen an explosion in “express kidnappings.” That’s when criminals abduct a person, hold them for a few hours, and assault and threaten them and their families to force them to extract money from their bank accounts.
One such victim was 44-year-old Gaviro, who declined to give her full name for fear of reprisal. As she stopped in a middle-class suburb of Johannesburg late last year to speak to an Uber driver friend, armed men shoved her into her friend’s car and drove them both to a nearby township where a separate group phoned Gaviro’s son, threatening to kill her unless 6,000 rand ($325) was transferred to them. When that was done, she was dumped on a dark street near a gas station. Police told Gaviro she was the 10th person to report such a crime in that area in a week.
The government’s inability to protect individuals and businesses from such activities has dented faith in the state apparatus and will need to be addressed no matter who wins the elections, says GI-TOC’s Irish-Qhobosheane: “It’s going to be a major challenge for the administration coming in.”
But even government officials hold out little hope.
“The cost across society is immense, and I suspect the figure is much more than 10%” of GDP, Ismail Momoniat, an adviser to the National Treasury, where he worked for three decades and rose to acting director general, said at a panel discussion in November. “The horrible lesson in South Africa is that crime actually pays. It’s worth being a criminal because you are never going to get caught.”
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