Impact of Crime on Small Businesses Report 2008 - Gauteng Online

THE IMPACT OF CRIMEON SMALL BUSINESSESIN SOUTH AFRICAA study commissioned by theSouth African PresidencySBPJuly 2008

SBP’s survey ong>ofong> the impact ong>ofong> crime on small businesses was undertaken underthe auspices ong>ofong> The Presidency. The survey was funded by USAID-South Africaunder the SEGA II programme. The Friedrich-Naumann-Stiftung provided financialsupport for the publication ong>ofong> this report.SBP’s research team managed the project, undertook the data analysis andcompiled the report. Kerri McDonald, research manager at SBP, is the principalauthor. Additional expert input was provided by Prong>ofong>essor Lawrence Schlemmerand Dr Neil Rankin. MarkData (Pty) Ltd undertook the survey fieldwork.SBP is an independent not-for-prong>ofong>it private sector development and researchcompany, promoting strategic partnerships and a better policy, regulatory andoperational environment for business growth in Africa. Our work combinesresearch, advocacy, and practical business development programmes. Ourprojects are supported by the private sector and a variety ong>ofong> developmentagencies. SBP (originally the Small Business Project) is registered inSouth Africa as a Section 21 company.Published by:SBP, 79 Oxford Road, SaxonwoldJohannesburg, South Africatel +27 (0)11 486-0797fax +27 (0)11 486-0810www.sbp.org.zaAll rights reserved. The material in this publication may not be stored, copied ortransmitted without the permission ong>ofong> the publisher. Short extracts may be quoted,provided the publisher is fully acknowledged.ISBN 978-0-620-41562-0

Table ong>ofong> contentsForeword...................................................................................................................................... 41 Introduction......................................................................................................................... 62 The survey........................................................................................................................ 103 Perceptions ong>ofong> crime......................................................................................................... 204 Actual experience ong>ofong> crime ............................................................................................... 305 Direct and indirect costs ong>ofong> crime ..................................................................................... 426 Costs ong>ofong> precautions......................................................................................................... 497 Opportunity costs.............................................................................................................. 538 Insurance.......................................................................................................................... 669 Psychological impact ........................................................................................................ 6910 Reporting crime incidents ................................................................................................. 7411 Conclusion and recommendations ................................................................................... 8012 Appendices....................................................................................................................... 88

FOREWORDTHE PROMOTION ong>ofong> entrepreneurship and small business is an important priorityong>ofong> the government ong>ofong> South Africa. The Small Business White Paper (1995), theSmall Business Act (1996), and the Integrated Strategy on the Promotion ong>ofong> Entrepreneurshipand Small Business provide a framework for role-players that seek tomake a contribution in assisting the entry ong>ofong> new players into the formal economy,strengthening growth and sustainability ong>ofong> existing enterprises and creating necessarylinkages in the continuum ong>ofong> enterprises so that some start-ups may graduatefrom local micro to globally competitive businesses.Our commitment is to ensure that small businesses progressively increase theircontribution towards growth and performance ong>ofong> the South African economy. Thesmall business sector has the potential to bring millions ong>ofong> people out ong>ofong> povertyinto the mainstream economy. The crucial indicator for the success ong>ofong> SMME sectoris the continued creation ong>ofong> new start-up firms by all segments ong>ofong> society and inall corners ong>ofong> our country resulting in the improvement ong>ofong> economic and social wellbeing ong>ofong> the poor communities. These start-ups must then cross the threshold tosustainability and develop the capacity to create decent jobs. However, crime is aconstraint to doing business in South Africa which affects small businesses quiteseverely.The international panel ong>ofong> economists that reported to government on growth andemployment creation identified crime as a factor that seemed to disadvantage smallbusinesses in South Africa. That project was not, however, able to follow up thisobservation with a scientific survey.Although levels ong>ofong> crime have been gradually going down, the scourge ong>ofong> crimeremains a real challenge. Over 2 million crimes were reported to the police in thefinancial year ong>ofong> 2007/08 in South Africa. Of these, 52 percent were theft, commercialcrime and property crime; 24 percent interpersonal violence; 9 percent robberies;8 percent firearms and alcohol and drug; and 7 percent damage to propertyand arson. Analysis ong>ofong> 2007/08 crime statistics shows an increase in crime victimisationong>ofong> businesses – burglary ong>ofong> business premises increased by 8 percent, commercialcrimes by 6 percent, and shoplifting by 2 percent. Even more worrying is a14 percent increase ong>ofong> robberies in residential premises.ong>Crimeong> statistics provide valuable information on volume ong>ofong> crime and are ong>ofong>tenused by the police in operational planning. However police crime statistics do notprovide sufficient information on public perceptions ong>ofong> crime, fear ong>ofong> crime, publicattitudes to criminal justice system as well private security measures. Victim sur-

FOREWORDveys are used to complement police statistics in formulating a holistic picture ong>ofong>crime. It is through the surveys that we can measure the physical and psychologicalimpact ong>ofong> crime and private spending on security. Understanding the small businessresponse to crime is important for developing crime prevention policy as well assmall business and police partnerships.In the pursuit ong>ofong> a more equitable, crime-free and prosperous South Africa, the PolicyCo-ordination and Advisory Services (PCAS) unit in the Presidency requestedSBP to provide a better understanding ong>ofong> the extent to which crime impacts onsmall enterprises, and more particularly on emerging black-owned businesses. Ourobjective was to get quantifiable assessment ong>ofong> the direct and indirect costs ong>ofong>crime for these businesses.The survey covered all types ong>ofong> very small business, but focused on black-owned smalland emerging businesses, and has provided useful new information about the types andseverity ong>ofong> crimes experienced by small businesses, costs to businesses as well theirsustainability. The results ong>ofong> the study will inform practical and workable policyrecommendations that will assist towards the fight against crime in the country.We understand that crime is not a sole concern ong>ofong> the state and effective crime preventionmeasures do not solely rest on state agencies and programmes. Citizen participationin crime prevention is indispensable and tends to yield better results thanwhen state agencies are acting on their own. Acknowledging that there is much tobe done to improve law enforcement and protection ong>ofong> the business sector, governmentwill continue to lead and encourage efforts to increase the level ong>ofong> smallbusiness creation. This undoubtedly entails intensifying the fight against crime. Wecall upon all stakeholders and role players to focus their efforts in respect ong>ofong> thischallenge.Alan HirschDeputy Head: Policy Coordination and Advisory ServicesThe PresidencyJuly 20085

MAIN REPORT

1 INTRODUCTIONTHERE IS broad agreement that the high levels ong>ofong> crime – and violent crime inparticular – significantly constrain businesses in South Africa. However, very littlehas been known about:• how likely small and emerging business are to be victims ong>ofong> crime• the types ong>ofong> crime they experience most frequently• the ways in which crime constrains small business growth and development,and• how much crime actually costs small businesses both in money and in resources.This report provides the first evidence-based answers to these questions. The surveycovered 446 small and emerging businesses, almost all owned by historicallydisadvantaged black Africans, in Cape Town, Durban and Johannesburg. The surveyfocused on businesses operating in industrial sectors with the potential to contributeto economic growth and to support job creation. The sample largely excludedsubsistence-level activities. It covered businesses located in inner city areas,large townships and informal settlements, and densely developed suburban areassuch as shopping centres and business parks, and provides robust evidence aboutthe experiences and perceptions ong>ofong> small business owners in a variety ong>ofong> settings inand around the three major metropolitan areas, with their different local economiesand urban cultures.ong>Crimeong> rates in South Africa – and particularly rates ong>ofong> violent crime - are high byinternational standards. The World Bank’s Investment Climate Report: South Africa(2005) rated crime as one ong>ofong> the four major constraints on enterprise operationand growth. About 30 percent ong>ofong> enterprises ong>ofong> all sizes surveyed for the World Bankstudy said crime was a major or very serious problem, and enterprises ong>ofong> all typeswere likely to rate crime among the top four constraints to doing business. The reportnoted that while firm productivity was relatively high and the investment climatemostly favourable, private investment was relatively low, partly as a consequenceong>ofong> the high cost ong>ofong> crime. 1These findings were echoed in the January 2007 Grant Thornton InternationalBusiness Report (IBR), which reported that while expectations for growth in keyareas such as turnover, prong>ofong>itability and employment were higher than in previousyears, overall optimism amongst South African privately held businesses was considerablylower, as a result ong>ofong> mainly non-business factors including increasedcrime. 2

THE IMPACT OF CRIME ON SMALL BUSINESSESIt seems likely that crime also has a deterrent effect on new business entrants. TheSouth Africa victim’s survey found that over a quarter ong>ofong> those interviewed saidthat they would not start their own business because they feared violent crime. 3Christopher Stone, in a paper based on his work on AsgiSA, observes that: ‘Whilethere is broad agreement that high levels ong>ofong> violent crime constrain growth, there isvery little known about how it does so and by how much… The South Africangovernment itself routinely lists the high level ong>ofong> crime, particularly violent crime,as an impediment to growth. Yet the evidence is much weaker about specificallyhow crime constrains growth. On this question, there are many hypotheses and fewcertainties.’ 4To date, studies assessing the impact ong>ofong> crime on business have tended to focus onthe large corporate sector. The specific problems ong>ofong> the small and emerging sectorsong>ofong> business have been less intensively considered. International studies have foundthat while small and micro firms are less likely to be targeted by criminals than largerfirms, when they are victimized, their costs are proportionately much higher. 5Big businesses can provide a relatively robust assessment ong>ofong> the costs ong>ofong> crimebased on insurance data. In contrast, the proportion ong>ofong> small businesses with insuranceagainst criminal acts is relatively low. Evidence from international researchalso suggests that SMEs are very likely to under-report crimes to the police.Given the importance ong>ofong> small business as a driver ong>ofong> economic growth and jobcreation, particularly in developing countries, the extent to which crime deters theformation and sustainability ong>ofong> small enterprises needs to be clearly understood. Itis also important to understand the links between a more vibrant small enterprisesector and reduced crime. To quote Martin Feinstein writing in Business Report:“A society where entrepreneurs are highly valued and supported, where small businessesflourish and where young people can put their energies into starting businessesbecause they see it as a viable and feasible option, will be a society wheremore people see options other than crime.” 6In 2007 the Policy Co-ordination and Advisory Services (PCAS) unit in the Presidencyrequested SBP to undertake research that would provide a better understandingong>ofong> the extent to which crime impacts on small enterprises, and more particularlyon emerging black-owned businesses. An objective, quantifiable assessment ong>ofong> theactual and efficiency costs ong>ofong> crime for small businesses was a key requirement.The study was funded by USAID under the SEGA II programme.The research was undertaken between May and October 2007, and involved closeconsultation with key stakeholders throughout the project. A reference group wasestablished, comprising representatives ong>ofong> The Presidency, the South African PoliceService, the National Secretariat for Safety and Security, the National Prose-8

THE IMPACT OF CRIME ON SMALL BUSINESSEScuting Authority, National Treasury and the Department ong>ofong> Trade and Industry. Itsvaluable input was complemented by advice from a team ong>ofong> issue experts in thefields ong>ofong> crime research, community safety and business action against crime, whobrought their considerable experience to bear at critical stages during the project,from survey design and to the report writing stage.Key findings from the draft project report were presented to a broad range ong>ofong>stakeholders in a series ong>ofong> regional workshops in the three cities surveyed. Theseworkshops enabled representatives ong>ofong> business, local government and the SAPS tocomment on the findings and, crucially, to contribute to formulation ong>ofong> recommendations,as contained in section 11 ong>ofong> the report.9

2 THE SURVEYTHE SCOPE OF the research was limited to small, micro and informal/emergingbusinesses run by black South Africans. 7 For the purposes ong>ofong> the study, small businesseswere defined as enterprises with between 5 and 50 employees; microbusinessas enterprises with fewer than five employees; and informal businesses asenterprises not registered as companies or for VAT. The survey was specificallyinterested in businesses with the potential to contribute to economic growth andsupport job creation, and therefore largely excluded subsistence-level activities.SBP contracted MarkData (Pty) Ltd to undertake surveys ong>ofong> small and emergingbusinesses in areas ong>ofong> high business density in three major urban centres: Durban,Cape Town and Johannesburg. Fieldwork took place between 20 June and 20 August2007. Over 100 separate locations were covered, and detailed results weregathered from a total ong>ofong> 446 enterprises.Interviews took place face to face with SME owners at the place ong>ofong> business. Theinterviews were conducted in the respondents’ choice ong>ofong> language and answers recordedin English. Completed questionnaires were quality checked by the fieldworksupervisor.2.1 Location ong>ofong> businessesThe survey targeted three types ong>ofong> locations in each city:• Inner city areas ong>ofong> high business density• Large urban townships and adjacent informal settlements; and• High density business locations in suburban locations, such as shopping centresand ong>ofong>fice and industrial parks.The survey design included several sites within each category, to enable comparisonong>ofong> localities experiencing high, medium and low levels ong>ofong> crime.Sampling involved the selection ong>ofong> random starting points from street maps in areasong>ofong> business concentration, classified according to the three location categories definedabove. Respondents were to be selected at roughly predetermined intervals.In order to qualify for selection, businesses:• had to comply with the project definition ong>ofong> small or emerging businesses• could operate in either the formal or informal sectors

THE IMPACT OF CRIME ON SMALL BUSINESSES• had to operate in one ong>ofong> four industrial sectors: Retail, personal or prong>ofong>essionalservices, small manufacturing and construction.Location typeTable 1: The sample by location type and cityInner city areas ong>ofong> high business density – businesses mostly based in shoppingcentres and ong>ofong>fice blocks. This category includes informal traders (14% ong>ofong> categorytotal)Large urban townships and adjacent informal settlements. About a third ong>ofong> businessesin this category operated from their own homes, and slightly over a third from ong>ofong>ficeblocks and shopping centres. Just over 20% were informal traders.High density business areas in suburban locations, such as shopping centres,business strips and ong>ofong>fice parks. This category includes a small portion ong>ofong> informaltraders (10% ong>ofong> category total) operating in areas ong>ofong> high business density, and asmall number ong>ofong> business located in industrial parksJohannesburgJohannesburg Inner City 37Townships/informal settlements: Soweto, Dobsonville, Kagiso, Alexandra, Daveyton,Kathlehong, TembisaHigh density suburban 71Total Johannesburg 158Cape TownCape Town Inner City 35Townships/informal settlements: Khayelitsha, Langa, Nyanga, Gugulethu, Woodstock,Bishop Lavis, Mitchel's Plein, Parow (Industrial), Ottery, Crossroads, Grassy Park,Kuils RivierHigh density suburban 66Total Cape Town 141DurbanDurban Inner City 38Townships/informal settlements: KwaMashu, Umlazi, Inanda, Chatsworth, Umbilo,ClermontHigh density suburban 66Total Durban 147Main Sample Total 446No. ong>ofong>businesses110133203504043Once sampling began, it was found that only a relatively small number ong>ofong> businessescomplied with the project definition ong>ofong> emerging businesses. The intentionto sample at intervals thus largely fell away, and all or most businesses that com-11

THE IMPACT OF CRIME ON SMALL BUSINESSESplied with the definition were included. As a result, the samples in most casescomprised ‘clusters,’ the broad locations ong>ofong> which were randomly distributed.It is important to stress that experience ong>ofong> crime was not used as a filtering criterion.2.1.1 Site ong>ofong> operationsThe majority ong>ofong> businesses included in the sample were located in an ong>ofong>fice blockor shopping centre. The remainder ong>ofong> the sample was comprised ong>ofong> informal traders,businesses operating from home, and small numbers ong>ofong> businesses in industrialparks, factories or free standing road-side structures. The majority ong>ofong> informal traderswere retailers ong>ofong> convenience items, sweets and groceries, and clothing. A smallnumber ong>ofong> personal services providers were also included in this sub-category.Over half the informal traders operated in townships and informal settlements,while just under a third worked in densely developed suburban areas, around shoppingmalls and ong>ofong>fice parks.Chart 1: Sample by business site1514Own housePart ong>ofong> ong>ofong>ficeblock/shopping centreInformal traderIndustrial parkBusiness cluster/complex66OtherSample size: 446 businessesVariations in site ong>ofong> operations by location are illustrated in Chart 2.12

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 2: Sample by business site and location908070% ong>ofong> sample6050403020100Inner city Townships & informal High density suburbanOwn house Part ong>ofong> ong>ofong>fice block/shopping centre Informal traderSample size: 446 businesses2.2 Sub-sectorsBusinesses included in the survey were drawn from a limited number ong>ofong> sectors, toenable robust comparative analysis. Sectors were selected and weighted with referenceto recent Finscope research, which identified retail, services, construction,manufacturing, transport and prong>ofong>essionals as key industry categories. 8The sub-sectors were relatively evenly represented across types ong>ofong> location. Highvalue and fixed premises retail businesses were concentrated in inner city and highdensity suburban areas, with slightly lower numbers in townships. Low level andinformal sector retail vendors were concentrated in townships and informal settlements.The majority ong>ofong> personal and prong>ofong>essional service providers were located inthe inner city, as demonstrated in Chart 4.13

THE IMPACT OF CRIME ON SMALL BUSINESSESTable 2: Sub-sectors by activities and site ong>ofong> operationsSub-sector Description BusinessesRetail: Lower level vendors (informaltraders and vendors operating from ownhomes or in shopping centres/ong>ofong>ficeblocks)Computers, mobile phones, other electronic goods;clothing and accessories; groceries and convenienceitems; other retail businesses46Retail: Fixed premises and high levelvendors (located mainly in shoppingcentres/ong>ofong>fice blocks)Personal services (operating mainly fromshopping centres/ong>ofong>fice blocks, but incl.one quarter informal traders)Prong>ofong>essional services (operating mainlyfrom shopping centres/ong>ofong>fice blocks)Small manufacturing (operating mainlyfrom industrial parks, own home, andsome informal traders)Construction (operating mainly from ownhome, industrial parks, and some informaltraders)Heavy goods e.g. furniture, fridges, cars; specialisedequipment; computers, mobile phones, other electronicgoods; clothing and accessories; convenience andgrocery stores; other retail businessesNon-tangible products, such as hairdressers; andbusinesses operating with high value equipment suchas computers and printersBusiness and financial services, IT support, medicalservices such as doctors, optometrists and dentistsHigh value low bulk goods; low value goods; heavy orbulky goods; repairs; crafts2 firms with large payrolls, 11 enterprises with fewemployeesTotal 44622186443415Sample size: 446 businessesChart 3: Composition ong>ofong> sample by sub-sector8%3%10%Retail vendors - lowlevel/informal10%Retail high level/fixedpremisesPersonal services19%50%Business, financial, IT,prong>ofong>essional servicesSmall manufacturing (incl.crafts)Construction14

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 4: Location ong>ofong> business60% ong>ofong> respondents50403020100Low levelretailHighlevel/fixedpremisesretailPersonalservicesProng>ofong>essionalservicesManufacturing ConstructionInner city Township/informal settlement High densitySample size: 446 businessesTable 3: Sub-sectors by site ong>ofong> operationsSub-sector Location/type % ong>ofong> sub-sectorHigh level and fixed premisesretailLower level retailPersonal servicesProng>ofong>essional servicesManufacturingConstructionShopping centres or ong>ofong>fice blocks 87Work from home 6Informal trader 4Industrial park 3Informal traders 65Vendors operating from their own homes or 35in shopping centresShopping centres or ong>ofong>fice blocks 55Informal traders 24Work from home 17Industrial park 4Shopping centres or ong>ofong>fice blocks 73Work from home 18Informal trader 5Industrial park 4Shopping centres or industrial parks 52Work from home 29Informal traders 20Work from home 47Shopping centres or industrial parks 33Informal traders 2015

THE IMPACT OF CRIME ON SMALL BUSINESSES2.3 Types ong>ofong> businessThe majority ong>ofong> businesses included in the sample were sole proprietors, close corporationsand family owned businesses. Partnerships and franchises comprised asmall proportion, as did private limited companies. A very small percentage ong>ofong>businesses described themselves as not registered in any way.Business included in the sample had been in operation, on average, for just undereight years. This average was fairly stable across location types. Small manufacturingand construction businesses appeared to be slightly more established, averagingnine and a half years, while retail vendors averaged just over six years in operation.Chart 5: Sample by type ong>ofong> business54 322733Sole proprietorClose corporationFamily ownedPartnershipFranchisePrivate ltd coNot registered27Sample size: 446 businesses2.4 Business sizeBusinesses included in the survey represented a broad range ong>ofong> turnover categories,with the majority clustered between R25 000 and R400 000 per annum, and a significantproportion above R800 000, as illustrated in Chart 6. A small proportion ong>ofong>firms represented in the over R800 000 band reported turnover ong>ofong> up to R3 millionper annum.16

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 6: Sample by annual turnover>R800KR600K -

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 7: Sample by turnover and location20%18%16%14%12%10%8%6%4%2%0%

THE IMPACT OF CRIME ON SMALL BUSINESSESTable 4: Sample by sub-sector and turnover bandsPercentage ong>ofong> respondentsLow levelretailHigh levelretailPersonalservices Prong>ofong>. services Manufacture Construction

3 PERCEPTIONS OF CRIMESMALL BUSINESS owners are very worried about crime. They worry about itseffects on their businesses, and they feel unsafe. They are also pessimistic aboutany prospect ong>ofong> relief: two thirds do not foresee any decrease in crime levels – andindeed, over a third expect crime levels to rise even further. Burglary and robberyare particular concerns, but the business owners also worry about other kinds ong>ofong>crime ranging from petty theft and shoplifting to hijacking.Any discussion about crime in South Africa needs to acknowledge that there is alively political debate about the relationship between public perceptions and reality.The South African Police Service and senior government figures have argued thatfear ong>ofong> crime and perceptions ong>ofong> crime levels are exaggerated, and are not justifiedby actual levels ong>ofong> crime as captured by police statistics.Fear ong>ofong> crime is a major problem for developing countries around the world. A recentUN Habitat survey found that fear ong>ofong> crime is driving investment away fromcities in developing countries and that more than half ong>ofong> urban dwellers in both richand poor countries worry about crime all ong>ofong> the time or very ong>ofong>ten. The Habitatstudy found that crime, and fear ong>ofong> crime, was worst in Latin America and Africa. 9It is important to emphasise that a political debate about the relationship betweenthe perception ong>ofong> crime and its reality cannot be ended by gathering empirical dataabout perceptions ong>ofong> crime and actual rates ong>ofong> victimisation. Within very broad limits,no matter what the actual rate ong>ofong> crime may be, there will be those who willconsider perceptions ong>ofong> crime to be exaggerated, while others will argue that crimecreates an intolerable burden on society and perceptions to this effect are absolutelyjustified.While an empirical survey cannot settle the debate, it can quantify both perceptionsand the actual rate ong>ofong> victimisation and describe the extent ong>ofong> overlap between perceptionsand reality.Section 3 explores perceptions ong>ofong> the impact ong>ofong> crime on business viability, andpersonal feelings ong>ofong> safety and risk when at work. Section 4 describes actual ratesong>ofong> victimisation and concludes with a brief discussion ong>ofong> the relationship betweenperception and reality.

THE IMPACT OF CRIME ON SMALL BUSINESSES3.1 ong>Crimeong> as a key challenge for small businessBusiness owners were asked to think about all the difficulties and constraints thatcurrently face their businesses, and to mention the three most serious problems.The question about constraints to business was open-ended and no probing wasundertaken. However, respondents were informed in advance that the survey wasspecifically about the impact ong>ofong> crime on small businesses, and were thus likely tohave crime concerns in mind from the start ong>ofong> the interview.Fifty-four percent ong>ofong> respondents cited crime in general as a key problem. Othercrime-related issues, such as shoplifting, credit card fraud, use ong>ofong> counterfeitmoney, and disruption to business owing to crime, were also specifically mentionedby a number ong>ofong> respondents. The perception ong>ofong> crime as a key challenge facingbusiness was particularly prominent among business owners in densely developedareas such as shopping centres and malls (70 percent ong>ofong> respondents), comparedto businesses in townships and informal settlements (63 percent) and innercity businesses (54 percent).There was considerable variation in responses across sub-sector. Seventy-two percentong>ofong> high level retail businesses cited crime as a major problem, as did 69 percentong>ofong> low level retail vendors and 67 percent ong>ofong> construction firms. The figureswere considerably lower for businesses ong>ofong>fering prong>ofong>essional and personal servicesand manufacturing enterprises, where crime was mentioned by just over half therespondents. A significantly higher than average proportion ong>ofong> bigger enterprises(turnover above R1 million per annum) cited crime as a major challenge facingtheir businesses, with over 90 percent ong>ofong> the biggest firms in the sample citingcrime as a serious concern. The figure was also high for the smallest firms in thesample (turnover below R15 000 per annum), many ong>ofong> whom are informal tradersand have very little security for their stock.Chart 8: Concern about crime by turnover% ong>ofong> responses1009080706050403020100

THE IMPACT OF CRIME ON SMALL BUSINESSESUnsurprisingly, businesses located in areas characterised as ‘high crime’ (on thebasis ong>ofong> businesses’ own perceptions) were most likely to cite crime as one ong>ofong> themajor problems facing their businesses – with 76 percent ong>ofong> them citing crime generallyas a challenge to doing business. Among businesses located in ‘moderatelyhigh crime areas,’ about half ong>ofong> the respondents rated crime as a major challenge totheir businesses, while the figure for those located in ‘low crime areas’ was 29 percent.YOUNG PEOPLE’S FEAR OF CRIMEFear ong>ofong> crime is also clearly present among South Africa’s potential entrepreneurs. In May 2007,‘Generation Next’ survey results showed that 70 percent ong>ofong> South Africa’s young people said itwas likely that they would work overseas and make a future for themselves there. Concern aboutcrime was cited as a key motivating factor. Asked if crime was “something I dislike enough for meto leave South Africa,” 66 percent ong>ofong> respondents said yes. The number ong>ofong> people who wouldleave because ong>ofong> crime increased with the age ong>ofong> the respondent. Among young urban black respondents,67 percent would seriously consider leaving the country owing to concerns aboutcrime. 103.2 Individual risk ong>ofong> crime while at workThe survey asked respondents to describe the extent to which they perceived themselvesand, where relevant, their employees, to be at risk ong>ofong> crime while at work.Seventy percent ong>ofong> respondents agreed with the statement: “I and/or my staff are atserious risk ong>ofong> crime while at work” (22 percent ong>ofong> these strongly agreed). Businessoperating in townships and informal settlements were more concerned than averageabout their vulnerability to crime while at work, as can be seen in Chart 9. Lowerlevel and informal sector retail vendors also considered themselves more at risk atwork than the sample average. This probably reflects the lack ong>ofong> access to securepremises or private security for enterprises in this sub-sector, as well as a significantconcentration ong>ofong> these enterprises in townships and informal settlements, asdiscussed in section 2.22

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 9: Perceived vulnerabilty to crime while at work% ong>ofong> respondents9080706050403020100Inner CityTownship/informalDenselydevelopedAverageAt serious risk ong>ofong> crime at workSample size 445 businessesRespondents were also asked to react to the statement “I and/or my staff are at seriousrisk ong>ofong> crime while travelling to and from work.” Three quarters ong>ofong> respondentsagreed with the statement (ong>ofong> these, a quarter ong>ofong> respondents strongly agreed). Respondentsoperating from inner city businesses were somewhat more likely to feelat risk. Manufacturing businesses also reported slightly higher than average perceptionsong>ofong> risk (sample size 440).PERCEIVED RISKThe level ong>ofong> perceived risk described by respondents was slightly higher than those found in comparablebusiness surveys. A Household and Business Satisfaction Survey undertaken on behalf ong>ofong>the City ong>ofong> Johannesburg in 2006, for example, found that just over half ong>ofong> informal sector businessoperators in the city reported feeling unsafe or very unsafe. The survey found that, while theperception ong>ofong> workers being safe in the workplace was 69 percent on average for firms ong>ofong> all sizesacross the sample, perceptions ong>ofong> safety were significantly lower for small businesses and for informalbusinesses, where just under half believed their employees were at considerable risk ong>ofong>crime in the workplace. Just over half ong>ofong> respondents across the sample (all firm sizes) believedthat their staff members were at risk while travelling to and from work. Concerns included hijackings,robberies and muggings. 11 Reaction to public perceptions Respondents were asked tocomment on the statement: “generally the dangers ong>ofong> crime are exaggerated.” Three quarters ong>ofong>respondents disagreed with the statement. Chart 10 illustrates the breakdown ong>ofong> responses. Businessowners in townships and informal settlements were least likely to agree that perceptions ong>ofong>crime were exaggerated.23

THE IMPACT OF CRIME ON SMALL BUSINESSES3.3 Reaction to public perceptionsRespondents were asked to comment on the statement: “generally the dangers ong>ofong>crime are exaggerated.” Three quarters ong>ofong> respondents disagreed with the statement.Chart 10 illustrates the breakdown ong>ofong> responses. Business owners in townshipsand informal settlements were least likely to agree that perceptions ong>ofong> crimewere exaggerated.Chart 10: Perception that crime is exaggerated4051936Strongly agree Agree Disagree Strongly disagree3.4 Perceived levels ong>ofong> crime in area ong>ofong> operationFirms were asked to comment on whether the area in which their business was locatedwas seen to be a high crime area, a moderately high crime area, or a lowcrime area. Thirty five percent ong>ofong> respondents described themselves as being locatedin high crime areas, 43 percent in moderately high crime areas, and 22 percentin low crime areas. 12Lower level retail vendors were most likely to describe their locations as highcrime areas (48 percent), with only 15 percent describing their locations as lowcrime. The spread among other sectors was largely in line with sample averages.Businesses operating in townships and informal settlements were most likely todescribe their locations as high crime areas. The majority ong>ofong> inner city businessesdescribed themselves as operating in moderately high crime environments, whilebusinesses operating in densely developed suburban areas such as shopping mallswere most likely to characterise their locations as low crime areas.24

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 11: Perceived levels ong>ofong> crime in businesses' area ong>ofong>operation50%40%30%20%10%0%Inner cityTownship/informalsettlementHigh density suburbanHigh crime area Moderately high crime area Low crime areaSample size: 441 businesses3.5 Perceived trends in crime levelsThe survey probed respondents for their perceptions ong>ofong> recent trends in crime levelsin their area ong>ofong> operation. The majority ong>ofong> respondents believed that incidents ong>ofong>crime against small businesses in their local areas had increased in the past year.Only 16 percent felt that incidents ong>ofong> crime against small businesses had decreased.13Chart 12: ong>Crimeong> trends - perceptions16%31%53%ong>Crimeong> has increasedong>Crimeong> levels stableong>Crimeong> has decreasedRespondents in townships and informal areas were most likely to believe that crimehad worsened (63 percent) while inner city businesses were most likely to reportthat crime had decreased. Seventy eight percent ong>ofong> respondents operating in high25

THE IMPACT OF CRIME ON SMALL BUSINESSEScrime areas believed that crime had increased compared to 31 percent ong>ofong> respondentsin low crime areas.At sub-sector level, retailers demonstrated a much higher than average perceptionong>ofong> an increase in crime trends. This was particularly true for low level and informalsector retail vendors, but was also a clear result for high level and fixed premisesretail outlets.Chart 13: Perceived crime trends - by sector% ong>ofong> respondents80706050403020100Low level retail vendorsHigh level and fixedpremises retailAverageong>Crimeong> has increased ong>Crimeong> is stable ong>Crimeong> has decreasedRespondents were evenly split as to whether levels ong>ofong> crime against small businesseswere likely to increase or decline over the coming year. Thirty five percentpredicted an increase, 35 percent a decrease, and 19 percent thought that levelswere likely to remain stable (ten percent ong>ofong> respondents had no clear expectations).Responses were fairly evenly spread across type ong>ofong> location, but showed some interestingvariations by sub-sector. Low level and informal sector retail vendors, thegroup reporting the highest perception ong>ofong> increased crime levels in the past year,was also one ong>ofong> the most optimistic that crime levels would decline in the in thecoming year. Respondents in the personal and prong>ofong>essional services sub-categorieswere also more optimistic than average about the prospects for a decline in crime levels.26

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 14: Expectations regarding crime trends60% ong>ofong> respondents50403020100Low level retailvendorsPersonal ServicesProng>ofong>essionalservicesAverageong>Crimeong> likely to increase ong>Crimeong> likely to decrease ong>Crimeong> likely to be stable3.6 ong>Crimeong>s perceived as being most problematic in the areaBusinesses were asked to state the kinds ong>ofong> crimes that were most problematic intheir area ong>ofong> operation at that time. Both burglary and robbery featured prominentlyin the responses, along with petty theft such as bag snatching and cell phone theft,and shoplifting.Chart 15: Perceived prevalence ong>ofong> crimeBurglary161511765Robbery/armed robberyPickpocket/cellphonetheft/bag snatchShoplifting28HijackingCar theft63Assault/street muggingNote: Respondents gave multiple responses – percentages therefore add up to over 100%.The types ong>ofong> crime perceived as prevalent in different areas varied with the characterisationong>ofong> areas as high, moderate or low crime. In high crime areas, robbery wasperceived as being ten percent more prevalent than the sample average. Burglary,27

THE IMPACT OF CRIME ON SMALL BUSINESSESon the other hand, was perceived as slightly higher in moderately high crime areas(70 percent ong>ofong> responses). Shoplifting was a more common response in low crimeareas (21 perception ong>ofong> responses), reflecting the concentration ong>ofong> businesses inlarge shopping centres in the low crime category.The perceived prevalence ong>ofong> different types ong>ofong> crime showed considerable differencesacross location type. Businesses operating in townships and informal settlementswere most likely to report a prevalence ong>ofong> burglaries and robberies in thearea.Chart 16: Perceived prevalence ong>ofong> crime -Township/informal settlementBurglary126 8Robbery/armed robbery25478Pickpocket/cellphonetheft/bag snatchShopliftingHijackingCar theft82Assault/street muggingInner city and suburban businesses reported higher levels ong>ofong> petty theft, such as bagsnatching and cell phone theft, and shoplifting. Businesses in suburban locationswere also more likely to cite hijacking as a concern.Chart 17: Perceived prevalance ong>ofong> crime -Inner city614105715BurglaryRobbery/armed robberyPickpocket/cellphonetheft/bag snatchShopliftingHijacking44Car theft63Assault/street mugging28

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 18: Perceived prevalence ong>ofong> crime - High densitysuburbanBurglary241813660Robbery/armed robberyPickpocket/cellphonetheft/bag snatchShopliftingHijacking2250Car theftAssault/street mugging29

4 ACTUAL EXPERIENCE OF CRIME4.1 Direct experience ong>ofong> crimeJust over half ong>ofong> the respondents said that they had experienced an incident ong>ofong>crime in the past year. This overall figure is comparable to the experience ong>ofong> smallbusinesses in developed countries such as Australia, the UK and the USA. But althoughSouth African small businesses face the same overall rate ong>ofong> crime, the patternis different - South African small businesses experience more serious and more violentcrime. The risks ong>ofong> crime appear to be highest for the most vulnerable smallentrepreneurs, and for companies on the verge ong>ofong> entering the ‘first economy’ – aparticularly unfortunate pattern for growth and development. Respondents wereasked whether their businesses had experienced an incident ong>ofong> crime in the pastyear. Of the 446 respondents, 243 businesses, or 54 percent, had experienced anincident ong>ofong> crime in the past year.INTERNATIONAL COMPARISONSInterestingly, our figure (a victimisation rate ong>ofong> 54%) is closely comparable to theexperience ong>ofong> small businesses in developed countries such as Australia, the UKand the USA, where surveys ong>ofong> small businesses’ experience ong>ofong> crime havefound that approximately half ong>ofong> small businesses report at least one incident ong>ofong>crime over a one year period. It is considerably lower than recent figures for Jamaica,which suggest that 65 percent ong>ofong> small businesses fall victim to crime in aperiod ong>ofong> one year. However, the types ong>ofong> crime experienced show considerablevariation across countries. In the United States study, over 80 percent ong>ofong> crimeswere against small businesses properties, with burglary and vandalism prevalent.Violent crime had affected only five percent ong>ofong> businesses in the sample.UK small businesses were also more likely to suffer damage or loss to propertythan to encounter criminals face to face - the main types ong>ofong> crime experiencedby survey respondents were vehicle damage (20 percent), theft (16 percent),and vandalism (14 percent), although 15 percent ong>ofong> the sample reported experiencingthreatening behaviour or intimidation. The top crimes experienced bySMEs in Australia were burglary (27 percent ong>ofong> respondents), shoplifting (21percent), vandalism (18 percent) and fraud (ten percent). Only in Jamaica werethe victims ong>ofong> crime likely to come face to face with their attackers – violentcrime, including robbery, extortion and protection rackets, accounted for a thirdong>ofong> crimes experienced by small businesses in the study. 14 In our study, about 20percent ong>ofong> incidents involved a violent or threatening encounter.

THE IMPACT OF CRIME ON SMALL BUSINESSESBusinesses surveyed had experienced an average ong>ofong> 1.36 incidents ong>ofong> crime duringthe previous year. The figure was slightly higher for inner city businesses, at 1.7.Firms in townships and informal settlements reported a slightly lower figure, averagingone incident in the past year. In areas perceived as high crime, the averagenumber ong>ofong> incidents in the past year was 1.9, compared to 1.1 in moderately highcrime areas and 1 in low crime areas. Larger businesses reported more crime incidentsthan did smaller firms, as can be seen in Table 5.Table 5: Average incidence ong>ofong> crimeR3m0.5 0.6 1 1.4 2.2 3.6 1.9The results also showed some variation across sub-sectors, with fixed retail premisesand construction businesses reporting higher than average crime incidents (1.8and 1.7 respectively).4.2 Firm characteristics and crimeOur analysis includes an assessment ong>ofong> the characteristics associated with businessesaffected by crime, and ong>ofong> whether a similar set ong>ofong> characteristics are associatedwith the number times a firm is affected by crime. Column 1 in Table 6 presentsthe results ong>ofong> a probit estimation. The dependent variable is whether a firmhas experienced a crime incident in the past 12 months. The results suggest thatthose firms which report that they are situated in a high crime area are 28 percentmore likely to be affected by crime than those in a low crime area. Firms in moderatecrime areas are 14 percent more likely to be affected by crime than those in lowcrime areas. This cannot be interpreted as a causal relationship however – firmsthat are affected by crime may be more likely to report that they are in a high crimearea than those that are unaffected.Whether a business operates from the inner city, a township or a suburban area appearsto make little significant difference on whether a firm experiences an incidentong>ofong> crime. However, Cape Town firms are more likely to have experienced a crimethan firms in either Johannesburg or Durban. 15 Across size bands, businesses withmore than R800 000 turnover are more likely to have been affected by crime thanthose with turnover ong>ofong> less than R800 000.31

THE IMPACT OF CRIME ON SMALL BUSINESSESTable 6: Probit estimates ong>ofong> factors influencing the probability ong>ofong> being exposed to crime,and the number ong>ofong> crimes(1) (2)ong>Crimeong> incidenceLn (Number ong>ofong> crimes)(Marginal effects)High crime area 0.282 0.051(3.88)*** (0.41)Moderate crime area 0.136 -0.048(1.92)* (0.43)City centre 0.051 0.281(0.73) (2.43)**Township 0.071 -0.163(1.02) (1.66)*Turnover < R10 000 -0.013 -0.763(0.06) (1.82)*Turnover R10 000-R14 999 -0.385 -0.576(1.88)* (1.36)Turnover R15 000-R24 999 -0.068 -0.626(0.35) (1.51)Turnover R25 000-R49 999 -0.246 -0.500(1.25) (1.16)Turnover R50 000-R74 999 -0.109 -0.413(0.58) (0.99)Turnover R75 000-R99 999 -0.125 -0.428(0.64) (1.02)Turnover R100 000-R199 999 -0.012 -0.514(0.06) (1.22)Turnover R200 000-R399 999 -0.067 -0.634(0.34) (1.51)Turnover R400 000-R599 999 -0.039 -0.421(0.19) (0.98)Turnover R600 000-R799 999 0.097 -0.269(0.45) (0.62)Turnover R800 000-R999 999 0.292 -0.209(1.79)* (0.50)Turnover >R1 million 0.298 -0.269(1.73)* (0.64)Cape Town 0.537 0.445(8.20)*** (4.09)***Durban -0.102 -0.028(1.57) (0.24)Constant 0.802(2.00)**Observations 446 243R-squared 0.22Absolute value ong>ofong> z statistics in parentheses* significant at 10%; ** significant at 5%; *** significant at 1%32

THE IMPACT OF CRIME ON SMALL BUSINESSESColumn 2 examines the factors associated with the number ong>ofong> times a firm is affectedby crime conditional on the firm being affected. There is no evidence thatthe perception ong>ofong> the crime intensity ong>ofong> the area is associated with the number ong>ofong>crime incidents. Firms in the city centre are more likely than suburban firms to beaffected repeatedly, and those in townships are less likely. Cape Town firms aremore likely than Johannesburg or Durban firms to be affected multiple times bycrime. There is little evidence that the size ong>ofong> firm is related to the number ong>ofong> timesthat the firm is struck by crime.4.3 Types ong>ofong> crime experienced by businesses in the sampleLooking at all incidents ong>ofong> crime suffered by businesses in the sample, burglaryaccounted for just over 40 percent ong>ofong> incidents, followed by shoplifting and robbery.Other crimes such as fraud, petty theft, vandalism, car theft and street violencetogether accounted for about one fifth ong>ofong> incidents.Chart 19: Experience ong>ofong> crime in past year23643BurglaryRobberyShopliftingFraudPetty theftVandalismCar theftAssault19INCIDENCE OF CRIME IN THE GENERAL POPULATIONThe 2006/07 SAPS Annual Report and the SAPS report on the ong>Crimeong> Situation in South Afrrica(June 2008) provide figures for the incidence ong>ofong> crime per 100 000 ong>ofong> the broader population:2006/7 2007/8Burglary at non-residential premises 123 131.7Robbery with aggravating circumstances 267 247.3Shoplifting 138 140.0Commercial crime 130 136.433

THE IMPACT OF CRIME ON SMALL BUSINESSESThe results showed some variation across sub-sector. Chart 20 shows the variationin the proportion ong>ofong> businesses in each sector that had been victims ong>ofong> crime. Retailbusinesses - from high level businesses selling items such as cars, fridges andChart 20: Victims ong>ofong> crime: by sub-sector% ong>ofong> businesses706050403020100High levelretailLow levelretailConstructionPersonalservicesManufacturingProng>ofong>essionalservicesclothing, to low level retail vendors selling food and convenience items - weremost likely to have suffered one or more incidents ong>ofong> crime in the previous year.The most commonly experienced crime across all sectors was burglary. Low levelretail, prong>ofong>essional services and manufacturing enterprises reported above averageincidents ong>ofong> robbery. Shoplifting was, unsurprisingly, concentrated among retailenterprises. Chart 21 shows the percentage ong>ofong> incidents ong>ofong> burglary, robbery andshoplifting as a percentage ong>ofong> the total number ong>ofong> crime incidents experienced byChart 21: Types ong>ofong> crime experienced by businesses in sample:burglary, robbery, shoplifting% ong>ofong> incidents9080706050403020100Retail vendorsRetail fixed premisesPersonal servicesProng>ofong>essional servicesSmall manufacturingConstructionAverageBurglary Robbery Shoplifting34

THE IMPACT OF CRIME ON SMALL BUSINESSESbusinesses in each sub-sector (other crimes such as petty theft, vandalism and cartheft accounted for a very small proportion ong>ofong> total incidents).Burglaries accounted for 57 percent ong>ofong> incidents in townships and informal settlements,while robberies made up 28 percent ong>ofong> crimes against businesses in theseareas. Among inner city businesses, burglaries accounted for 32 percent ong>ofong> incidentsand robberies for 13 percent, while shoplifting accounted for just below 40percent. In areas ong>ofong> high density such as malls burglaries comprised 43 percent ong>ofong>incidents, robberies 20 percent and shoplifting 19 percent ong>ofong> incidents.According to SAPS figures, between October 2004 and September 2005, 54 percentong>ofong> armed robbery cases occurred in inner cities, and only ten percent ong>ofong> businessrobberies took place in townships. However, the SAPS statistics cover businessesong>ofong> all sizes. Bigger businesses are more likely to report crimes to the police,particularly when they wish to make insurance claims, and reporting data is thuslikely to be skewed toward the experience ong>ofong> larger firms in the formal sector. Thelarge numbers ong>ofong> informal sector enterprises operating in townships and informalsettlements may be less inclined to report incidents ong>ofong> crime, even in the case ong>ofong>burglary and robbery, as noted in Section 10. It should also be noted that SAPS statistics,which categorise both robberies and burglaries into crimes ‘against businesspremises’ and crimes ‘against residential premises’ may not accurately recordcrimes against businesses when entrepreneurs operate from their homes – as is theChart 22: Types ong>ofong> crimes experienced by businesses - bylocation6050% ong>ofong> incidents403020100Inner cityTownship/informalsettlementHigh densitysuburbanTotalBurglary Shoplifting Robbery Fraudcase for a significant proportion ong>ofong> our sample, particularly in townships and informallocations.35

THE IMPACT OF CRIME ON SMALL BUSINESSESAlmost all the incidents ong>ofong> crime experienced by the smallest enterprises in thesample (turnover below R15 000) were burglaries and robberies. These businesseswere mainly informal traders, with limited access to secure storage facilities forstock or equipment, and limited personal security.Burglary accounted for the highest proportion ong>ofong> crimes for the smallest and thelarger businesses in the sample. Businesses in the highest turnover band are likelyto present an attractive target, with sophisticated equipment on site, including computersand laptops, in addition to stock. They also generate more activities and thuspresent a broader target. In the middle turnover bands, businesses reported a widervariety ong>ofong> crime incidents, with shoplifting in particular accounting for a significantproportion ong>ofong> crime incidents among firms in the R25 000 to up to R3 million turnoverbands.Chart 23 shows incidents ong>ofong> burglary, robbery and shoplifting incidents as a percentageong>ofong> the total number ong>ofong> crime incidents experienced by firms in each turnoverband.70Chart 23: Types ong>ofong> crimes experienced by businesses in the sample - byturnover60% ong>ofong> responses50403020100

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 23b: Incident rates for burglary and robbery1.6Average no. ong>ofong> incidents1.41.210.80.60.40.2BurglaryRobbery0R3m4.4 Repeat victimisationThe averages calculated for the sample as a whole mask a very high degree ong>ofong> repeatvictimisation among those businesses that have been targeted. Among the 243businesses that had been affected by crime, a total ong>ofong> 578 incidents were experienced– an average ong>ofong> 2.4 incidents per business.While just under a quarter ong>ofong> businesses in the sample reported that they had experiencedonly one incident ong>ofong> crime, almost a third had been victimised more thanonce – with eighteen percent victimised three or more times. Among businessesthat had experienced 3 or more incidents ong>ofong> crime in the past year, the averagenumber ong>ofong> incidents was 4.8.Chart 24: Businesses experience ong>ofong> crime - Number ong>ofong> incidents18%13%46%0 incidents1 incident2 incidents3+ incidents23%37

THE IMPACT OF CRIME ON SMALL BUSINESSESComparative research in other countries also highlights skewed patterns ong>ofong> victimisation,with a minority ong>ofong> businesses being repeatedly targeted and accounting for aconsiderable proportion ong>ofong> recorded crimes. Studies from America, Australia, the UKand Jamaica indicate that once a business has suffered an incident ong>ofong> crime, the riskong>ofong> repeat attacks is considerably higher. Research undertaken in the UK concludesthat “victimisation is the best single predictor ong>ofong> victimisation,” that when victimisationrecurs it tends to do so quickly, and that “a major reason for repetition is thatong>ofong>fenders take later advantage ong>ofong> opportunities which the first ong>ofong>fence throws up.”It also suggests that perpetrators who repeatedly victimise the same target tend tobe more established in crime careers than those who do not. 16Factors noted as encouraging repeat victimization include general level ong>ofong> crime in thearea, precise site ong>ofong> the premises, operational practices and interior and exterior design.The ability ong>ofong> businesses to repair breaches to security, and their access to resourcesto enable them to recover from an incident ong>ofong> crime, are also key issues.REPEAT VICTIMISATION: THE UK EXPERIENCEA 1998 study in the UK found that among small businesses victimised by crime,five percent suffered 34 percent ong>ofong> the most serious incidents, and three percentong>ofong> the sample accounted for 81 percent ong>ofong> incidents ong>ofong> violence. Seventeen percentong>ofong> businesses accounted for 69 percent ong>ofong> all incidents ong>ofong> burglary. Repeatvictimisation was particularly prevalent in the retail and manufacturing sectors.Research in the UK has pointed to the benefits ong>ofong> targeted work to address repeatvictimisation. The benefits ong>ofong> focusing specifically on repeat attacks include:- Automatically concentrating effort on areas ong>ofong> highest crime- Automatically concentrating on individuals at greatest risk ong>ofong> future victimisation- Enabling resources to be appropriately targeted in time and geographically –by charting the typical time-course ong>ofong> repeat incidents- Fusing the roles ong>ofong> victim support and crime prevention- Enabling targeting ong>ofong> prolific ong>ofong>fenders 17In locations described by respondents as high crime areas, two thirds ong>ofong> respondentshad experienced one or more incidents ong>ofong> crime in the past year. Of these, 22percent had experienced three or more incidents. In moderately high crime areas,just over half the respondents had suffered crimes against their businesses, with 16percent experiencing three or more crimes in the past year. In low crime areas, 57percent ong>ofong> businesses had been free ong>ofong> any incidents ong>ofong> crime, but repeat victimisationwas comparable to that in moderate crime areas.38

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 25: Perceptions and experience ong>ofong> crime% ong>ofong> businesses in sample120100806040200High crime areaModerately high crimeareaLow crime area0 incidents 1 incident 2 incidents 3+ incidentsLooking across businesses at the number ong>ofong> actual incidents ong>ofong> each type ong>ofong> crimeexperienced, the picture ong>ofong> repeat victimisation is alarming. Eighteen percent ong>ofong>businesses experienced sixty one percent ong>ofong> all crimes – which included 57 percentong>ofong> burglaries, 87 percent ong>ofong> shoplifting incidents, 34 percent ong>ofong> robberies and 81percent ong>ofong> incidents ong>ofong> fraud.4.5 Aggravating circumstancesAn analysis ong>ofong> aggravating circumstances across all incidents ong>ofong> crime experiencedby businesses in the sample shows that victims ong>ofong> crime operating in townships andinformal settlements were more likely to be exposed to violence, guns, and damageor destruction ong>ofong> their property, as can be seen in Chart 27.Chart 27: Aggravating circumstances807060% ong>ofong> incidents50403020100Inner city Township/informal Densely developed TotalNone Violence Guns Destruction ong>ofong> property/damageSample size: 243 businesses39

THE IMPACT OF CRIME ON SMALL BUSINESSESIn twelve percent ong>ofong> all incidents ong>ofong> crime the perpetrators had carried guns. Duringincidents ong>ofong> robbery experienced by businesses in the sample, perpetrators hadbeen armed in 60 percent ong>ofong> cases. Robberies were accompanied by violence in tenpercent ong>ofong> cases, and in one case had resulted in deaths. A small percentage ong>ofong> burglarycases had also involved violence, and in one ong>ofong> these cases a person had beenkilled. Serious damage to or destruction ong>ofong> property occurred in just under 30 percentong>ofong> burglary cases, and was most common during burglaries in townships andinformal settlements.Chart 28 provides an overview ong>ofong> aggravating circumstances characterising incidentsong>ofong> burglary and robbery experienced by businesses in the sample.Chart 28: Aggravating circumstances - Robbery and Burglary70% ong>ofong> incidents6050403020100Violence Guns Destruction ong>ofong> propertyRobberyBurglarySample size: 243 businesses4.6 Familiarity ong>ofong> perpetratorsRespondents were asked whether they knew the people who had committed thecrime against their business. Of the 243 businesses who responded to this question,many had experienced more than one incident ong>ofong> crime over the past year. Of thetotal ong>ofong> 578 recorded incidents, the perpetrators had not been known to the victimsin 82 percent ong>ofong> cases (this figure includes burglaries and other crimes where therewere no witnesses to the crime).However, in 18 percent ong>ofong> incidents, the respondents claimed that the perpetratorswere known to them. The proportion ong>ofong> victims reporting that they knew their attackerswas significantly lower in businesses operating in densely developed suburbanareas, compared to inner cities and townships/informal settlements. Therewere no significant patterns across high, moderate and low crime areas, and theproportion ong>ofong> victims who knew the perpetrators was much the same whether the40

THE IMPACT OF CRIME ON SMALL BUSINESSESbusiness had experienced one or multiple incidents ong>ofong> crime in the past year. Thelikelihood ong>ofong> perpetrators being known to the business also showed no particularcorrelation with the number ong>ofong> people employed by the business. While businessowners with no staff said that they knew the perpetrators in 20 percent ong>ofong> incidents,the figures for businesses with one to six staff varied between 13 and 20 percent,and rose to 24 percent for businesses with seven or more employees.4.7 The overlap between perception and realityThere was a considerable degree ong>ofong> overlap between businesses’ actual experienceong>ofong> crime and their perceptions about crime levels. As reported in Section3, just over60 percent ong>ofong> businesses had suggested that burglaries were common in their areaong>ofong> operation. Over 40 percent ong>ofong> businesses in the sample had direct experience ong>ofong>being burgled. Taking into account repeat victimisation, burglaries accounted forover half ong>ofong> the crimes experienced by business.Just less than 20 percent ong>ofong> businesses had direct experience ong>ofong> robbery – with theperpetrators armed in the majority ong>ofong> cases. Sixty percent ong>ofong> businesses describedrobbery as being prevalent in their areas ong>ofong> operation. If a small business in the immediatevicinity has been held up by armed robbers, neighbouring businesses arelikely to know about it – and to worry about the threat ong>ofong> something similar happeningto them. It is probably not surprising that respondents were more concernedabout robbery than shoplifting, petty theft or fraud. While businesses had been subjectto the latter crimes to considerable extent, they are unlikely to be life-threatening,and it is probably for this reason that businesses were less likely to mention themwhen discussing the prevalence ong>ofong> types ong>ofong> crime in the area. Chart 26 shows thevariations in perceptions and experience for businesses in the sample as a whole. 18Chart 26: Perceptions and experience706050403020100BurglaryRobberyShopliftingPickpockets/phoneor bag theftHijackingCar theftAssault/streetmuggingFraud% ong>ofong> responsesPerceived prevalence ong>ofong> crimeActual experience ong>ofong> crime41

5 DIRECT AND INDIRECT COSTS OF CRIMETHE SURVEY FINDINGS show that crime can have a devastating effect on theprong>ofong>itability and viability ong>ofong> many small enterprises. The smallest businesses maybe particularly vulnerable; but the actual costs for larger firms can be disturbinglyhigh. ong>Crimeong> has both direct and indirect costs. The direct costs are made up ong>ofong> thevalue ong>ofong> goods or money stolen and/or the cost ong>ofong> damage to property or goods.Indirect costs include the cost ong>ofong> the disruption to business/lost work hours owingto staff time ong>ofong>f work, loss ong>ofong> necessary equipment or temporary closure ong>ofong> thebusiness, as well as medical expenses, loss ong>ofong> staff and increased insurance premiums.Businesses also incur precautionary/security costs, which are dealt with insection 6. Opportunity costs, such as a tendency for businesses to limit growth orstaff numbers owing to concerns about crime, are dealt with in section 7.THE MOUNTING COSTS OF THEFT IN A ‘LOW CRIME’ NEIGHBOURHOODX Air manufactures and installs air-conditioning units. The business is based in Roodepoort, on Johannesburg’swest rand, and employs twenty staff members. The manager describes the area as alow crime neighbourhood. He is nonetheless aware ong>ofong> a number ong>ofong> break-ins and thefts amongneighbouring enterprises, and his own business has experienced several incidents ong>ofong> theft in the pasttwelve months. The business faces onto an open space, and is about 1.5kms from a large informalsettlement – two factors which he believes play a part in regular incidents ong>ofong> petty theft.In the previous twelve months the business experienced five incidents ong>ofong> crime, ranging from thetheft ong>ofong> a vehicle and equipment from the premises, to petty theft ong>ofong> tools through the workshop window.While no single crime had a particularly large impact in itself, the costs ong>ofong> repairing or replacingequipment saw the total direct costs ong>ofong> these five thefts tally up to about R19 000 over the year.Indirect costs were also considerable. The stolen vehicle, loaded with equipment, was fortunatelyinsured. However, it was two months before the claim was paid out – two months during which aparticular job had to be put on hold because essential equipment could not be replaced. Threedays ong>ofong> work were lost in the immediate aftermath ong>ofong> the incident, reporting the incident to the police,dealing with the insurance company, and making arrangements to deal with the loss ong>ofong> vehicleand equipment. Given that the firm works with a figure ong>ofong> R500 a day for labour and R700 aday in overheads – those three days alone amount to R3 600 in lost revenue.The company’s security costs included once ong>ofong>f installation costs for trackers on the five companyvehicles, at a cost ong>ofong> around R12 000, as well as installation ong>ofong> an alarm system. The companypays about R250 monthly for armed response. It also incurs insurance costs for the building,equipment and five vehicles.

THE IMPACT OF CRIME ON SMALL BUSINESSESSurvey respondents were asked to estimate both their direct and indirect losses toincidents ong>ofong> crime in the past year. This section uses the survey data to examine theeconomic impact ong>ofong> crime in detail, using econometric modelling. It examines twospecific areas:1. The actual and statistically expected cost ong>ofong> crime2. The factors that characterise firms impacted by crimeTable 7 shows the sum ong>ofong> indirect and direct costs, per incident, by firm size(measured by turnover).Table 7: Mean and median costs ong>ofong> crime by turnoverTurnover per year Mean Median>R5,000 R1 650 R950R5,000 - R9,999 R4 831 R2 750R10,000 - R14,999 R4 040 R2 900R15,000 - R24,999 R23 972 R2 750R25,000 - R49,000 R3 382 R2 267R50,000 - R74,999 R8 028 R3 875R75,000 - R99,999 R2 758 R1 433R100,000 – R199,999 R6 630 R1 417R200,000 – R399,999 R2 030 R1 000R400,000 – R599,999 R12 899 R3 500R600,000 – R799,999 R2 796 R960R800,000 – R999,999 R37 803 R4 813More than R1m R49 203 R4 833Total R15 556 R2 250These results illustrate that, especially for smaller firms, the average costs ong>ofong> acrime incident can constitute a large proportion ong>ofong> their turnover. This finding isechoed by research in former Eastern bloc and Soviet Union countries, which foundthat the cost ong>ofong> crime as a proportion ong>ofong> company revenues is greater for small and microng>ofong>irms than large firms, despite smaller and micro firms experiencing fewer incidentsong>ofong> crime. Similarly, a study in Jamaica found that the direct costs ong>ofong> crimeamounted to two percent ong>ofong> revenue for large and medium firms, and nine percent ong>ofong>revenue for micro firms. 19The results presented in Table 7 are the costs ong>ofong> crime if a firm is a victim ong>ofong> crime.The probabilities ong>ofong> a business experiencing an incident ong>ofong> crime are presented inTable 8.43

THE IMPACT OF CRIME ON SMALL BUSINESSESTable 8: Probability ong>ofong> firm experiencing an incident ong>ofong> crimeTurnover per year Mean MedianR1 million 1.91 1.50Total 1.36 1.00The results suggest that for the sample as a whole, the average probability ong>ofong> experiencinga crime is 1.36. The probability ong>ofong> being exposed to crime is U-shaped -very small firms and larger firms within the sample have higher probabilities ong>ofong>being victims ong>ofong> crime.Chart 29 shows the mean probability that an entrepreneur or small firm will experiencea crime in one year (a value ong>ofong> 1 means that it is a statistical certainty that theaverage firm will experience a crime). As Chart 29 shows, the smallest entrepreneursin our sample will experience an average ong>ofong> 1.4 crimes in a year. Firms in thelargest size bands experience well over 1 crime per year on average, with firmsturning over just under R1 million experiencing a mean ong>ofong> 3 crimes a year. Thechart suggests that the risks ong>ofong> crime are highest for the most vulnerable small entrepreneursand for companies that are just on the verge ong>ofong> entering the ‘first economy.’ong>Crimeong> therefore seems to hit the poorest and the most successful entrepreneurshardest – a particularly unfortunate pattern for growth and development.44

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 29:Mean probability ong>ofong> experiencing a crime in a year (by meanturnover)3.532.521.510.50R1mThe likely impact ong>ofong> crime on firms is the probability ong>ofong> a firm being affected bycrime multiplied by the costs ong>ofong> crime to the firm if it is affected. This is ong>ofong>tencalled the ‘expected cost.’ The expected costs ong>ofong> crime are presented in Table 9below. Columns 2 and 3 present the probability ong>ofong> being a victim ong>ofong> crime multipliedby the average cost ong>ofong> the crime incident (column 2) and the median cost(column 3). Columns 4 and 5 present these as a proportion ong>ofong> turnover. 20 Columns6 and 7 present the actual costs ong>ofong> a crime incident as a proportion ong>ofong> turnover butdo not take into account the probability ong>ofong> a crime affecting the firm. The medianvalues are influenced less by crimes with high costs and are thus more reflective ong>ofong>the ‘typical’ firm.45

THE IMPACT OF CRIME ON SMALL BUSINESSESTable 9: Expected costs ong>ofong> crime by turnover bandExpected costProportion ong>ofong> turnover(expected cost)Proportion ong>ofong> turnover(actual cost)Mean Median cost Mean Median cost Mean Median costR1 million R93 933 R9 227 8.5% 0.8% 4.5% 0.4%Total R21 136 21 R3 057The results in Table 9 suggest that for firms with a turnover ong>ofong> less than R10 000the expected cost ong>ofong> crime, measured using the median cost, is at least 20 percentong>ofong> turnover. This expected cost falls with an increase in firm size. This fall is notthe result ong>ofong> a firm becoming less likely to be affected by crime (as noted above,larger firms have higher crime incidence) but rather because the costs ong>ofong> crime as apercentage ong>ofong> turnover is lower. In absolute terms, larger firms have higher expectedcosts ong>ofong> crime but since their turnover is also higher, their relative costs arelower.Chart 30 shows how much crime cost the firms in our sample by turnover band. Ascan be seen, the cost impact ong>ofong> crime is strongly regressive: it has the largest proportionalimpact on small entrepreneurs. The average cost ong>ofong> crime by turnoverstays above 5 percent ong>ofong> sales until firms have sales ong>ofong> above R75 000 per year. Itshould be emphasised that this is sales rather than prong>ofong>it. What this means is thatcrime is very likely to have a devastating impact on the livelihoods ong>ofong> many smallentrepreneurs.46

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 30: Actual annual cost ong>ofong> crime by median turnover40%35%30%25%20%15%10%5%0%R1mChart 31 shows the expected cost ong>ofong> crime per year – that is the average cost ong>ofong>crime multiplied by the probability ong>ofong> experiencing a crime. In effect, this is an estimateong>ofong> the likely financial impact ong>ofong> crimes on the firms in our sample next year,assuming that crime rates remain the same. For instance, if a small entrepreneurwith sales ong>ofong> between R15 000 and R25 000 has escaped crime this year, it is neverthelesslikely that he or she will face crime costs ong>ofong> around 8.3 percent ong>ofong> turnovernext year. This could very well shut the business down. It is also worth notingthat the rate ong>ofong> crime faced by the firms in our sample makes it very unlikely thatany firm with sales under R75 000 a year could afford insurance.Chart 31: Expected annual cost ong>ofong> crime (by median turnover)40%35%30%25%20%15%10%5%0%R1m47

THE IMPACT OF CRIME ON SMALL BUSINESSESTHE WORLD BANK’S ASSESSMENT OF THE COSTS OF CRIMEThe World Bank’s Investment Climate Assessment: South Africa (2005) revealed that, for the medianfirm, direct losses due to crime and the cost ong>ofong> security were equal to about 1.1 percent ong>ofong>sales – similar to Brazil, Russia, the Philippines and Peru, but higher than China, Poland, Morocco,Turkey and the Ukraine. The survey reported that security costs account for about twothirdsong>ofong> the cost ong>ofong> crime, while direct losses account for the additional third. Extrapolating thecost ong>ofong> crime to the whole economy, the study estimated the cost ong>ofong> crime to business at about R28.5 billion per year, or R700 per capita. The study noted that this figure was in line with previousestimates. A 1996 NEDCOR project, for example, estimated the total annual cost ong>ofong> crime and violence,including indirect costs ong>ofong> lower investment, at R31 billion for the economy as a whole.48

6 COSTS OF PRECAUTIONSTHE COSTS OF precautions against crime include external security measures such aselectric fencing, alarm systems, secure parking and armed guards, and systems toprevent employee theft and fraud, such as elaborate accounting and internal surveillancesystems. These security costs apply even when the business is not directly affectedby crime. Security costs essentially represent an unproductive investment,driving up costs for firms ong>ofong> all sizes, and diverting resources away from more productiveactivity. Security costs are very likely to disadvantage small firms relativeto large firms, given that security costs are likely to be higher for small firms as aproportion ong>ofong> overall spend. Furthermore, small firms are likely to operate in marketswhere costs matter a great deal. Larger firms, on the other hand, are morelikely to benefit from some degree ong>ofong> pricing power. High security costs will alsotend to disadvantage local firms relative to foreign firms, if foreign firms enjoylower security costs in their home countries. This has could inflate the costs ong>ofong> exportproducts, and require local firms to compete against less costly imports.SECURITY COSTS AND SMALL BUSINESSESA 2003 World Bank study in Jamaica found that over half the firms surveyed stated that increasedsecurity costs had a highly significant or significant negative impact on doing business. The studyhighlighted the disproportionate costs borne by small businesses as a result ong>ofong> expenditure on privatesecurity. It estimated that while the average size firm spent about 7 percent ong>ofong> revenue costson private security, this cost equated to only 0.7 percent ong>ofong> revenue for large firms – and a staggering17 percent ong>ofong> revenue for micro firms. 226.1 Costs incurred by the business on securityRespondents were asked to estimate their costs incurred for security such as surveillancecameras, burglar guards and armed response. Other security costs incurredby businesses in the sample but not included in the figures below includeduse ong>ofong> private guards and car guards and payments for communal security arrangementsfor example in shopping centres.Costs were separated into once-ong>ofong>f and recurring costs. The average costs are presentedin Table 10 according to business location, whether businesses are located ina high crime area, and how many incidents ong>ofong> crime the businesses have experiencedin the past 12 months.

THE IMPACT OF CRIME ON SMALL BUSINESSESTable 10: Security costs by location and levels ong>ofong> crime in the areaInner cityTownships/informalHigh densitysuburbanAverage acrosssampleOnce-ong>ofong>f R9 750 R7 840 R12 090 R10 110Recurring R13 630 R12 760 R8 020 R10 870High crime area Moderately high Low crime areacrime areaOnce-ong>ofong>f R12 570 R10 230 R6 470Recurring p.a. R19 050 R7 810 R4 810No crime in pastyear1 incident 2 or more incidentsOnce-ong>ofong>f R6 570 R11 450 R14 780Recurring p.a. R6 660 R15 100 R14 300Businesses located in high density suburban areas tended to have higher initial securitycosts than the sample average, while inner city and township/informal settlementbusinesses reported higher recurring security costs. As noted in section 2,businesses in suburban areas were concentrated in the larger turnover bands, and itis thus perhaps not surprising that they were willing to incur fairly high initial costsfor sophisticated and comprehensive security systems. On the other hand, businessesin townships/informal settlements and inner city locations were more likelyto perceive their areas ong>ofong> operation as being characterised by high or moderatelyhigh levels ong>ofong> crime – possibly accounting for their higher annual security expenditure.Security spending, both once-ong>ofong>f and recurring, increases substantially if a firm experiencesa crime. There is some evidence that the average once-ong>ofong>f spending onsecurity is larger for firms that experience two or more crimes, although medianspending is lower. This suggests that there are a number ong>ofong> firms, that have experienced2 or more crimes that spend large amounts on security thus increasing theaverage spend. Recurring costs are related to being affected by crime rather thanthe number ong>ofong> crime incidents that the firm experiences. ong>Crimeong> affected firmsspend almost double what firms that are not affected by crime. The average spendingby firms that have experienced one incident ong>ofong> crime is similar to those thathave experienced more than one incidentIndeed, costs showed considerable variation across turnover bands, as can be seenin Table 11. It should be noted that a very small number ong>ofong> businesses reportedvery large security costs, comprising a considerable proportion ong>ofong> their turnover. Inorder to avoid distortion ong>ofong> the results by these very high figures, results are presentedusing medians rather than means.50

THE IMPACT OF CRIME ON SMALL BUSINESSESTable 11: Once-ong>ofong>f security costs by turnover (R) 1mOnce ong>ofong>f cost in Rand550 350 875 1,200 3,000 2,000 1,250 3,500 6,000 3,500 15K 5000Once ong>ofong>f cost as percentage ong>ofong> turnover11% 3% 4% 3% 5% 2% 1% 1% 1% 1% 2% 1%Recurring costs also showed interesting variations across turnover bands. Thesmallest businesses (with turnover below R50 000 per annum) reported, on average,very low to no recurring costs. These businesses tended to reply on burglarproong>ofong>ing (a once-ong>ofong>f cost) and for the most part considered things like armed responseor alarm systems un-affordable when viewed against their bottom line. Annualcosts were somewhat higher for the larger businesses in the sample, reflectingcosts such as monthly subscriptions for alarms and armed response, vehicle tracking,and even staff credit card fees, where businesses sought to eliminate petty cashas a security measure. Recurring costs ranged widely across different businesses.The median shows that they nonetheless made up a very small percentage ong>ofong> turnover- from 1.6 percent for firms on the R50 000 – R75 000 band, to 0.3 percent forthe largest firms in the sample.6.2 Protection paymentsIt is unlikely that many businesses would freely admit that they make protectionpayments. Given this, respondents were asked whether they were aware ong>ofong> othersmall businesses like themselves paying protection, for example so that criminalswould not target their businesses. Only 19 respondents said that they were aware ong>ofong>such arrangements (4 percent). Of these, most were in the retail sector and just overhalf were located in townships or informal settlements. Half were located in areasperceived as high crime areas. These respondents were fairly evenly spread acrossthe turnover groups. Almost all had themselves experienced one or more incidentsong>ofong> crime in the past year.Estimates ong>ofong> how much such protection payments might cost small businesses variedwidely across individual respondents. Looking across the sample, the averageestimate was around R15 300 per annum. Unsurprisingly, the responses receivedfrom businesses located in high crime areas were higher than in other areas – withaverage estimates ong>ofong> R20 700 per annum. In areas perceived as having lower crimerates the estimate was around R10 000.51

THE IMPACT OF CRIME ON SMALL BUSINESSESEstimated costs varied across turnover bands. Firms in the R100 000 to R400 000turnover category estimated substantially higher than average costs. It is ong>ofong> coursevery difficult to gauge the accuracy ong>ofong> such estimates, given that firms were askedthe question hypothetically rather than directly, but it does appear that in somecases at least, the cost ong>ofong> protection payments may be significant.52

7 OPPORTUNITY COSTSTHE STUDY FOUND clear evidence that the impact ong>ofong> crime on small businessesgoes beyond monetary costs. Perceptions ong>ofong> high levels ong>ofong> violent crime, togetherwith businesses’ actual experience ong>ofong> serious crimes such as robbery and burglary,create considerable opportunity costs for individual enterprises and the broader economy.Because ong>ofong> crime, many businesses limit their operations, and are reluctant toexpand. Analysis ong>ofong> the survey data shows that businesses that have been directlyaffected by crime are less likely to increase their employment. In addition, businesseshave to contend with the effects ong>ofong> fear ong>ofong> crime among customers/clients and suppliers,which can result in a loss ong>ofong> passing trade and in difficulties accessing stock.Studies in various countries have demonstrated the negative impact ong>ofong> crime onsmall business development. A 2002 study assessing the impact ong>ofong> crime on firm performancein Latin America, for example, found that 67 percent ong>ofong> firms cited crime asan obstacle to doing business - substantially reducing the overall economic performanceong>ofong> private enterprises, and sales growth in particular. 23Businesses may decide to put expansion plans on hold because ong>ofong> concern aboutcrime. A July 2006 study conducted in transition economies in Europe and Asia,for example, reported that increases in crime-related enterprise costs had divertedresources from business expansion and other improvements. 24 Twenty-three percentong>ofong> US firms surveyed stated that they had postponed or cancelled expansionplans because ong>ofong> concerns about crime. 25 Among firms in Jamaica, 37 percentstated that crime had curtailed expansion plans, and 37 percent reported that crimehad constrained investments to improve productivity. 26Respondents in our survey were asked whether general levels ong>ofong> crime (actualrather than perceived) in their area ong>ofong> operation had impacted on the way they didbusiness. A third ong>ofong> businesses reported that crime had made an impact. The figurein areas characterised as high crime was just under half, compared to less than 20percent in areas ong>ofong> low crime. Forty percent ong>ofong> retail businesses, across the turnoverscale, reported changes to their business operations as a result ong>ofong> crime in their areaong>ofong> operation.Over half ong>ofong> the respondents who indicated that crime had impacted on their waysong>ofong> working referred to increased levels ong>ofong> personal vigilance and caution. A third ong>ofong>these noted various changes in their patterns ong>ofong> operation to try to reduce the risk ong>ofong>crime, including keeping lower levels ong>ofong> expensive equipment and stock on thepremises, and avoidance ong>ofong> cash transactions. A quarter had increased their spendingon security as a result ong>ofong> crime in the area.

THE IMPACT OF CRIME ON SMALL BUSINESSES7.1 ong>Impactong> on firm growth and employment decisionsThe survey sought to test the extent to which businesses might be reluctant to expandtheir businesses or invest more money in their business owing to concernsabout crime. Just over half the respondents stated that crime had made no impacton their decisions regarding investment in or expansion ong>ofong> their businesses. Howevera quarter ong>ofong> all respondents expressed reluctance or unwillingness to expandor invest in their business because ong>ofong> the threat ong>ofong> crime. For those unwilling to investmore in their businesses, reasons included the likelihood that equipment orcomputers would be stolen, and that money that could have been spent on growingthe business was being directed toward improving security arrangements.Businesses operating in townships and informal settlements were most likely not toinvest in or grow their businesses owing to the threat ong>ofong> crime. Just under a third ong>ofong>respondents indicated that they were unlikely to expand or invest in improvements.The opportunity costs ong>ofong> crime appeared to be considerably lower in inner city areasand suburbs. Nonetheless, 27 percent ong>ofong> inner city responses indicated a reluctanceto expand or invest in new equipment owing to concerns about crime, whilethe figure for businesses in densely developed suburban areas was 16 percent.Thirty two percent ong>ofong> responses in high crime areas noted an unwillingness to expandor invest in improvements to the business owing to crime concerns – considerablyhigher than the 21 percent in moderate and 18 percent in low crime areas.The spread ong>ofong> responses across sector types was fairly even. Lower level retailerswere most likely to indicate unwillingness to expand. However, given the informalnature ong>ofong> many ong>ofong> these businesses, it should be recognised that crime is not theonly factor, and perhaps not even a major one preventing expansion or investmentin these businesses.Chart 32: ong>Impactong> ong>ofong> crime on expansion/investment in business% ong>ofong> responses706050403020100Low level retailManufacturingConstructionAveragePersonal servicesHigh level & fixed retailProng>ofong>essional servicesUnlikely to expand/investNo impact54

THE IMPACT OF CRIME ON SMALL BUSINESSESThirty five percent ong>ofong> small manufacturing enterprises expressed unwillingness toexpand and invest in new equipment or improvements to the business because ong>ofong>crime. Five percent ong>ofong> manufacturing enterprises were considering relocating orhad already done so owing to crime concerns. However, this sector was also themost likely to report that businesses were already expanding (12 percent), indicatingsignificant variations among businesses within the sector. Prong>ofong>essional services,including financial and IT consultants, were least likely to report an impact ong>ofong>crime in decisions about expansion or investment – possibly reflecting variationsassociated with having a less tangible product and thus less risk regarding stockand equipment.7.2 ong>Impactong> on employment decisionsAre businesses reluctant to take on new employees owing to concerns about crime?Table12 presents results from a probit estimation that examines the association betweenchanges in firm size and the occurrence ong>ofong> crime. The results are large andsignificant. Businesses that have been affected by crime are 17 percent to 22 percentless likely to increase employment. Furthermore, businesses affected by crimeare 10 percent to 12 percent more likely to decrease employment.The results suggest a strong link between crime and enterprise growth. They alsosuggest that crime is the largest explanatory factor in changes in employment. Thepredicted probabilities from the model, a measure ong>ofong> the goodness ong>ofong> fit, are veryclose to the observed proportions for both the employment-increase and employment-decreasemodels if the crime variable is included as the only explanatoryvariable. Adding other controls, such as turnover bands and location, has little effecton these predicted probabilities. However, the estimated size ong>ofong> the crime effectmight well have been different if it had been possible to include other firmcharacteristics, such as prong>ofong>itability, in the models.55

THE IMPACT OF CRIME ON SMALL BUSINESSESTable 12: Probit estimates ong>ofong> the relationship between firm growth and crime(1) (2) (3) (4)EmploymentincreaseEmploymentincreaseEmploymentdecreaseEmploymentdecrease(marginaleffects)(marginaleffects)(marginaleffects)(marginaleffects)ong>Crimeong> affected -0.170 -0.219 0.122 0.101(2.55)** (4.23)*** (2.55)** (2.59)***High crime area 0.017 -0.008(0.23) (0.16)Moderate crime area -0.118 -0.016(1.70)* (0.33)Inner city 0.038 -0.042(0.57) (0.90)Township/informal settlement 0.008 -0.015(0.12) (0.31)Turnover R1m -0.226 -0.118(0.90) (1.15)Cape Town -0.076 0.026(1.06) (0.50)Durban 0.110 0.055(1.54) (1.03)Observations 370 370 370 370Obs P 0.595 0.595 0.165 0.165Predicted P (at mean) 0.605 0.599 0.147 0.159Absolute value ong>ofong> z statistics in parentheses* significant at 10%; ** significant at 5%; *** significant at 1%56

THE IMPACT OF CRIME ON SMALL BUSINESSESVariations in impact can be demonstrated according to the type ong>ofong> crime experiencedby businesses, as in Table 13. The results suggest that businesses that havehad a burglary are 11.6 percent less likely to experience an increase in employmentand 15.3 percent more likely to experience a decrease. Those who have been a victimong>ofong> robbery or armed robbery are 16.6 percent less likely to grow and 13 percentmore likely to shrink. The effect ong>ofong> fraud on firm growth is large and significant atthe one percent level. Firms affected by fraud are 41.8 percent less likely to increaseemployment. Shoplifting appears to have a statistically significant impact onboth firm expansion and contraction. Vandalism, pickpockets and assault seem tohave little impact on changes in employment.Table 13: Probit estimation ong>ofong> employment changes(1) Emp. increase (2) Emp. decreaseong>Crimeong> - burglary -0.116 0.153(1.76)* (2.98)***ong>Crimeong> - robbery -0.166 0.130(2.14)** (2.19)**ong>Crimeong> - fraud -0.418 0.188(2.67)*** (1.52)ong>Crimeong> - pickpockets -0.051(0.33)ong>Crimeong> – vandalism 0.216 -0.040(1.42) (0.36)ong>Crimeong> - assault -0.327 0.211(1.20) (1.17)ong>Crimeong> - shoplifting -0.325 0.249(3.41)*** (3.04)***High crime area 0.040 -0.020(0.52) (0.37)Moderate crime area -0.128 -0.024(1.75)* (0.47)City centre 0.066 -0.053(0.92) (1.06)Township 0.004 -0.026(0.06) (0.53)Turnover less than R10,000 -0.257 -0.022(0.79) (0.13)Turnover R10,000-R14,999 0.005 -0.072(0.02) (0.48)Turnover R15,000-R24,999 0.093 -0.144(0.39) (1.52)Turnover R25,000-R49,999 -0.057 -0.108(0.24) (0.97)Turnover R50,000-R74,999 -0.035 -0.095(0.15) (0.83)Turnover R75,000-R99,999 0.062 -0.118(0.26) (1.07)Turnover R100,000-R199,999 0.061 -0.152(0.26) (1.58)57

THE IMPACT OF CRIME ON SMALL BUSINESSESTurnover R200,000-R399,999 -0.167 -0.161(0.67) (1.81)*Turnover R400,000-R599,999 0.178 -0.156(0.78) (1.73)*Turnover R600,000-R799,999 0.047 -0.146(0.18) (1.61)Turnover R800,000-R999,999 0.089 -0.124(0.39) (1.17)Turnover more than R1,000,000 -0.214 -0.111(0.85) (1.01)Cape Town -0.052 -0.019(0.67) (0.34)Durban 0.108 0.058(1.46) (1.02)Observations 363 350Obs P 0.590 0.174Predicted P (at mean) 0.597 0.149Absolute value ong>ofong> z statistics in parentheses* significant at 10%; ** significant at 5%; *** significant at 1%The extent to which concerns about crime impacted on respondents’ employmentdecisions was not necessarily explicitly recognised by the business owners themselves.Just under half ong>ofong> all businesses in the sample stated that concerns aboutcrime had impacted on the way in which they choose their employees. Amongbusinesses that had experienced one or more incidents ong>ofong> crime the figure was 55percent. While the majority ong>ofong> these respondents reported making regular use ong>ofong>references and background checks - only a very small number stated that theywould be less likely to take on employees owing to crime concerns, and thesetended to be businesses in the smaller turnover bands.7.3 Changes to the business locationBusinesses may choose to relocate to safer areas or premises owing to perceptionsong>ofong> the risk ong>ofong> crime. Potential costs could involve moving further from the customerbase, increased rents, or reduced exposure to passing trade – as well as thedirect costs ong>ofong> the relocation itself. A US study ong>ofong> urban small businesses foundthat a third ong>ofong> respondents had considered moving to a new location, usually outsidethe city limits, following an incident ong>ofong> crime. A study in transition economiesin Europe and Asia found a similar pattern, and also reported that in extreme casessome enterprises had exited the marketplace altogether. 27Our survey asked businesses to describe what changes, if any, they had made to thelocation ong>ofong> their businesses as a result ong>ofong> the threat ong>ofong> crime in their area ong>ofong> operationover the past year. The large majority ong>ofong> respondents (about 90 percent) statedthat they had made no changes in location as a result ong>ofong> crime. Twelve percentstated that they had increased the security ong>ofong> their existing premises rather than re-58

THE IMPACT OF CRIME ON SMALL BUSINESSESlocate. Only four percent ong>ofong> respondents indicated that they had relocated as a resultong>ofong> crime or were thinking seriously ong>ofong> doing so. Respondents indicating a willingnessto relocate were most likely to be based in inner city locations and areasperceived as high crime areas. About seven percent ong>ofong> low level vendors stated thatthey had already moved to malls or other busy areas as a means ong>ofong> reducing theirvulnerability to crime. Manufacturing businesses were most likely to be consideringrelocating or to have relocated already owing to crime concerns (12 percent ong>ofong>responses).7.4 Loss ong>ofong> clients/customersPerceptions ong>ofong> crime among customers or clients is potentially damaging for smallbusinesses. Clients may fear a re-occurrence ong>ofong> a particular incident after a businesshas been victimised, or may simply prefer to avoid a particular area or street owingto perceptions ong>ofong> risk associated with the location.Forty seven percent ong>ofong> respondents felt that fear ong>ofong> crime among clients or customershad resulted in a negative impact on their businesses (sample size: 439). 28There was considerable variation in responses across location types – 58 percent ong>ofong>business owners in townships and informal settlements reported losing customers,as did 53 percent ong>ofong> inner city businesses. The figure for businesses located indensely developed suburban areas was considerably lower at 37 percent. The majorityong>ofong> businesses in the latter category enjoy the benefits ong>ofong> shopping centre/businesspark security, with secure parking for customers or clients, and arethus less likely to lose customers or clients as a result ong>ofong> concerns about crime.The perceived impact was similarly varied across sub-sectors. Just over 70 percentong>ofong> low level and informal sector retail vendors reported that customers’ or clients’concerns about crime had impacted negatively on their businesses. Many ong>ofong> thesebusinesses operate in townships and informal settlements, creating considerableoverlap with the location-specific results above. Construction businesses appearedto be least affected by customers’ concerns about crime. These firms are alsoprobably least reliant on customers coming to their premises to transact business,which may well reduce the perceived risk for customers.59

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 33: Clients' fear ong>ofong> crime - impact on business% ong>ofong> respondents80706050403020100Retail vendorsRetail fixed premisesPersonal ServicesProng>ofong>essional servicesManufacturingConstructionTotalNegative impact on businessNo impact7.5 Loss ong>ofong> passing tradeFirms were asked whether they had experienced any loss in passing trade as a resultong>ofong> crime in the area. Twenty eight percent ong>ofong> respondents felt that they had sufferedsuch losses. The figure was slightly lower than average for firms in the innercity. Unsurprisingly, the number ong>ofong> firms reporting loss in trade as a result ong>ofong> crimewas highest in areas characterised by high crime (37 percent%) and lowest in areasperceived as being safer (20 percent).The impact ong>ofong> loss ong>ofong> passing trade was greatest for firms in the retail sector (vendorsand fixed premises) – 36 percent ong>ofong> whom reported losses as a result ong>ofong> crime.Personal and prong>ofong>essional service providers also reported suffering some losses,although on a smaller scale (21 and 16 percent respectively). Manufacturing andconstruction businesses, on the other hand, neither ong>ofong> which are particularly relianton passing trade, tended not to report losses in this regard.7.6 Difficulty accessing supplies/deliveriesRespondents were asked whether concerns about crime among their suppliers hadcreated any negative impact for their businesses. Sixty percent ong>ofong> respondentsstated that this was not a problem. The pattern for businesses in informal settlementsand townships was markedly different however, where 60 percent ong>ofong> businessesfelt that suppliers’ concerns about crime had impacted negatively on theirbusinesses. This result is likely to be influenced both by generally worse perceptionsong>ofong> crime among business owners in townships and informal settlements, as60

THE IMPACT OF CRIME ON SMALL BUSINESSESevidenced in the previous sections, as well as reluctance among suppliers to deliverto such areas, which are likely to be viewed as more unsafe than more formal, betterserviced areas. At sub-sector level, low level and informal retail vendors weresubstantially above average in their perceptions ong>ofong> a negative impact as a result ong>ofong>suppliers’ concerns about crime. As noted above, this group was found to be considerablymore concerned about the negative impacts ong>ofong> crime in general. It alsooperates largely from townships and informal settlements, where concerns aboutcrime were found to be higher.Chart 34: Suppliers' fear ong>ofong> crime - impact on business706050403020100RetailvendorsRetail fixedpremisesPersonalServicesProng>ofong>essionalservicesManufacturingConstructionTotal% ong>ofong> respondentsNegative impact on businessNo impact7.7 Changes to operating timesA number ong>ofong> international studies have identified changes to business hours ong>ofong> operationas an indirect cost associated with precautions to prevent crime. The 2003 WorldBank study in Jamaica found that 37 percent ong>ofong> firms had opted to close before dark.Of these, many indicated that they would operate longer hours if their place ong>ofong> operationwere perceived to be safer. Firms reported that, on average, they would be willingto remain open an additional 3.6 hours per day if they were located in a safer area.29In Australia, 17 percent ong>ofong> owners/managers reported that staff had requested timetablechanges following a robbery. 30While 80 percent ong>ofong> respondents in our sample reported that they had not made anychanges to their operating hours, 13 percent ong>ofong> the sample had made such changesspecifically to try to reduce their risk ong>ofong> crime. Most ong>ofong> those who had madechanges were located in townships and informal settlements. While just seven percentong>ofong> businesses who had not been exposed to crime during the past year hadchanged their operating hours, the figure among businesses that had experiencedone or more incidents ong>ofong> crime was 20 percent.61

THE IMPACT OF CRIME ON SMALL BUSINESSESLower level retail vendors were most likely to report having changed their hours ong>ofong>operation as a result ong>ofong> crime concerns (22 percent ong>ofong> sub-sector respondents) – anunsurprising result given their lack ong>ofong> fixed premises and limited access to securitymeasures. Fixed retail premises were also somewhat more likely than average toreport changes to operating hours (16 percent), a factor possibly associated withhigh levels ong>ofong> movable stock.WORKING FROM HOME – MAMELODI AND MADINAChristopher Stone cites the example ong>ofong> a comparative study ong>ofong> home-based enterprises in twolow-income settlements – in South Africa and Ghana, both located on the fringes ong>ofong> the capitalcity.In Mamelodi, 40 percent ong>ofong> households have at least one home based enterprise, 73 percent ong>ofong>which are operated by women. Businesses produce monthly income roughly equal to the minimumwage, and over 90 percent are operated by a sole proprietor or by family members. Fear ong>ofong>crime is pervasive. Shops close early, and business is conducted mainly indoors and ong>ofong>ten behindscreens. Robberies are frequent. Ventures are ong>ofong>ten short-lived, as individuals find that the smallmargins do not justify the associated risk.Madina, in contrast, while providing the same range ong>ofong> home-based enterprises, experiences verylittle crime. Many enterprises are busiest after dark when the streets are full ong>ofong> people, and operatorsong>ofong>ten store their goods outside, with little fear ong>ofong> theft. 317.8 Reluctance ong>ofong> insurers to provide cover in the areaThirteen percent ong>ofong> firms stated that they had encountered reluctance from insurersto cover their businesses because ong>ofong> the area in which they were located. While thisfigure appears relatively low, it should be borne in mind that the majority ong>ofong> emergingsmall businesses do not apply for insurance at all. The proportion ong>ofong> firms whohad been turned down for insurance was considerably higher than average in townshipsand informal settlements, at 21 percent. It was also considerably higher inareas characterised by high crime (20 percent), than areas ong>ofong> moderate (11 percent)and low crime (5 percent). Among businesses that had experienced an incident ong>ofong>crime the figure was 20 percent.At sub-sector level there were no major deviations from the average, with the exceptionong>ofong> the manufacturing sector. While it should be noted that the sample sizewas small (34 businesses), the survey found that 24 percent ong>ofong> businesses in themanufacturing sector reported difficulty getting insurance.62

THE IMPACT OF CRIME ON SMALL BUSINESSES7.9 Competition from sale ong>ofong> stolen goods in the areaTwenty two percent ong>ofong> respondents stated that their businesses had suffered as aresult ong>ofong> competition from sales ong>ofong> stolen goods in the area. This figure was highestfor firms in townships and informal settlements, at 35 percent, and firms in highcrime areas (30 percent). Among retail businesses the impact ong>ofong> competition fromstolen goods was slightly higher than average, particularly for low level vendors(28 percent). This result is to be expected, given that these low level vending enterprisesfor the most part sell small, highly tradable items such as CDs and DVDs,cell phones and electronic equipment – items which are easily stolen and resold.7.10 Personal experience ong>ofong> crime and financial viability ong>ofong> businessRespondents were asked whether incidents ong>ofong> crime experienced in their personalcapacity had impacted on the financial viability ong>ofong> their businesses. Forty five percentong>ofong> respondents stated that the financial viability ong>ofong> their businesses had beennegatively affected as a result ong>ofong> their personal experience ong>ofong> crime. This figurewas highest for businesses operating in townships and informal areas (55 percent)(sample size: 93).7.11 Business closureOnly two respondents in our sample indicated that they were likely to sell or closetheir businesses as a result ong>ofong> crime. Both ong>ofong> these were located in areas perceivedto be characterised by high crime levels, and both experienced three or more incidentsong>ofong> crime in the past year.All respondents were asked whether they knew ong>ofong> any businesses in the area thathave closed down or relocated as a result ong>ofong> crime. Fourteen percent stated thatthey knew ong>ofong> such cases.Through a process ong>ofong> snowballing, the survey team was able to identify a smallsample ong>ofong> 42 individuals who had closed down their businesses, and who statedtheir primary reason for doing so as the effect ong>ofong> or concerns about crime. Just overhalf ong>ofong> these had formerly operated in townships or informal settlements, a quarterin densely developed suburban areas, and 20 percent in inner cities. Just under halfhad been fixed premises retailers, including food and convenience stores, about athird were informal sector retail vendors, and sixteen percent had been small manufacturers.These businesses represented a broad range ong>ofong> turnover bands, from R10 000 toR15 000 per annum, all the way to R5 million per annum. Forty percent turnedover between R25 000 and R75 000 per annum, and a further 30 percent fell in the63

THE IMPACT OF CRIME ON SMALL BUSINESSESR100 000 to R400 00 bands. Just under half had been located in an ong>ofong>fice block orshopping centre, a quarter worked from home, and a quarter operated as informaltraders. Forty one percent had been family owned, thirty percent were sole proprietors,and twenty percent were close corporations. On average the businesses hadbeen in operation for about eight years – although the average in densely developedsuburban areas was closer to fifteen years.The large majority ong>ofong> respondents had closed their businesses following an incidentong>ofong> burglary or robbery. In one third ong>ofong> cases the respondent had experienced an incidentong>ofong> armed robbery characterized by some level ong>ofong> violence, including deathsin some cases. Eighty percent ong>ofong> respondents had experienced several incidents ong>ofong>crime over a period ong>ofong> time before taking the decision to close their business. Mostrespondents felt that their area ong>ofong> operation had become prone to high levels ong>ofong>crime, and that they had lost passing trade as a result. Only seven percent ong>ofong> thosewho had closed their businesses characterized the area in which they had operatedas a low crime area.Two thirds ong>ofong> the respondents had not insured their businesses against crime. Sixtypercent ong>ofong> these cited unaffordably high costs, and the remainder stated that thecompany was too small or was not formally registered. Of the few who were covered,most had successfully claimed against their insurance.A CASE STUDY OF THE OPPORTUNITY COSTS OF CRIMETwo years ago, Arnold N, a salaried employee with an entrepreneurial flair, invested his savings ina small hairdressing salon, to be run by Busi, his wife and an experienced hairdresser. The couplelived in Berea, Johannesburg, and decided to establish the business close to home in order tominimise travelling costs. A local home-owner was letting a garage in her yard. While acknowledgingBerea as a high crime area, Arnold and Busi were not too perturbed because the garage wasin someone’s yard and on a busy strip, which would hopefully attract clients. Two additional hairdresserswere employed, and the business opened its doors. It achieved a turnover ong>ofong> around R20000 in its first year and enjoyed a steady stream ong>ofong> customers. However, six months into the secondyear ong>ofong> operations, the business was burgled. The building was damaged and all the hairdressingequipment was stolen. Arnold had not insured the premises or stock. He reported the incidentto the police, but did not receive any follow-up and soon became disillusioned about thepossibility ong>ofong> anything coming ong>ofong> the case. Faced with starting from scratch, with no resources andno safety net, Arnold closed the business, after eighteen months in operation. He had exhaustedhis savings, and was unwilling to attempt to raise more capital only to be victimised again. He wasalso aware that were he to embark on any such venture again, he would have to incur considerableadditional costs in the form ong>ofong> private security and insurance, payable on a monthly basis.That, he was convinced, would cancel any potential prong>ofong>its.64

THE IMPACT OF CRIME ON SMALL BUSINESSESSince closing their businesses, 43 percent ong>ofong> respondents had opened new smallbusinesses, seventeen percent had taken jobs with other businesses, and thirty percentwere unemployed. Two thirds ong>ofong> the sample said that they would consideropening another small business in the future – although half ong>ofong> these would be doingso owing to a lack ong>ofong> other options. Most said that they would relocate to a differentarea, and about half would spend more on security for their businesses.Among the third that would not open their own business again, the large majoritycited fear ong>ofong> crime as the primary disincentive.CRIME AS A DETERRENT TO ENTREPRENEURSHIPA study conducted by DPRU and TIPS in 2005 demonstrated that crime was perceived to be thedominant deterrent keeping the unemployed from entering self-employment in Khayelitsha. Researchwas undertaken during 2000 with a follow-up survey in 2005. While other hindrances to entrepreneurialactivity, such as the risk ong>ofong> business failure, lack ong>ofong> access to start-up capital, transportcosts, and jealousy within the community were shown to be important deterrents to selfemployment,crime was rated as the only “critical” hindrance according to the ranking ong>ofong> results.The researchers noted that relatively low levels ong>ofong> employment in small scale entrepreneurial workcontributes to South Africa’s very high unemployment, and suggested that exclusion from smallscale entrepreneurial activities may also prevent individuals from accumulating skills and/or capitalto improve their livelihoods in the future. They recommended the need for further analysis to determinewhere the crime is taking place, and what forms ong>ofong> crime are affecting different types ong>ofong>people and business operations. 32 65

8 INSURANCE8.1 Proportion ong>ofong> insurance coverage across the sampleRespondents were asked whether they had insured their businesses against incidentsong>ofong> crime. The sample was almost evenly split between businesses that did have insurance(51 percent) and businesses that did not (49 percent). Businesses located inareas characterised as low crime were somewhat more likely to be insured (59 percent)compared to businesses in high crime areas (51 percent). It is possible thatbusinesses in high crime areas may have experienced somewhat more difficulty inaccessing insurance, but it is probably more likely, given the small size ong>ofong> the variation,that the difference reflects variation in the types ong>ofong> businesses operating in differentareas, and their willingness to incur costs on insurance or not. Businessesshowed wide variation in insurance coverage at sub-sector level. Very few ong>ofong> thesmallest businesses were insured. These variations can be seen in Table 14:Table 14: Percentage ong>ofong> businesses covered by insurance against criminal acts, by sub-sectorSub-sector% Insured against incidents ong>ofong> crimeHigh level/fixed premises retail 60%Manufacturing 56%Prong>ofong>essional service providers 52%Construction 47%Personal service providers 42%Low level and informal sector vendors 17%TurnoverR1m-R3m 100%R400K-R1m 80%R100K-R400K 61%R25K-R100K 41%R15K-R25K 12%

THE IMPACT OF CRIME ON SMALL BUSINESSESong>ofong> the higher incidents ong>ofong> serious crimes such as burglary and robbery, and destructionong>ofong> property, in these areas. Over a third ong>ofong> businesses who did not have insuranceagainst crime claimed that the costs ong>ofong> insurance were too high and/or thatthey could not afford insurance. This figure was highest among firms in the innercity, firms located in areas characterised by high crime, and informal and low levelretail vendors and construction businesses. Fifteen percent ong>ofong> responses stated thatthe business was too new or too small to be insured (sample size: 225).8.2 Coping mechanisms in the absence ong>ofong> insuranceRespondents who had reported that they were not insured were asked what supportsystems they might have access to in the event ong>ofong> a major crime event. The mostcommon response across the sample was that firms would resort to reserve funds.Among businesses with turnover above R100 000 per annum it accounted for thesignificant majority ong>ofong> responses. Over twenty percent ong>ofong> businesses would rely onloans or credit to see them through. This response accounted for over 25 percent ong>ofong>responses for businesses with turnover between R15 000 and R100 000, and businesseswith turnover between R400 000 and R1 million. Just over ten percentwould borrow money from family and networks. This response was most prominentamong businesses in the R15 000 to R25 00 turnover band. Just over 15 percentong>ofong> responses suggested that firms would find ways to absorb costs and survive.The smallest businesses (with turnover below R15 000) were most likely to respondalong these lines. Almost 20 percent ong>ofong> respondents indicated that they mighthave to close down in the event ong>ofong> a serious crime. This response was higher thanaverage among businesses in the lower turnover bands. A small number ong>ofong> businesses,all with turnover below R100 000 per annum, indicated that they wouldprobably relocate following a serious criminal incident.67

THE IMPACT OF CRIME ON SMALL BUSINESSESChart 35: Coping with crime in the absence ong>ofong> insurance3530% ong>ofong> responses2520151050Up to R15000R15 000-25000R25 000-R100 000R100 000-R400 000R400 000-R1millionTotalTake a loan Use reserve funds Help from family/networksClose downJust absorb costs/surviveSample size: 210 businesses, without insurance coverage (excludes firms in turnover bands aboveR1 million, all ong>ofong> whom have insurance)Business with potential access to loans (whether formal or informal) were mainlyin the retail sectors (low level vendors and fixed premises), and prong>ofong>essional services,where loans accounted for a quarter ong>ofong> all responses. Just over a quarter ong>ofong>manufacturing enterprises stated that they would probably rely on help from familyand friends. The proportion ong>ofong> businesses who stated that they would have to closedown in the event ong>ofong> a serious incident ong>ofong> crime varied across sub-sectors. Manufacturingand construction businesses appeared most vulnerable – over one thirdindicated closure as a likely consequence ong>ofong> an incident ong>ofong> serious crime. Amongretailers across the formal and informal sectors the figure was 20 percent.68

9 PSYCHOLOGICAL IMPACTIn a crime-ridden society, the impact ong>ofong> crime on individuals is cumulative. Businessowners are vulnerable to crime both at work and in their personal capacity.The negative psychological impacts ong>ofong> exposure to crime, at work or at home, wereevident among a significant proportion ong>ofong> the sample, particularly those who hadexperienced more serious incidents such as robbery and burglary.The impacts ong>ofong> crime are cumulative both in a financial sense, but also, less tangibly,in terms ong>ofong> the fear and trauma that individuals carry in their heads as the resultong>ofong> being exposed to crime, as victims themselves, and as managers, colleagues orfamily members ong>ofong> victims. Studies suggest that the psychological impacts ong>ofong> crime– leading for example to high employee turnover and decreased productivity as aresult ong>ofong> high levels ong>ofong> anxiety and stress-related illness - may undermine the continuedviability ong>ofong> a small business. 33A 1999 Australia Institute ong>ofong> Criminology study found that 19 percent ong>ofong> businessowners/managers who had experienced a robbery reported personal difficulty in attendingthe premises after the incident. Twenty-nine percent suffered flashbacks, 33 percentreported nightmares and sleeping problems and 53 percent experienced fear ong>ofong>crime after the event. Reports ong>ofong> employee difficulties following a robbery were significant– 14 percent ong>ofong> business owners/managers reported frequent employee absencesfollowing the crime incident and 11 percent reported that their employees haddeveloped difficulties in interacting with their customers. 34In South Africa, a 2007 Grant Thornton study found that among South African mediumto large businesses affected by crime, 65 percent reported decreased productivity andmotivation ong>ofong> staff, 41 percent reported a decrease in creativity, ingenuity and resourcefulnessong>ofong> staff, and 32 percent said crime had resulted in loss ong>ofong> staff. 359.1 ong>Impactong> on the business ownerOur survey asked all respondents a series ong>ofong> questions to assess the extent to whichan experience ong>ofong> serious crime had impacted on their psychological well-being inrelation to their ability to run their business effectively. About half ong>ofong> these reportedthat crime had made no impact on their ability to work effectively. This correspondsroughly with the proportion ong>ofong> businesses in the sample that had not experiencedan incident ong>ofong> crime in the past year.Table 15 shows different levels ong>ofong> psychological impact reported by respondents,in relation to their ability to:

THE IMPACT OF CRIME ON SMALL BUSINESSES• return to work• work productively and effectively• motivate themselves and maintain a positive outlook, and• interact effectively with staff and customersTable 15: Psychological impact on business ownersDifficulty returning toworkVery severeimpactSevereimpactSome impact No impact Don’t know17% 7% 14% 51% 11%Reduced productivity 14% 10% 14% 52% 11%Depression/ lack ong>ofong> 16% 11% 14% 49% 10%motivationDifficulty interactingwith customers/clients11% 6% 11% 62% 11%The most commonly cited psychological impact across the sample was depressionand lack ong>ofong> motivation. Among victims ong>ofong> robbery, the negative psychological impactwas understandably much greater. More than half these respondents reporteddepression and difficulty returning to work, 45 percent felt that they were less productiveor effect at work as a result ong>ofong> the trauma ong>ofong> the incident, and over a thirdfelt that their ability to interact effectively with customers had been impaired.The psychological effects ong>ofong> serious crime incidents appeared to be considerablyhigher for businesses operating in areas perceived as being characterised as highcrime. As noted above, businesses in these areas were more likely to have experiencedmultiple incidents ong>ofong> crime. Forty percent ong>ofong> respondents operating in theseareas reported severe or very severe difficulty returning to work following a seriouscrime incident. Similarly 35 percent ong>ofong> businesses in high crime areas reported reducedproductivity or effectiveness at work, and 41 percent reported depressionand lack ong>ofong> motivation.As evident in the graph below, individuals operating in townships and informal settlementsreported significantly higher than average negative impacts as a result ong>ofong>their experience ong>ofong> crime. This is in line with the earlier findings ong>ofong> both higheroverall levels ong>ofong> crime in townships and informal settlements, higher levels ong>ofong> moreserious crimes such as robbery and burglary, and higher levels ong>ofong> violence andother aggravating circumstances associated with crimes in these areas.70

THE IMPACT OF CRIME ON SMALL BUSINESSES% ong>ofong> respondents reporting very severeor severe impact4035302520151050Chart 36: Psychological impact ong>ofong> exposure to crimeInner city Township/informal High densitysuburbanTotalDifficulty returning to workDepression/ lack ong>ofong> motivationReduced productivity impact at workDifficulty interacting with customers/clientsSample size 446At sub-sector level, lower level retailers reported significantly higher than averagenegative psychological impacts across all questions. This group, which includesindividuals operating in the informal sector, is probably less likely to have protectionagainst crime while at work, and is thus probably more prone to fear and anxietyin the aftermath ong>ofong> crime. Interestingly, respondents providing prong>ofong>essional servicesalso reported higher than average negative psychological impacts. This canbe explained in terms ong>ofong> the results ong>ofong> section 4.1 (Chart 21), which show that prong>ofong>essionalservice providers in the sample had experienced a significantly higherthan average rate ong>ofong> robbery, including armed robbery, compared to other subsectors.9.2 ong>Crimeong> against the SME owner in personal capacityClearly, the psychological impacts ong>ofong> crime go beyond what is experienced by thebusiness owner at work, and include exposure to crime in one’s personal capacity.Respondents were thus asked whether they had been a victim ong>ofong> a serious crime intheir personal capacity during the past 12 months, when not at work. Twenty onepercent ong>ofong> all respondents (95 individuals) had been victims ong>ofong> crime in their personalcapacity.Several respondents had experienced multiple incidents – making a total ong>ofong> 130incidents. Of those who had experienced crime in their personal capacity, thirtyfive percent had had their houses burgled during the course ong>ofong> the year. Twenty sixpercent had experienced an armed robbery at their home. Others had experienced71

THE IMPACT OF CRIME ON SMALL BUSINESSEStheft from cars, theft ong>ofong> cell-phones and/or ID documents, assault or violence, pickpocketingor bag snatching, hijacking, damage to property, mugging and car theft.Chart 37 shows the percentage ong>ofong> respondents experiencing various types ong>ofong> crime.Chart 37: Experience ong>ofong> crime in personal capacity6% 5%6%House-breaking7%35%Armed robbery12%Theft from carsCellphones/ID doc theftAssault or violenceBag snatchingMugging16%Hijacking26%Theft ong>ofong> car16%Sample size: 95. Totals exceed 100 percent owing to multiple experiences ong>ofong> crimeRespondents who had experienced crime in their personal capacity were then askedwhether the psychological impacts ong>ofong> this experience had in any way impacted ontheir ability or motivation to run their businesses. Just over half the respondentsstated that their ability or motivation had been impaired as a result ong>ofong> their experienceong>ofong> crime. This figure was highest for businesses operating in densely developedsuburban areas (60 percent) – suggesting that while business owners operatingin these areas appear to be less subject to the negative impacts ong>ofong> crime while atwork, their exposure to crime in their personal capacity has a significant negativepsychological impact, which carries over into their prong>ofong>essional work.9.3 ong>Impactong> on employeesThe psychological impact ong>ofong> crime on employees was recently explored in the 2007Grant Thornton report, which found that among South African medium to large businessesaffected by crime, 65 percent reported decreased productivity and motivation ong>ofong>staff. Thirty-two percent ong>ofong> medium to large firms affected by crime reported a directloss ong>ofong> staff. Our survey asked respondents whose businesses employed staff otherthan themselves to comment on the apparent psychological impact ong>ofong> crime ontheir employees. Across the sample, difficulty returning to work was the mostcommonly cited psychological impact for employees, slightly ahead ong>ofong> reducedproductivity or effectiveness. Difficulty in interacting with customers, higher staff72

THE IMPACT OF CRIME ON SMALL BUSINESSESturnover, and damage to the employer/employee relationship were reported in asmaller percentage ong>ofong> cases.Table 16: Psychological impact on staffVery severe orsevere impactSome impact No impact Don’t knowDifficulty returning to work 22% 12% 54% 12%Reduced productivity 21% 14% 54% 12%Difficulty interacting with 16% 12% 59% 13%customers/clientsDamage toemployer/employeerelationship12% 9% 67% 13%Higher staff turnover 9% 8% 68% 16%Sample size: 379Businesses located in townships and informal settlements, and business operatingin inner cities, reported similar levels ong>ofong> employee difficulties as a result ong>ofong> traumaexperienced during incidents ong>ofong> crime. The impact on employees in densely developedsuburban areas was slightly lower than average in all cases.Again, results differed significantly according to whether the respondent operatedfrom an area perceived as being high crime or relatively safe. In areas characterisedas high crime, 22 percent ong>ofong> respondents reported very severe impact on staff interms ong>ofong> difficulty returning to work - compared to eight percent in low crime areas.Twenty nine percent ong>ofong> respondents in high crime areas felt that staff memberswere showing considerable levels ong>ofong> reduced productivity as a result ong>ofong> exposure tocrime. Twenty four percent ong>ofong> respondents in high crime areas reported a severe orvery severe impact in terms ong>ofong> staff difficulties in interacting with customers andclients - compared to nine percent in low crime areas.Understandably, robberies appeared to create the greatest negative effect. Amongrespondents whose businesses had been robbed, half said that their employees hadexperienced difficulties returning to work, and 40 percent reported reduced productivity.Over a third reported damage both to employees’ ability to interact with customers,and to the employer-employee relationship. Fifteen percent reported higherstaff turnover.73

10 REPORTING CRIME INCIDENTSINTERNATIONAL STUDIES have found that small businesses tend to under-reporttheir experience ong>ofong> crime to the police. This is particularly the case where there is asense that money or goods are unlikely to be recovered as a result ong>ofong> reporting, and/orthat ong>ofong>fenders are unlikely to be caught or prosecuted. . 36 The research suggests thatmany small firms perceive reporting crimes to the police to be largely futile, and thatthe police do not take crimes against small businesses seriously. A study in the UK, forexample, found that 40 percent ong>ofong> small businesses that had experienced crime had notreported those crimes to the police.In instances where firms wish to claim insurance, or there have been injuries or fatalities,businesses are more likely to make a formal report. As a result, it is likely that patternsong>ofong> crime reflected in police data do not accurately reflect actual incidents,with burglary and robbery over-represented compared with theft and fraud. Studiesong>ofong> small businesses in the US and Australia have found that, while the large majorityong>ofong> burglaries and robberies are reported to the police, very few incidents ong>ofong>shoplifting, employee theft and credit fraud are reported. Small business owners inthese studies expressed pessimism about the police’s ability to respond to reports ong>ofong>crime, and thus tended not to report incidents if there appeared to be little prospectong>ofong> ong>ofong>fenders being prosecuted or goods/money being retrieved. 37Patterns in South Africa appear to be similar. The World Bank Investment ClimateReport found that just over half ong>ofong> businesses (ong>ofong> all sizes) reported all incidents ong>ofong>crime to the police, but that 28 percent reported none. The 2003 Victims ong>ofong> ong>Crimeong>Survey, undertaken by the Institute for Security Studies, found that while almost allvictims ong>ofong> car theft and hijacking reported the crime to the police, reporting ratesfor other serious crimes like housebreaking, assault and robbery were low. Themain reason cited by respondents for not reporting was that the crime was not importantenough – even in the case ong>ofong> violent ong>ofong>fences such as assault. 3810.1 Reporting to policeSurvey respondents who had indicated that their business had experienced one ormore incidents ong>ofong> crime during the past year were asked whether they had reportedany ong>ofong> these incidents to the police. Sixty four percent ong>ofong> respondents said they hadreported crimes to the police. Interestingly, the figure was highest among businessowners operating in townships and informal settlements (75 percent). The proportionong>ofong> respondents who had reported crimes was lowest in areas characterised bylow crime (40 percent had reported). There was no clear pattern ong>ofong> reporting/not

THE IMPACT OF CRIME ON SMALL BUSINESSESreporting across turnover bands. There was however a very clear correlation betweeninsurance coverage and reporting, as seen in Chart 38. The exception is thelow level retail sector, where reporting rates were high, despite an extremely lowlevel ong>ofong> insurance coverage. This may be a reflection ong>ofong> higher than average levelsong>ofong> robbery among businesses in this sector, together with fairly high levels ong>ofong> burglary– crimes that are more likely to be reported to the police than shoplifting andfraud, as discussed below.Chart 38: Correlation between Insurance coverage and reporting80% ong>ofong> businesses in sample706050403020100Low level retailHigh level retailPersonal servicesProng>ofong> servicesManufacturingConstructionCovered by insurance against crimeReported incident ong>ofong> crime to policeRespondents were asked to describe the sorts ong>ofong> crimes that occurred against theirbusinesses that they had not reported to the police. Forty percent ong>ofong> respondentsstated that they did not report incidents ong>ofong> shoplifting to the police. Petty theft, stafftheft, fraud and use ong>ofong> counterfeit money were also mentioned by a small proportionong>ofong> respondents as crimes unlikely to be reported (sample size 177).75

THE IMPACT OF CRIME ON SMALL BUSINESSESIn contrast to the international experience, the survey found relatively high rates ong>ofong>non-reporting for burglary and robbery. This is consistent with the findings ong>ofong> the2003 Victims ong>ofong> ong>Crimeong> Survey, cited above. In SBP’s survey, thirty eight percentong>ofong> respondents stated that they did not report incidents ong>ofong> burglary, and fourteenpercent said that they had not reported robberies experienced by their businesses.Despite the high proportion ong>ofong> businesses operating in townships and informal settlementsthat had indicated that they do report crimes to the police, this questionfound that burglaries and robberies in townships and informal settlements weremore likely to go unreported than those occurring in inner city and suburban areas.Chart 39: ong>Crimeong>s not reported to police60% ong>ofong> respondents50403020100Inner City Township/informal Densely developed TotalBurglaryRobberyRespondents were asked to give some ong>ofong> the reasons why they do not report crimesto the police. Thirty eight percent ong>ofong> responses stated that the incident was too minorto report. This response was highest among businesses in low crime areas, and mayreflect a prevalence ong>ofong> petty crimes such as shop-lifting and staff pilfering affectingthese businesses. Twenty-two percent ong>ofong> respondents said that the police would notbe interested or there would be a poor service from the police. Respondents in areasong>ofong> high crime and moderately high crime were considerably more likely to criticisethe service received from the police. Nine percent said they did not report becausethe chances ong>ofong> any arrest are too small to make it worthwhile. This response washighest among businesses in high crime areas (15 percent). Fifteen percent ong>ofong> respondentsstated that an internal solution to the problem was found – this rangedfrom reporting the matter to mall security, to staff disciplinaries, and small businesses‘dealing with the criminals’ themselves (sample size 182).76

THE IMPACT OF CRIME ON SMALL BUSINESSES10.2 Satisfaction and resultsAmong respondents who had reported crimes to the police, 46 percent stated thatthey were satisfied with the service received from the police at the time ong>ofong> reporting.However, the figure in high crime areas was significantly lower at 33 percent.There were also considerable differences across location types. Fifty six percent ong>ofong>inner city businesses reported satisfaction with the police at the time ong>ofong> reporting.The figure for township and informal settlement businesses was 46 percent, but indensely developed suburban areas it was just 39 percent. Reasons given for lack ong>ofong>satisfaction with the police response included incompetence or inefficiency (19percent), lack ong>ofong> evidence to follow up the case (14 percent), lack ong>ofong> results (11percent) and police corruption (7 percent) (sample size 156).Respondents were also asked to comment on whether they had been satisfied withthe response ong>ofong> the police in the period following the reporting ong>ofong> an incident, interms ong>ofong> the extent to which the police provided feedback to the respondent andkept them informed ong>ofong> the progress ong>ofong> the case. Over half the respondents were dissatisfiedwith police follow up ong>ofong> their case, as demonstrated in Chart 39. Seventeenpercent stated that they were very satisfied with police follow-up, and 22 percentwere satisfied to some extent.Chart 40: Satisfaction with police follow-up ong>ofong> case1736 Very satisfiedSatisified to some extentNeutral22DissatisfiedVery dissatisifed1411Sample size: 154Dissatisfaction was highest in inner city locations (42 percent) and areas characterisedby high crime (30 percent), and lowest among township and informal settlementbusinesses (28 percent) and in low crime areas (18 percent). Reasons for dissatisfactionincluded lack ong>ofong> results (42 percent), police incompetence or ineffi-77

THE IMPACT OF CRIME ON SMALL BUSINESSESciency (38 percent), lack ong>ofong> feedback (31 percent) and delays in police response (27percent). Police attitude was also mentioned in 11 percent ong>ofong> responses.A quarter ong>ofong> respondents stated that there had been arrests resulting from criminalcases they had reported to the police. Business owners in townships and informalsettlements were most likely to report successful arrests (39 percent), compared to16 percent in inner city locations and 20 percent in densely developed areas (samplesize 156).According to respondents, however, few arrests had resulted in convictions. Only12 percent ong>ofong> respondents reported convictions taking place. Seventy percent statedthat there had been no convictions in the cases they had brought to the police. Thisfinding bears out the results ong>ofong> the Investment Climate Report: South Africa, whichfound that 72 percent ong>ofong> firms ong>ofong> all sizes that had reported criminal incidents to thepolice reported that none ong>ofong> the incidents were solved. Similarly, the SAPS2006/07 annual report notes that only 14 percent ong>ofong> burglary at non-residentialpremises cases were referred to court, as were ten percent ong>ofong> business robberies.10.3 Reporting to community structuresIn recognition that small businesses may under-report incidents ong>ofong> crime to the police,the study aimed to establish whether small businesses had access to or expresseda preference for community based structures for reporting purposes. Businessesin the sample were thus asked whether they belonged to a community structurethat included action against crime within its mandate, and/or whether they hadreported experiences ong>ofong> crime to such structures. Interestingly, the proportion ong>ofong>businesses that belonged to community forums was very low. Furthermore, mostbusinesses were more likely to report crimes to the police than to community basedorganisations.Thirteen percent ong>ofong> businesses in the sample reported being members ong>ofong> a communitystructure aimed at addressing crime. The figure was lowest for businesses inthe inner city (6 percent) and highest for businesses operating in densely developedsuburban areas (18 percent). The latter figure is however somewhat inflated, sincebusinesses included access to shopping centre security and subscriptions to privatearmed response companies in their responses. Only six percent ong>ofong> respondents inthe sample were actually members ong>ofong> community forums.Fifteen percent ong>ofong> respondents who had experienced incidents ong>ofong> crime against theirbusinesses had reported one or more incidents to community structures (as definedby respondents i.e. including private security). The figure was highest for businessesin densely developed suburban areas (18 percent), and included a significant78

THE IMPACT OF CRIME ON SMALL BUSINESSESproportion ong>ofong> businesses that had referred incidents to shopping centre/mall securityor management. Only five percent ong>ofong> respondents had reported to communityforums or safety and security forums. Of those who had reported crimes to communitystructures, two thirds were satisfied with the outcome.Two thirds ong>ofong> all respondents believed that business owners preferred to reportcrimes to the police. Twenty-nine percent felt that they would report crimes to bothcommunity structures and police. Only six percent believed that business peoplepreferred to report crime to community structures rather than police. Businesses intownships and informal settlements showed a slight variation on results, with 12percent ong>ofong> respondents indicating that community structures would be preferred tothe police.79

11 CONCLUSION AND RECOMMENDATIONSTHIS SECTION summarises various recommendations that emerged from respondent’scomments elicited by the survey, as well as more focused discussion in threeregional workshops at which the survey findings were presented to a range ong>ofong>stakeholders.Workshop participants included provincial and local government ong>ofong>ficials, seniorpolice ong>ofong>ficers, representatives ong>ofong> business associations, and individuals with activeroles in multi-agency crime prevention initiatives. 39 The workshops provided anopportunity to validate the survey results against participants’ experience and identifyareas for further exploration. They also, very importantly, provided an excellentforum to discuss policy issues, and the participants’ insights and constructiverecommendations were very helpful in the production ong>ofong> this report.The recommendations are specifically concerned with the situation ong>ofong> small businesses– and in particular, with the circumstances ong>ofong> black-owned and emergingsmall businesses.11.1 Reporting incidents ong>ofong> crime, and improving data collection andpublic relationsStakeholder recommendations point to the need for continuing improvement in theprong>ofong>essionalism ong>ofong> the police service. Survey respondents were vocal in their callsfor more effective policing, including better police visibility and area coverage,faster response times, and, crucially, better communication between the police andvictims ong>ofong> crime together with concentrated efforts to build public trust in the policeservice.It was suggested that SAPS needs to raise its standards for recruitment and concentrateon attracting prong>ofong>essional, interested and committed individuals who can presenta competent face to the public. The need to run the police service like a business,with a strong emphasis on customer service, was stressed by a number ong>ofong>stakeholders.Effective policing requires, as a first step, that crimes are reported. The survey resultssuggest that there is a positive foundation on which to build, with relativelyhigh rates ong>ofong> reporting, at least among businesses with insurance. On the otherhand, reporting appears to depend very much on the perceived seriousness ong>ofong> thecrime, and respondents were very unlikely to report ‘minor’ crimes such as shoplifting,staff theft and vandalism. Business owners must be persuaded that it is im-

THE IMPACT OF CRIME ON SMALL BUSINESSESportant to report all crimes, regardless ong>ofong> whether they are viewed by the businessesas serious or not, and irrespective ong>ofong> whether the business intends to makean insurance claim. Businesses also need to understand the connection betweenlocal crime statistics and the ways in which police are deployed.International research indicates that levels ong>ofong> reporting are strongly correlated toexpectations ong>ofong> police reaction and effectiveness. Efforts to improve reportingtherefore require that victims ong>ofong> crime experience a positive reception at the policestation – coming away from the reporting process confident that their case has beentaken seriously and the relevant information has been efficiently recorded.This should be coupled with broader efforts to strengthen ong>ofong>ficial crime data collection,possibly complemented with specialised victimisation surveys, in order to establishregular and reliable crime data, and to identify and remedy gaps betweenong>ofong>ficial statistics and other survey data. Robust data collection ong>ofong> this sort is centralto trend detection and identification ong>ofong> groups most at risk.A real-time information management service should be developed, to facilitate theidentification ong>ofong> priorities and accurate targeting ong>ofong> scarce resources. The feasibilityong>ofong> introducing electronic reporting ong>ofong> crime incidents for businesses should be investigated.This could potentially draw lessons from the SARS reporting model.Given the high rates ong>ofong> repeat victimisation seen in the survey results, improvementsare needed to information systems to enable the timing and circumstances ong>ofong>repeat crimes to be better recorded.The survey results pointed very clearly to the need for better communication andfollow-up from the police following reporting. Individuals’ concerns about crimeand feelings ong>ofong> being at risk ong>ofong> crime are likely to be exacerbated by the perceptionthat police are not particularly interested in their experience or do not have the resourcesto investigate the case. These feelings ong>ofong> helplessness tend to be compoundedby low expectations ong>ofong> receiving justice from the wider criminal justicesystem, from prosecutors to magistrates and judges, and correctional services.The importance ong>ofong> adequate feedback cannot be over-emphasised – people whoreceive follow-up information from the police in the days, weeks and months followinga crime incident, are more likely to report an incident in the future, and tourge their colleagues and peers to do the same. They will also very likely developmore positive perceptions ong>ofong> the police service, which will tend to impact positivelyon their perceptions about crime levels generally and their own fear ong>ofong> crime.Efforts to educate the public about the importance ong>ofong> reporting crimes ong>ofong> all typesand sizes are needed. These should be underpinned with a clear message aboutwhat sort ong>ofong> reception and follow-up victims ong>ofong> crime may expect from the police81

THE IMPACT OF CRIME ON SMALL BUSINESSESservice, and what to do if they feel that these standards are not being met. It musthowever be made clear that the onus is also at least partly on the business owners,who should be encouraged to take the initiative in seeking follow up informationabout their cases.11.2 A working relationship between the police and the communityBusiness people consulted during the study spoke ong>ofong> the need for businesses themselves– as members ong>ofong> their communities – to take a proactive role in workingwith the police to address crime and community safety issues.Community Policing Forums (CPFs) appear to be a promising mechanism toachieve this. The SAPS 2007 annual report notes that, to date, over 1 000 CPFshave been established at police stations, including 169 high-contact crime stations.The CPFs enable the police to provide communities with regular feedback aboutcrime trends, and enable communities to participate in assessing police performanceagainst priorities and targets. Discussions are under way to modify the prong>ofong>ileong>ofong> CPFs to allow them to act on behalf ong>ofong> communities, interact with the policeabout policing priorities and draw up jointly-owned policing programmes. Expansioninto integrated community safety forums, incorporating a broader range ong>ofong>partners in the criminal justice system, including correctional services and municipalities,is also under consideration.However, while there is strong support for businesses to get involved in such initiatives,actually achieving wide participation is an uphill battle, particularly amongsmall businesses. It is always going to be difficult for small business owners to findtime to participate. Individuals tend to participate in forums ong>ofong> this sort only whenthey have a problem, and then stop once the problem has been resolved or receded.Businesses need to be persuaded to move beyond an immediate problem-centredapproach, toward building relationships ong>ofong> trust based on ongoing involvement, andrecognising that there are specific steps that they themselves can take to help reducecrime in their areas ong>ofong> operation. CPFs need to be actively marketed to businessas a mechanism to build personal relationships with the police and exchangeinformation relevant to combating crime.CPFs require a minimum level ong>ofong> resources to function effectively. It may be possibleto explore mechanisms to share resources and expertise between wellestablishedCPFs and those in less well resourced areas such as townships and informalsettlements.Another option might be to use an incentive-based approach through the introductionong>ofong> a government/insurance industry/private security sponsored scheme, which82

THE IMPACT OF CRIME ON SMALL BUSINESSESprovides businesses who participate in local initiatives such as CPF or BusinessWatch with discounted rates for insurance and/or private security.THE CAPE TOWN PARTNERSHIPDiscussions with stakeholders highlighted the positive progress that has been achieved throughthe Cape Town Partnership. One ong>ofong> the Partnership’s initiatives is the establishment ong>ofong> City ImprovementDistricts (CIDs), a key mechanism for urban management in Cape Town. The CIDsprovide a number ong>ofong> services that complement those provided by the Cape Metro.A CID is a geographical area in which property owners agree to contribute above and beyond therates levied by the Council towards extra services within the area. The funds are mainly channelledtoward extra cleansing and security, as well as maintenance ong>ofong> infrastructure and upgradingthe environment.A City ong>ofong> Cape Town by-law allows for the creation ong>ofong> CIDs and the collection ong>ofong> the top-up levy onrates. With the agreement ong>ofong> at least 51 percent ong>ofong> all property owners in a particular area, a CIDmay request the local authority to levy all property owners within the area to pay for the additionalservices. The contribution is then mandatory – ensuring that free-rider problems are avoided. Undera service level agreement between the City and the CID, both the municipality and CID provideguaranteed services with penalties for non-performance.The Cape Town Central City Improvement District (CCID), for example, dedicates half its fundingto security - providing 2 dedicated security managers, 10 mounted horseback patrols and 6 mobilepatrol vehicles. The CCID private security collaborates with SAPS, the Traffic Department and CityPolice, who provide 2 uniformed ong>ofong>ficers with powers ong>ofong> arrest.11.3 Environmental design and urban infrastructureTown planning and environmental design emerged as a key factor in making urbanareas easier to police. This includes issues such as the provision ong>ofong> adequate andreliable street lighting, ensuring that taxi ranks are designed to accommodate largenumbers ong>ofong> taxis, thus eliminating the need for triple parking on public roads, andthe demarcation ong>ofong> secure trading areas for informal traders, where their own riskong>ofong> exposure to crime is reduced, and where they are less likely to contribute – directlyor indirectly – to robberies and petty theft.Police representatives told us ong>ofong> the difficulties ong>ofong> undertaking foot patrols in innercity areas, where pavements crowded with hawkers make it easy for criminals torob street-front shops, or grab bags and cell phones from pedestrians, and then meltaway into the crowd, where they cannot be tracked by CCTV. Hawkers may alsobe coerced by criminals into hiding stolen goods and weapons, as well as providinga cover for the perpetrators themselves.83

THE IMPACT OF CRIME ON SMALL BUSINESSESSAPS has developed guidelines for crime prevention through improved environmentaldesign, which aim to promote cooperation between, local government, keyrole players and other community structures and SAPS when new spatial developmentsare being planned or existing ones upgraded.As another way ong>ofong> fostering a more ‘law-abiding’ environment, Cape Town hastackled relatively minor infringements like public nuisance crimes through the useong>ofong> community courts and community service sentences, resulting in a considerablereduction in public nuisance problems. Cape Town ong>ofong>ficials emphasised the importanceong>ofong> channelling small crimes to community courts to free up the police to dealwith bigger issues.11.4 Sharing responsibility for the neighbourhoodIncentives can be used to induce businesses to take greater responsibility for theimmediate vicinity in which they operate.For example, businesses can be encouraged to examine the factors that contributeto crime in their area ong>ofong> operation (such as the operation ong>ofong> illegal shebeens, proximityto derelict buildings), or circumstances that could impact on the safety ong>ofong>their employees when travelling to and from work. Recognising that these arelikely to impact on their operations, they can the consider ways to mitigate thisrisk. Clearly that is likely to be a hard sell. However, options to make such actionmore attractive might include the introduction ong>ofong> a municipal rates rebate for businessesthat commit to cleaning up the surrounding area. Businesses might also beong>ofong>fered rebates or incentives to open in decaying areas, as part ong>ofong> a renewal strategy.‘Adopt a spot’ campaigns could also be accompanied by rates rebates. Simple,no-cost actions like sharing contact details and getting to know neighbouring businessesshould also be encouraged.Given the importance ong>ofong> local environmental factors in fostering crime, businessesshould receive quick support from the relevant authorities when problems arise. Itis recommended that a single contact point, such as a call centre, be developed toenable businesses to easily report matters such as overgrown vegetation, streetlights not working, dumping, vagrants or emerging shack settlements. Informationreceived via the call centre should be passed on to the relevant city authority or thepolice for quick response.More effective communication between service providers such as Eskom and thepolice, and private security providers, would also enable law enforcement bodies tomobilise resources more effectively. Police representatives noted that they do not84

THE IMPACT OF CRIME ON SMALL BUSINESSESreceive notification ong>ofong> planned load-shedding from Eskom, yet police statisticsshow a clear spike in burglaries coinciding with black-outs.11.5 Security arrangementsLarge numbers ong>ofong> small businesses have very little if any security, and are reluctantto invest in even basic burglar proong>ofong>ing because ong>ofong> the expense involved. Manysmall businesses introduce relatively inexpensive – and very ineffective – securitymeasures, such as a single unarmed night-guard with no radio communication,which does nothing to protect the business and puts the guard himself in considerabledanger.More prong>ofong>itable businesses that are able to afford armed response, ong>ofong>ten find thatsecurity companies refuse to work in townships and informal settlements, whileothers charge a large premium for doing so.With these issues in mind, the DTI might consider the development ong>ofong> mechanismsto assist emerging businesses to access security. Options could include subsidisationong>ofong> once-ong>ofong>f security costs such as burglar proong>ofong>ing, and/or a requirement thatbusiness plans include mandatory crime risk analysis and relevant security measures.11.6 InsuranceHalf the businesses in the sample confirmed that they did not have insuranceagainst incidents ong>ofong> crime, and as many as 20 percent ong>ofong> these indicated that theymight have to close the business in the event ong>ofong> a serious incident ong>ofong> crime. Respondentfeedback confirms that for the smallest businesses, insurance is consideredan unaffordable luxury. The likelihood ong>ofong> businesses being insured increasesmarkedly for larger businesses.It may be advisable to consider introducing a minimum level ong>ofong> mandatory insurancefor small businesses above a certain threshold. Government could look atworking with insurance companies to develop an appropriate insurance producttailored for small businesses. The arrangement would also probably require somesubsidisation ong>ofong> initial security costs, as mentioned above.11.7 Minimising cash transactionsThe banking sector and small business representatives should work together to exploreinnovations that will enable even very small businesses to reduce the levels ong>ofong>cash they hold on the premises. Efforts may include wider use ong>ofong> credit card facili-85

THE IMPACT OF CRIME ON SMALL BUSINESSESties (charges may have to be waived for small businesses), drop safes, and morefrequent banking. The Consumer Goods Council is currently working with a numberong>ofong> banks to reduce the need for businesses to hold cash on the premises.11.8 Collaborative multi-agency approachesStakeholders across the board stressed the importance ong>ofong> a partnership-based approachto tackle crime at the community level. ong>Crimeong> prevention is most likely tosucceed when it is tackled by a range ong>ofong> role players, including government departmentssuch as the Education and Social Development, local government, communitybased agencies, organised business and the general public.There was strong emphasis on the importance ong>ofong> involving the departments ong>ofong> Justiceand Correctional Services in formulating solutions, particularly around sharedresponsibilities such as conviction rates. Currently a large number ong>ofong> cases arestuck in the system, which undermines public confidence in both the police and thebroader criminal justice system.Respondents to the survey also saw a need for support for public education campaignsaimed at improving citizens’ moral attitudes and ethics, as well as interventionstargeted at young people to stop them from falling into crime, including jointinitiatives by the police and schools.11.9 The need for a specific focus on businesses in townships andinformal settlementsThe mere fact ong>ofong> a business being located in a township or informal settlement didnot appear to significantly increase its likelihood ong>ofong> being a victim ong>ofong> crime. However,the survey did clearly demonstrate that victims ong>ofong> crime in townships and informalsettlements were more likely to be exposed to violence and guns comparedto the sample as a whole. The most common crimes experienced by businesses intownships were burglaries and robberies. About a third ong>ofong> township/informal settlementburglaries were characterised by serious damage to or destruction ong>ofong> property.This would suggest the importance ong>ofong> effective and accessible victim support,accompanied by concerted efforts to encourage business owners to improve theirsecurity arrangements, and to get involved in community policing initiatives suchas CPFs and Neighbourhood Watch.Among business owners, those operating in townships and informal settlements arethe most disheartened and discouraged by crime. This set ong>ofong> respondents reportedthat they were most likely not to invest in or grow their businesses owing to thethreat ong>ofong> crime. They were also considerably more likely than the sample average86

THE IMPACT OF CRIME ON SMALL BUSINESSESto feel that fear ong>ofong> crime among clients or customers had resulted in a negative impacton their businesses, and were also much more likely to say that concerns aboutcrime among their suppliers had impacted negatively on their businesses. Fear ong>ofong>crime across the value chain clearly has a disproportionately negative impact ontownship businesses, and underlines the importance ong>ofong> addressing environmentalfactors - such as clean, well-signposted streets, well maintained public spaces andsecure parking, together with a visible policing presence - to try to encourage patronsand suppliers back to the area.Despite expressing considerably higher levels ong>ofong> concern about crime than businessesin other locations, respondents operating in townships and informal settlementswere considerably less likely than the sample average to have insurance coverage.Only a quarter ong>ofong> these businesses had insurance – compared to half in thesample as a whole. The proportion ong>ofong> businesses who had been turned down forinsurance was considerably higher than average in townships and informal settlements.For these businesses, the probability ong>ofong> closure following one or more incidentsong>ofong> serious crime appears considerable. Indeed, among the 42 individualsidentified through the survey who had closed their businesses owing to crime, overhalf had formerly operated in townships or informal settlements. It is ong>ofong> crucial importanceto develop affordable insurance solutions for businesses in these areas,and to persuade and incentivise them to take up insurance as a non-negotiable investmentin the long-term viability ong>ofong> their businesses.87

12 APPENDICES12.1 Comparative data regarding prevalence ong>ofong> crimeStudies in developed countries show a fairly high prevalence ong>ofong> crimes affecting business,with around half ong>ofong> all businesses reporting at least one incident ong>ofong> crime over aone year period. Table 17 provides a rough comparison across three developed countries,together with Jamaica, a developing economy whose business environment in2003 was described by the World Bank as increasingly hostile and difficult. It shouldhowever be recognised that the sample sizes and survey methodologies are vastly differentin each case.Table 17SampleUSA 40 UK 41 Australia 42 Jamaica 43176 smallbusinesses in 2urban areasSize ong>ofong> business Small business < 50employeesReportingperiod% ong>ofong>respondentswere victims ong>ofong>crimeMain types ong>ofong>crimeMembers ong>ofong> theFederation ong>ofong> SmallBusinesses -manufacture andretailSmall business4 000 small retailbusinesses in 6 subsectorsMicro (

THE IMPACT OF CRIME ON SMALL BUSINESSESter-American Development Bank report suggested that the economic cost ong>ofong> crimein Latin America was equivalent to 14.2 percent ong>ofong> the region’s GDP. 45A 1999 Australian Institute ong>ofong> Criminology survey estimated that the total nationaldirect and indirect costs ong>ofong> all crimes covered by a 1999 small business survey inthe six retail sectors studied amounted to approximately Aus$170 million. Thestudy found that the most expensive crimes for businesses overall were burglary(accounting for 35 percent ong>ofong> total costs ong>ofong> crime), shoplifting (20 percent ong>ofong> totalcosts) and employee theft (18 percent ong>ofong> costs). Table 18 shows the direct and indirectcosts ong>ofong> crime against small and micro businesses that had been victimisedby crime. Figures are shown in equivalent South African Rand (using current exchangerates). 46Table 18: Mean direct and indirect costs ong>ofong> crime for victimised premises, Australia, 1999Losses MicrobusinessesSmallbusinessesAll businessesMeanMeanMeanAll businessesDirect R14 700 R29 100 R21 900Indirect R5 100 R7 800 R6 30089

THE IMPACT OF CRIME ON SMALL BUSINESSES12.3 Reference group and technical expertsThe project was overseen by a reference group, comprising senior staff in relevantgovernment departments, who were closely engaged throughout the project.Name Position OrganisationMr Alan HirschDeputy Director-General: Policy The PresidencyCo-ordination & AdvisoryServices (PCAS)Mr Sibusiso MasukuDirector: Policy Co-ordination &Advisory Services (PCAS)The PresidencyMs Busisiwe KubekaDeputy Director: Policy CoordinationThe Presidency& Advisory Services(PCAS)Mr Ashraf Kariem Director: Economic Sector –Policy Co-ordination & AdvisoryThe PresidencyServices (PCAS)Ms Daphney Dlamini-Mokhele Policy Analyst: Economic Sector– Policy Co-ordination &Advisory Services (PCAS)The PresidencyMr Matthew Stern Chief ong>ofong> Party SEGA IIMs Rebecca Rishty Deputy Chief ong>ofong> Party SEGA IIMr Mlungisi Menziwa Director: Policy Research National Secretariat for Safetyand Security (NSSS)Senior Superintendent JohannSchnetlerStrategic ResearchSAPS: Research – ong>Crimeong>Information Analysis Centre(CIAC)A technical advisory group consisting ong>ofong> issue experts was convened to provideinput on questionnaire design and sample selection, and feedback on survey dataanalysis and reporting.Name Position OrganisationPatrick Burton Research Director Centre for Justice and ong>Crimeong>PreventionBarbara Holtman Safety and Security Unit CSIRGareth Newham Safety and Security Unit Gauteng Dept for CommunitySafetyJohnny Steinberg Author and Consultant Author and ConsultantJenny Irish-Qhobosheane Project Manager, Aggravated Business Against ong>Crimeong>Robberies - RetailIan McCun Executive Director CASE90

THE IMPACT OF CRIME ON SMALL BUSINESSES12.4 Regional Workshop ParticipantsJohannesburg Workshop5 October 2007: 9.00 – 11.00SBP, 79 Oxford Road, SaxonwoldName Position OrganisationMs Desiree Daniels Head ong>ofong> Commercial ong>Crimeong> Business Against ong>Crimeong> (BAC)Project Manager: Organised Business Against ong>Crimeong> (BAC)Mr David Lekotaong>Crimeong> ProjectMs Angie MakwetlaChief Executive OfficerBusinesswomen's Association ong>ofong>South AfricaMs Yuri Ramkissoon Project Officer Community Agency for SocialEnquiry (CASE)Ms Barbara Holtmann Safety and Security Unit, DPSS Council for Scientific & IndustrialResearch (CSIR)Ms Judi Hudson Market Researcher FinMark TrustMr Tello MayBusiness Development SupportManagerGauteng Enterprise Propeller(GEP)Mr Gareth Newham Adviser to MEC Gauteng Safety & Security DeptMs Nazira Cachalia Programme Manager Jhb City Safety ProgrammeSenior Superintendent JJL vanRhynHillbrow SAPSMr Simon ModibaHillbrow CPFMr Keith Brebnor Chief Executive Officer NafcocJcciSenior Superintendent RPGMakaringeSection Head: PartnershipPolicingChief Executive OfficerMs Alta MulderMr Neil Fraser Chief Executive Officer Urban IncSAPS Gauteng Provincial HeadOfficeSouthern Ekurhuleni Chamber ong>ofong>Business91

THE IMPACT OF CRIME ON SMALL BUSINESSESCape Town Workshop8 October 2007: 14.00 – 16.00Cape Chamber House, 19 Louis Gradner StreetName Position OrganisationMr Barrie TerblancheB2B InsightMr Muneeb (Mo) Hendricks Head ong>ofong> Security Cape Town PartnershipCaptain Nestus KellerCape Town Police StationMs Arifa Parkar Head ong>ofong> Marketing Cape Town Regional CCIMr Albert Schuitmaker Chief Executive Officer Cape Town Regional CCIMs Karen Kuhlcke Business Information Officer Cape Town Regional CCIMr Thembinkosi SigandaActing Director: EconomicDevelopmentSection Head: BusinessSupportCommercial ong>Crimeong> UnitCity ong>ofong> Cape Town MetropolitanMunicipalityCity ong>ofong> Cape Town MetropolitanMunicipalityMr Carlo VizziSuperintendent JeromeHardenbergSA Police Service (SAPS)Marketing ManagerSmall Enterprise DevelopmentMs Denise DookooAgency (SEDA)Mr Lavendra Naidoo General Manager, eKapa The Business PlaceDurban Workshop10 October 2007: 10.00-12.00Durban Chamber House, 190 Stanger StreetName Position OrganisationMr Kelvin Glen Managing Director Business Against ong>Crimeong>, KZNMs Tamasyn PalmerProject Manager, SupportProgramme for Police Stations Business Against ong>Crimeong>, KZNExecutive Director : Durban Business PartnersMr Gerry van BiljonBranchDirector AR HarryDurban Central Police StationChief Executive OfficerDurban Investment PromotionMr Russell CurtisAgencyDurban Metropolitan PoliceServicesSuperintendent Phillip LionnetDurban Metropolitan PoliceSuperintendent Ari DibbenServicesExecutive ChairmanEnforce Security Services/ SouthMr Sibusiso NcubeAfrican Security AssociationMr Mgcini Mbhele Business Information Manager SEDA - EthekwiniMr Lindani DhlomoProvincial Manager, KwaZuluNatalSEDAMr Jonathan Naidoo Chief Operations Officer Trade & Investment KZN92

THE IMPACT OF CRIME ON SMALL BUSINESSES12.5 SAPS ong>Crimeong> Statistics - April 2006 to March 2007This appendix presents ong>ofong>ficial police statistics in respect ong>ofong> robbery at businesspremises, burglary at business premises, and shoplifting, for the period April 2006– March 2007, for each ong>ofong> the policing districts in which interviews were conducted.While the police statistics are not directly comparable with the SBP surveyresults, since they cover businesses ong>ofong> all sizes and are less likely to include businessesoperating in the informal sector and entrepreneurs working from home inthe ‘at business premises’ categories, they are included here as contextual background.JOHANNESBURGJohannesburg Area TotalRobbery at business premises 1 634Burglary at business premises 3 711Shoplifting 4 607Inner City - Johannesburg CentralRobbery at business premises 406Burglary at business premises 1 012Shoplifting 1 408Townships and Informal SettlementsSoweto Area TotalRobbery at business premises 119Burglary at business premises 445Shoplifting 1 780AlexandraRobbery at business premises 22Burglary at business premises 54Shoplifting 107DaveytonRobbery at business premises 5Burglary at business premises 23Shoplifting 10193

THE IMPACT OF CRIME ON SMALL BUSINESSESKatlehongRobbery at business premises 11Burglary at business premises 30Shoplifting 116TembisaRobbery at business premises 67Burglary at business premises 82Shoplifting 169Densely developed suburban areasBedfordviewRobbery at business premises 67Burglary at business premises 197Shoplifting 564EdenvaleRobbery at business premises 42Burglary at business premises 84Shoplifting 51KrugersdorpRobbery at business premises 42Burglary at business premises 245Shoplifting 163MondeorRobbery at business premises 33Burglary at business premises 43Shoplifting 406RandburgRobbery at business premises 114Burglary at business premises 329Shoplifting 155SandtonRobbery at business premises 150Burglary at business premises 349Shoplifting 58494

THE IMPACT OF CRIME ON SMALL BUSINESSESCAPE TOWNEast Metropole Area Total West Metropole Area TotalRobbery at business premises 128 52Burglary at business premises 3 312 3 567Shoplifting 3 762 6 158Cape Town Central - Inner CityRobbery at business premises 0Burglary at business premises 480Shoplifting 1 012Townships and Informal SettlementsBishop LavisRobbery at business premises 1Burglary at business premises 262Shoplifting 225DelftRobbery at business premises 0Burglary at business premises 14Shoplifting 18GuguletuRobbery at business premises 0Burglary at business premises 51Shoplifting 11HarareRobbery at business premises 17Burglary at business premises 42Shoplifting 28KhayelitshaRobbery at business premises 50Burglary at business premises 104Shoplifting 21Mitchells PlainRobbery at business premises 14Burglary at business premises 412Shoplifting 1 90195

THE IMPACT OF CRIME ON SMALL BUSINESSESDensely developed suburban areasAthloneRobbery at business premises 0Burglary at business premises 175Shoplifting 443DieprivierRobbery at business premises 0Burglary at business premises 143Shoplifting 73GoodwoodRobbery at business premises 0Burglary at business premises 111Shoplifting 210KuilsrivierRobbery at business premises 2Burglary at business premises 109Shoplifting 98MowbrayRobbery at business premises 0Burglary at business premises 55Shoplifting 50NyangaRobbery at business premises 2Burglary at business premises 52Shoplifting 8ParowRobbery at business premises 1Burglary at business premises 276Shoplifting 479PhillippiRobbery at business premises 1Burglary at business premises 27Shoplifting 6596

THE IMPACT OF CRIME ON SMALL BUSINESSESPinelandsRobbery at business premises 2Burglary at business premises 117Shoplifting 51StrandRobbery at business premises 0Burglary at business premises 155Shoplifting 48WoodstockRobbery at business premises 0Burglary at business premises 441Shoplifting 31DURBANDurban North Area Total Durban South Area TotalRobbery at business premises 385 302Burglary at business premises 2 617 2 102Shoplifting 3 298 1 779Inner city - Durban CentralRobbery at business premises 42Burglary at business premises 884Shoplifting 1 517Townships and Informal SettlementsInandaRobbery at business premises 4Burglary at business premises 65Shoplifting 215LamontvilleRobbery at business premises 0Burglary at business premises 2Shoplifting 0Kwa MashuRobbery at business premises 11Burglary at business premises 42Shoplifting 8797

THE IMPACT OF CRIME ON SMALL BUSINESSESKwamakhuthaRobbery at business premises 0Burglary at business premises 46Shoplifting 0PhoenixRobbery at business premises 79Burglary at business premises 172Shoplifting 259UmlaziRobbery at business premises 38Burglary at business premises 114Shoplifting 27Densely developed suburban areasAmanzimtotiRobbery at business premises 9Burglary at business premises 91Shoplifting 114BereaRobbery at business premises 3Burglary at business premises 120Shoplifting 102Brighton BeachRobbery at business premises 6Burglary at business premises 200Shoplifting 90ChatsworthRobbery at business premises 14Burglary at business premises 116Shoplifting 348MalvernRobbery at business premises 10Burglary at business premises 70Shoplifting 36MayvilleRobbery at business premises 698

THE IMPACT OF CRIME ON SMALL BUSINESSESBurglary at business premises 45Shoplifting 8UmbiloRobbery at business premises 93Burglary at business premises 334Shoplifting 15299

ENDNOTES1234567South Africa: An Assessment ong>ofong> the Investment Climate, World Bank, December 2005http://www1.worldbank.org/rped/documents/ICA008.pdfhttp://www.gt.co.zaNational Victims ong>ofong> ong>Crimeong> Survey South Africa, 2003Christopher Stone (2006) ong>Crimeong>, Justice, and Growth in South Africa: Toward aPlausible Contribution from Criminal Justice to Economic Growth, CID Working Paperno. 131, Center for International Development, Harvard University, p2.Libor Krkoska and Katrin Robeck, EBRD working paper: The impact ong>ofong> crime on theenterprise sector: Transition versus non-transition countries, July 2006,www.ebrd.org/pubs/econo/wp0097.pdfBusiness Report, 21 March 2007The final sample allowed for five percent white owned businesses. ‘Black-ownedbusinesses’ included businesses operated by coloured people, particularly in Cape Town.8 FinScope Small Business Survey Report, Gauteng 2006, Prepared for FinMark Trust andGauteng Enterprise Propeller, December 2006. The study assessed the degree ong>ofong>sophistication ong>ofong> small businesses operating in Gauteng, ranging from the informal streetvendors to more sophisticated and sustainable businesses. Eighty seven percent ong>ofong> smallbusinesses covered by the Finscope study were owned and run by black owners. Themajority ong>ofong> black owned businesses were in the informal sector.910111213141516"Enhancing Urban Safety and Security: Global Report on Human Settlements, UN-HABITAT, 2007Generation Next Survey Results, published in the Sunday Times, 27 May 2007Household and Business Satisfaction Surveys, 2006, study commissioned by theCorporate Planning Unit, City ong>ofong> Johannesburg, compiled by AA Lightelm and DHTustin, Bureau ong>ofong> Market Research UNISA, June 2006Sample size 441 - 5 respondents declined to categorise the area in which they operated.These figures are in line with the findings ong>ofong> the 2003 National Victims ong>ofong> ong>Crimeong>Survey, which found that 53% ong>ofong> South Africans believed that crime in their area ong>ofong>residence had increased in the past three years, 25% believed that crime levels hadstayed the same, and 21% said that crime in their area had decreased(www.iss.co.za/Monographs/No101/Chap4.htm)See Annex 1 for detailed comparative dataThis finding corresponds with the findings ong>ofong> the World Bank Investment Climate study,which found that, after controlling for size, ownership, and costs and losses associatedwith crime, firms in Cape Town were most likely to suffer losses from crime.Ken Pease, Repeat Victimisation: Taking Stock, ong>Crimeong> Detection and Prevention SeriesPaper 90, UK Home Office, 1998

THE IMPACT OF CRIME ON SMALL BUSINESSES171819202122232425262728293031Police Research Series Paper 95 - Business as Usual: An Evaluation ong>ofong> the SmallBusiness and ong>Crimeong> Initiative, Nick Tilley, Matt Hopkins, Editor: Barry Webb, HomeOffice Policing and Reducing ong>Crimeong> Unit, Research, Development and StatisticsDirectorate, United Kingdom, 1998 – reporting on a study ong>ofong> small businesses inLeicesterPerceptions are presented as the percentage ong>ofong> businesses reporting that a particularcrime is prevalent in an area. Actual experience is presented as the number ong>ofong> times aparticular type ong>ofong> crime was experienced divided by the number ong>ofong> businesses in thesample.Business Environment and Enterprise Performance Survey (BEEPS), cited by Krkoskaand Robeck, 2003; Jamaica: The Road to Sustained Growth, Country EconomicMemorandum, Report no. 26088-JM, World Bank, December 2003Turnover is assumed to be the mid point ong>ofong> the turnover band in column 1The mean cost ong>ofong> crime for firms across the sample is very similar to that found by theAIC in the 1999 study ong>ofong> small retailers in Australia – see Appendix 2 for details.Jamaica: The Road to Sustained Growth, Country Economic Memorandum, Report no.26088-JM, World Bank, December 2003Gaviria, A., 2002, “Assessing the Effects ong>ofong> Corruption and ong>Crimeong> on Firm Performance:Evidence from Latin America”, Emerging Markets Review, Vol. 3(3), pp245-268Transitional economies: Libor Krkoska and Katrin Robeck, EBRD working paper, July2006John Sloan and Madhava Bodapati, UAB criminologists: ong>Impactong> ong>ofong> crime on smallbusinesses in downtown Birmingham and Southside, UAB Magazine, Spring 1998, Vol.18, Number 2Jamaica: The Road to Sustained Growth, Country Economic Memorandum, Report no.26088-JM, World Bank, December 2003John Sloan and Madhava Bodapati, UAB criminologists: ong>Impactong> ong>ofong> crime on smallbusinesses in downtown Birmingham and Southside, UAB Magazine, Spring 1998, Vol.18, Number 2; Transitional economies: Libor Krkoska and Katrin Robeck, EBRDworking paper, July 2006The impact ong>ofong> crime in terms ong>ofong> loss ong>ofong> customers appears to considerably higher forsmall businesses compared to medium and large firms. The 2007 Grant Thornton surveyfound that 18% ong>ofong> medium to large businesses reported loss ong>ofong> customers as a result ong>ofong>crime – compared to almost half ong>ofong> our small business sample.Jamaica: The Road to Sustained Growth, Country Economic Memorandum, Report no.26088-JM, World Bank, December 2003Taylor, N. & Mayhew, P. 2002: Financial and Psychological Costs ong>ofong> ong>Crimeong> for SmallRetail Businesses, Trends and Issues in ong>Crimeong> and Criminal Justice, no. 229, AustralianInstitute ong>ofong> Criminology, CanberraChristopher Stone, ong>Crimeong>, Justice, and Growth in South Africa: Toward a PlausibleContribution from Criminal Justice to Economic Growth, Harvard University Center forInternational Development Working Paper No. 131, August 2006101

THE IMPACT OF CRIME ON SMALL BUSINESSES3233Paul Cichello, Colin Almeleh, Liberty Ncube and Morné Oosthuizen, Perceived Barriersto Entry into Self-Employment in Khayelitsha, South Africa: ong>Crimeong>, Risk, and Start-upCapital Dominate Prong>ofong>it Concerns, DPRU and Tips Conference Paper, October 2006AIC report citing Randall 1997, p. 57; Wynne et al. 1996, p. 16; UNISON 1996;Reynolds 1994, pp. 35–36; Cardy 1992, p. 32.www.aic.gov.au/publications/rpp/33/RPP33_03_background.pdf34 Taylor, N. & Mayhew, P. 2002: Financial and Psychological Costs ong>ofong> ong>Crimeong> for SmallRetail Businesses, Trends and Issues in ong>Crimeong> and Criminal Justice, no. 229, AustralianInstitute ong>ofong> Criminology, Canberra, www.aic.gov.uk, reporting on the 1999 studyundertaken by the Australian Institute ong>ofong> Criminology (AIC) and the Council ong>ofong> SmallBusiness Organisations ong>ofong> Australia (COSBOA)35363738394041International Business Report 2007, Grant ThorntonTaylor, N. 2002, John Sloan and Madhava Bodapati 1998, World Bank Report onJamaica 2003Taylor, N. 2002, "Reporting ong>ofong> ong>Crimeong> against Small Retail Businesses", Trends andIssues in ong>Crimeong> and Criminal Justice, no. 242, Australian Institute ong>ofong> Criminology,CanberraPatrick Burton, Anton du Plessis, Ted Leggett, Antoinette Louw, Duxita Mistry, Hennievan Vuuren, National Victims ong>ofong> ong>Crimeong> Survey South Africa, 2003, ISS Mongraph No101, July 2004See Appendix 4 for a list ong>ofong> workshop participantsJohn Sloan and Madhava Bodapati, ong>Impactong> ong>ofong> crime on small businesses in downtownBirmingham and Southside, UAB, 1998http://main.uab.edu/show.asp?durki=45971www.fsb.org.uk42 Taylor, N. & Mayhew, P. 2002: Financial and Psychological Costs ong>ofong> ong>Crimeong> for SmallRetail Businesses, Trends and Issues in ong>Crimeong> and Criminal Justice, no. 229, AustralianInstitute ong>ofong> Criminology, Canberra, www.aic.gov.uk, reporting on the 1999 studyundertaken by the Australian Institute ong>ofong> Criminology (AIC) and the Council ong>ofong> SmallBusiness Organisations ong>ofong> Australia (COSBOA)434445Jamaica: The Road to Sustained Growth, Country Economic Memorandum, Report no.26088-JM, World Bank, December 2003http://www.homeong>ofong>fice.gov.uk/crime-victims/reducing-crime/business-retail-crimeLatin American crime is crimping growth, Jens Erik Gould, The New York Times, 16Oct 200646 AIC Small Business ong>Crimeong> Survey 1999102