Impact of Crime on Small Businesses Report 2008 - Gauteng Online

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THE IMPACT OF CRIME ON SMALL BUSINESSESTable 9: Expected costs <strong>of</strong> crime by turnover bandExpected costProportion <strong>of</strong> turnover(expected cost)Proportion <strong>of</strong> 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 <strong>of</strong> less than R10 000the expected cost <strong>of</strong> crime, measured using the median cost, is at least 20 percent<strong>of</strong> turnover. This expected cost falls with an increase in firm size. This fall is notthe result <strong>of</strong> a firm becoming less likely to be affected by crime (as noted above,larger firms have higher crime incidence) but rather because the costs <strong>of</strong> crime as apercentage <strong>of</strong> turnover is lower. In absolute terms, larger firms have higher expectedcosts <strong>of</strong> 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 <strong>of</strong> crime is strongly regressive: it has the largest proportionalimpact on small entrepreneurs. The average cost <strong>of</strong> crime by turnoverstays above 5 percent <strong>of</strong> sales until firms have sales <strong>of</strong> above R75 000 per year. Itshould be emphasised that this is sales rather than pr<strong>of</strong>it. What this means is thatcrime is very likely to have a devastating impact on the livelihoods <strong>of</strong> many smallentrepreneurs.46
THE IMPACT OF CRIME ON SMALL BUSINESSESChart 30: Actual annual cost <strong>of</strong> crime by median turnover40%35%30%25%20%15%10%5%0%R1mChart 31 shows the expected cost <strong>of</strong> crime per year – that is the average cost <strong>of</strong>crime multiplied by the probability <strong>of</strong> experiencing a crime. In effect, this is an estimate<strong>of</strong> the likely financial impact <strong>of</strong> crimes on the firms in our sample next year,assuming that crime rates remain the same. For instance, if a small entrepreneurwith sales <strong>of</strong> between R15 000 and R25 000 has escaped crime this year, it is neverthelesslikely that he or she will face crime costs <strong>of</strong> around 8.3 percent <strong>of</strong> turnovernext year. This could very well shut the business down. It is also worth notingthat the rate <strong>of</strong> 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 <strong>of</strong> crime (by median turnover)40%35%30%25%20%15%10%5%0%R1m47
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Impact of Crime on Small Businesses Report 2008 - Gauteng Online

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