Impact of Crime on Small Businesses Report 2008 - Gauteng Online

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THE IMPACT OF CRIME ON SMALL BUSINESSESTable 10: Security costs by location and levels <strong>of</strong> crime in the areaInner cityTownships/informalHigh densitysuburbanAverage acrosssampleOnce-<strong>of</strong>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-<strong>of</strong>f R12 570 R10 230 R6 470Recurring p.a. R19 050 R7 810 R4 810No crime in pastyear1 incident 2 or more incidentsOnce-<strong>of</strong>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 <strong>of</strong> operation as being characterised by high or moderatelyhigh levels <strong>of</strong> crime – possibly accounting for their higher annual security expenditure.Security spending, both once-<strong>of</strong>f and recurring, increases substantially if a firm experiencesa crime. There is some evidence that the average once-<strong>of</strong>f spending onsecurity is larger for firms that experience two or more crimes, although medianspending is lower. This suggests that there are a number <strong>of</strong> 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 <strong>of</strong> crime incidents that the firm experiences. <strong>Crime</strong> affected firmsspend almost double what firms that are not affected by crime. The average spendingby firms that have experienced one incident <strong>of</strong> 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 <strong>of</strong> businesses reportedvery large security costs, comprising a considerable proportion <strong>of</strong> their turnover. Inorder to avoid distortion <strong>of</strong> the results by these very high figures, results are presentedusing medians rather than means.50
THE IMPACT OF CRIME ON SMALL BUSINESSESTable 11: Once-<strong>of</strong>f security costs by turnover (R) 1mOnce <strong>of</strong>f cost in Rand550 350 875 1,200 3,000 2,000 1,250 3,500 6,000 3,500 15K 5000Once <strong>of</strong>f cost as percentage <strong>of</strong> 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 burglarpro<strong>of</strong>ing (a once-<strong>of</strong>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 <strong>of</strong> 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 <strong>of</strong> othersmall businesses like themselves paying protection, for example so that criminalswould not target their businesses. Only 19 respondents said that they were aware <strong>of</strong>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 incidents<strong>of</strong> crime in the past year.Estimates <strong>of</strong> 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 <strong>of</strong> R20 700 per annum. In areas perceived as having lower crimerates the estimate was around R10 000.51
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