Impact of Crime on Small Businesses Report 2008 - Gauteng Online

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THE IMPACT OF CRIME ON SMALL BUSINESSES7.1 <strong>Impact</strong> 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 <strong>of</strong> their businesses. Howevera quarter <strong>of</strong> all respondents expressed reluctance or unwillingness to expandor invest in their business because <strong>of</strong> the threat <strong>of</strong> 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 <strong>of</strong> crime. Just under a third <strong>of</strong>respondents indicated that they were unlikely to expand or invest in improvements.The opportunity costs <strong>of</strong> crime appeared to be considerably lower in inner city areasand suburbs. Nonetheless, 27 percent <strong>of</strong> 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 <strong>of</strong> 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 <strong>of</strong> responses across sector types was fairly even. Lower level retailerswere most likely to indicate unwillingness to expand. However, given the informalnature <strong>of</strong> many <strong>of</strong> 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: <strong>Impact</strong> <strong>of</strong> crime on expansion/investment in business% <strong>of</strong> responses706050403020100Low level retailManufacturingConstructionAveragePersonal servicesHigh level & fixed retailPr<strong>of</strong>essional servicesUnlikely to expand/investNo impact54
THE IMPACT OF CRIME ON SMALL BUSINESSESThirty five percent <strong>of</strong> small manufacturing enterprises expressed unwillingness toexpand and invest in new equipment or improvements to the business because <strong>of</strong>crime. Five percent <strong>of</strong> 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. Pr<strong>of</strong>essional services,including financial and IT consultants, were least likely to report an impact <strong>of</strong>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 <strong>Impact</strong> 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 <strong>of</strong> 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 <strong>of</strong> the goodness <strong>of</strong> 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 <strong>of</strong> the crime effectmight well have been different if it had been possible to include other firmcharacteristics, such as pr<strong>of</strong>itability, in the models.55
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THE IMPACT OF CRIMEON SMALL BUSINES
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Page 5 and 6: FOREWORDveys are used to complement
Page 7 and 8: 1 INTRODUCTIONTHERE IS broad agreem
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