Crucial to know impact of crime on economy

By Kevin Tutani | Apr. 5, 2024

Electricity cable theft affects production in some companies that have no alternative source of power.

UNDERSTANDING the effects of crime on economic activity is extremely important. A major reason for this is because, as the country advances in economic development, criminals will also be seeking greater opportunities for theft.

In that regard, records on economic crimes and other offences should always be available and their trends continually monitored.

So far, Zimbabwe's neighbour (South Africa) along with its development partners, such as the World Bank, has managed to create dynamic records, which show the impact of crime on the country's (South Africa's) economy.

Such information is vital in order to understand the urgency of crime and also for the selection of effective methods in responding to it.

In Zimbabwe, reports of violent robberies have been increasing in the past decade. However, the Zimbabwe Republic Police(ZRP) seem to be equal to the task, through their apprehension of thieves.

In February, for instance, Quest Financial Services, located in Belgravia, lost US$720 000 to 12 robbers. Although the thieves had managed to escape from the scene of the crime, half of them were located and placed in police custody, within only two days of committing the offense.

The effectiveness of the ZRP is a crucial part of what keeps order and civility within Zimbabwe. However, a little more can still be done to ensure that crime continues to be overwhelmed by the police force and the rest of the criminal justice system.

This article will focus on economic crimes, which have to do with the theft of household, business and public property, and how to improve on existing crime response strategies.

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The importance of appropriate data

South Africa, for instance, has managed to determine how crime affects its economic growth. For example, studies reveal that the impact of criminal activity on its economy is as much as 9,6% of its total economic activity (gross domestic product, GDP), each year.

Of this 9,6%; 0,3% was attributed to losses of personal property and assets, while 1,3% was ascribed to personal (household) spending on insurance and security services, 1,5% pertained to loss of businesses' stock and missed sales and productive opportunities due to crime.

Around 0,7% entailed extortion of businesses by illegal gangs, 0,1% represented infrastructure (railway cables, electricity infrastructure, etc) theft, 2,9% (of GDP) was spent on businesses' security services, 1,1% represented loss in tourist arrivals as a result of crime and 0,3% comprised higher transport costs as businesses sought the services of private security to secure their cash-in-transit and raw materials.

In addition, 1% represented excessive government expenditure (when compared to peer countries) associated with supporting the criminal justice system (police, public prosecutors and other judicial officers), whilst 0,4% represented missed opportunities, as the funds used for security could have been profitably invested elsewhere.

Understanding such figures reveals how committed the South African government and its development partners are when it comes to matters of resolving criminal activities.

These figures will guide the South African government's policies, while the effectiveness of the public strategies can also be measured against changes in the above mentioned metrics.

The major challenge that the country will continue to face is that, it has “world-class” criminal activity. However, having accurate details on the effects of crime will assist in resolving it.

In order for Zimbabwe to get its own data on the economic impact of crime, the government may need to engage a reputable research firm, which will then distribute surveys to a representative sample of households, businesses and public sector entities.

The state-run enterprises should include the Zimbabwe Electricity Supply Authority Holdings, National Railways of Zimbabwe, Zimbabwe National Water Authority and Zimbabwe Revenue Authority.

Questions, such as, whether the respondents have been victims of crime in past 12 months, if so; the value of goods or services they have lost will need to be known.

Their expenditure on private security and insurance subscriptions meant to protect against theft will also be interrogated. The research may surprisingly reveal the true impact of crime on the economy, which would have otherwise remained a mystery.

Knowing the accurate impact will then appropriately guide government policy, going forward.

The economic costs of crime can easily make an economy inefficient or uncompetitive. Domestic businesses and wealthy citizens intending to expand their investments may eventually choose to assign their capital in safer countries, since they may not incur costs, such as extortion, expensive private security subscriptions or high insurance premiums, in other foreign lands.

This is the same for foreign investors. Instead of choosing to assign their funds to Zimbabwe, terrible crime statistics may drive them to carefully consider other destinations (countries), which have better conditions and competitiveness.

This reduces the dynamism (growth and vibrancy) of the economy, since it slows down new investments and also, the diversity of the economy.

This is because, even for local projects, investors will direct much of their investments where safety and security are guaranteed, instead of where opportunities actually lie.

Firms also invest much less in new technologies and innovations, when they direct a significant portion of their earnings to safety and security.

Costs of private security can also be transferred to final consumer prices.

The mentioned effects will ultimately affect both domestic and international competitiveness of local companies.

Further recommendations

The authorities in charge of domestic security services already have their national crime strategies, which seem very effective so far.

Nevertheless, providing additional ideas to support their existing policies would likely result in more robust crime response systems.

Firstly, businesses and communities should continue to be given a stake in the design of safety and security policies, in order to make them (the policies) relevant.

This would encourage broad-based (inclusive) participation during implementation, and increase the number of brilliant ideas proposed during the drafting stages of designing the policies.

Secondly, targeting the most notorious crimes would also assist in increasing awareness on the futility of crime alongside the effectiveness and capabilities of law enforcement personnel.

This would imply prioritising the reduction of armed robbery, homicide, or drug peddling, for example.

Thirdly, intelligence services (state security) should continually monitor the police and judicial officers at all levels to ensure that any act of corruption or unprofessional conduct is rewarded its commensurate dues (conviction and legal punishment).

By ensuring that rogue police and judicial officers are indicted (charged at law) and convicted, the whole criminal justice system would be revitalised for the overall good of the economy.

That would likely result in a drastic decline of incidences where rogue ZRP officers collude with criminals, for instance.

Fourthly, the government's security policy should ideally enable private security officers (detectives and guards, etc) to carry out duties similar to those executed by the police.

If possible, the private security can be permitted to execute even more responsibilities than the ZRP. The genius in this would be that, it would be akin (similar) to outsourcing some of the ZRP's duties to a more-resourced and plentiful private security labour force.

The outsourcing will also come at zero cost to government. In order to maintain order, the government will then need to strengthen its oversight and regulation over the sector (private security).

In other words, private security firms should be encouraged to identify and report criminal activity in a manner, which leads to convictions. In that regard, if possible, the government should create mechanisms, which enable the private officers to be rewarded for any criminal convictions realised from their service.

This will be crucial since private security firms may already have more personnel (more headcount) than the police. By and large, their efforts will not only serve the communities within which they serve but will work wonders for the overall economy, through reducing national crime statistics.

This will make the country more attractive to investors, affluent citizens and tourists. It will also enable local businesses to be more competitive and have more breathing space to expand their enterprises.

Fifthly, the current police-to-civilian ratio in Zimbabwe, is about 1:355, or 45 000 officers, for the population of around 16 million. This already compares favourably well with other countries, such as South Africa, which has a more stretched ratio of one officer, for 430 civilians.

However, to stay ahead of criminal activity, the number of serving officers will need to be gradually and continually, expanded.

A wealth tax, which charges 0,1% (a tenth of a percent) on the estimated value of properties in urban areas (or business revenue), may also be charged by the government on households and businesses, to finance the expansion of the police force and the criminal justice system.

The collection of the tax can be streamlined by enabling it to reflect on household's and businesses' utility bills, each month.

The tax receipts can then be used to improve systems used in fighting criminal activity and also promoting civility in the country's major CBDs (Central Business Districts).

Sixthly, the structure of the police force should continually be optimised (made efficient), so that it is not overly hierarchical whilst employees are streamlined (capable of being repurposed and delivering competently in their roles).

Permitting the use of technologies in administrative and investigative matters, will enable the police force to be more productive and agile.

Rather than using paper, for example, the ZRP should make modest efforts to digitise, and opt for using tablets and other ICT tools for capturing statements from the public, finger prints, evidence in criminal matters, etc.

The government can start off by assigning one tablet computer, for a group of 10 officers, which should be an affordable and feasible goal.

Additionally, the rate at which police officers solve crimes should be known and improved, until it reaches global best-practices.

This is because, when the ZRP is popular for resolving crimes, the public will trust them and be moved to continue reporting criminal activity.

That also implies that, as more people report crime to the police, correct statistics pertaining to it (crime) will be made available.

This is unlike what would happen when the public does not trust the police. The loss of confidence in the ZRP may lead to an under reporting of crime, among other things.

Finally, there will also be the need to address inequality and poverty as these are the root causes of most criminal activities. This may include the provision of counselling, sporting and entertainment activities for students in lower income communities.

This should positively affect their lifestyle, thinking and behaviours, until its impact is felt through a reduction in criminal activity, in the long term.

Overall, vibrant long-term economic growth, will do much to reduce some extreme inequalities, which still persist in society. That vibrant economic growth would be one of the most effective ways to nature a civil and law abiding population.