CRIME, SECURITY AND FIRM PERFORMANCE IN SOUTH AFRICA

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Abstract

We use cross sectional data from the World Bank enterprise surveys gathered in 2007 in South Africa’s four cities (Johannesburg, Cape Town, Durban and Port Elizabeth) to assess the impact of business related crimes on firm performance proxied using firm sales. Using Ordinary Least Squares (OLS) and Tobit model, we find that crime in the form of theft, robbery, arson and vandalism has a negative effect on sales and hence firm performance. However the impact of domestic shipment crime is mixed and varies from city to city depending on the magnitude of losses incurred by firms in each city. Results also show that crime is regressive in nature because crime related losses are relatively higher among small firms than large firms. The prevalence of crime amongst small firms and its negative effect on firm performance suggest the need for government and the business community to come together and develop security systems that are effective and affordable to small businesses. This is because, supporting small businesses is important for growth and employment creation.

Keywords: Crime, Security, Firm Performance

How to cite this paper: Moyo, B. (2012). Crime, security and firm performance in South Africa. Corporate Ownership & Control, 9(4-2), 241-252. https://doi.org/10.22495/cocv9i4c2art5