Costs of Doing Business in Africa: Security vs. Corruption

Jon Gosier —  July 21, 2009 — Leave a comment

The Private Sector Development blog, a World Bank initiative, reports that crime and security are impediments as damaging to business as corruption. After comparing losses due to theft and security to bribes paid, in some countries, security is an equal or more substantial cost.

crime_security_corruption_africa
PSD suggests that while corruption is a large cost of business, Western rhetoric often emphasizes it to the exclusion of other more costly problems, such as security. While the blog article is understandably short, I think its conclusions warrant further analysis. Corruption and insecurity are intertwined. The link between police corruption and wider violence and poverty is well documented. Officers who accept bribes for looking the other way; officers who refuse to investigate crimes without a bribe; officers who arrest innocent men and women, then charge their families for their release-all of these small actions contribute to wider insecurity.

PSD took the data from Enterprise Surveys, a company that surveys businessmen throughout the world on indicators to measure and quantify the business environment in 90 emerging markets. The corruption survey lists the following indicators:

  • % of Firms Expected to Pay Informal Payment to Public Officials (to Get Things Done)
  • % of Firms Expected to Give Gifts to Get an Operating License
  • % of Firms Expected to Give Gifts In Meetings With Tax Officials
  • % of Firms Expected to Give Gifts to Secure a Government Contract
  • % of Firms Identifying Corruption as a Major Constraint

Whereas the crime survey lists the following:

  • % of Firms Paying for Security
  • Losses Due to Theft, Robbery, Vandalism, and Arson Against the Firm (% of Sales)
  • Security Costs (% of Sales)
  • Products Shipped to Supply Domestic Markets Lost Due to Theft (%)
  • % of Firms Identifying Crime, Theft and Disorder as Major Constraints

Also interesting would have been something like “% of firms expected to give gifts in order to have a crime investigated,” or “% of firms expected to give gifts in order to recover stolen goods from the impound.” The surveys aren’t flawed, just limited in their scope. A survey of businessmen, for example, cannot measure corruption in police agencies or public ministries.

It’s important to acknowledge that security is an important cost of doing business throughout Africa. But it’s also disingenuous to separate that from the equally large problem of corruption.

Jon Gosier

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Founder of Apps4Africa, Appfrica, and D8A

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