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DON’T LET CRISIS GO TO WASTE

24/08/2022 08:17:00 Sanele Sibiya

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I have been pondering on the observed spate of ATM bombings in the country.

I have just realised that the perpetrators of such unjust courses are actually taking advantage of the current crisis. They have sat down and observed that due to the ongoing killings of police officers and lack of police visibility at night, the streets are a free for all. One then questions why are we not seeing ethical businesses take advantage of the current crisis? And what are the impacts of the emerging lawlessness in our society on business and commerce and the macro economy as a whole. This week I will share my two cents on this emerging trend.
Impacts of lawlessness on economic growth.

Let me borrow on evidence from neighbouring countries on the impact of lawlessness on economic growth. Research publications show that one of the major constraints to growth on the South African economy is crime. Commerce does not like crime, capital does not stay where crime abodes. If we do not arrest the problem and restore social order we are likely going to see an increase in capital flight. Furthermore, we shall struggle as a nation to attract direct foreign investment; this will water down the efforts by the State’s apparatus to attract investment into the country to drive growth.

In a nutshell, this might affect our ability to grow as a country and our social ills of unemployment, poverty and hunger will go unsolved. We owe it to ourselves as a nation to solve the underlying factors that cause us to devolve into this state of lawlessness, that is let there be dialogue and talk with one another. I worry we will not be able to reverse the spate of crime in the country if we allow the problem to persist further. I imagine we are bundling radical political extremism and a surge in crime, we will have a lot to deal with in the future if we do not do anything now.

Crime premium

In order to survive this level of lawlessness or crime, businesses would have to invest in security measures. The basic rule of pricing is, everything that you put in the production process must be reflected in the price and the conservative pricing objective is to breakeven, or get back what you put in even without profit. This shall begin to feed into the prices and it is something I would like to call the crime premium. This is the additional amount one would have to pay to have the goods and services in circulation with the observed levels of crime. In simple terms, we might have a higher price level than we would have witnessed in the absence of crime as businesses factor in the amount of money they have invested in security to insulate against the crime, also their insurance premiums may now be higher and this would have to be reflected in the prices they charge us. Furthermore, as capital flies we might not have enough choice from which to select our consumption commodities, limited choice would also result to above normal inflation and a poor quality of life.

Ethical charge of the crisis

I see an opportunity for private security companies to venture in and close the space and improve on the security packages that they offer. The environment is ripe for such a business to come into the space and ensure that they provide world class security to ensure that commerce thrives. I also see space for digital payment solutions to eliminate the need for money in our society and ultimately less ATMs to bomb. We need the financial industry to quickly usher us into a cashless society, which will in itself require improved digital security solutions. The opportunities for ethical businesses to grab are endless, ethical businesses need to understand that every crisis has opportunities. The mega millionaire corporations were mostly founded on the backdrop of war and political instability, the criminals seem to see the opportunities that this crisis brings, why aren’t ethical businesses following suit?

Peace dividend

I need not delve much into this because our growth story before the 1990s is testament to a country enjoying a peace dividend. During that time we attracted a lot of businesses into the country because we were a stable destination compared to South Africa and Mozambique. As soon as those countries resolved their internal disputes, the capital started flying from Eswatini to those destinations. I charge this question to the country’s leadership; do you not see the value in peace when a historical analysis of the macro economy shows that we have, as a country, benefited from being a peaceful destination comparatively? We have seen beautiful policies aimed at turning the economy around being tabled but none seem to work. Can we work at restoring a peaceful discourse so we can start planning and invigorating our growth.

Conclusion

The country needs expedient action to halt the rise of criminal activity as it has negative impacts on economic activity and commerce.