The cost of cyber-crime in South Africa

Cyber-crime is having a significant economic impact on South Africa and the rest world, costing the country over R5.8 billion each year – a situation set to get worse.

This is according to the Global Cost of Cyber-crime report, compiled by Intel-owned McAfee software on behalf of the Center for Strategic and International Studies (CSIS), which estimates the cost of cyber-crime to the global economy to be in the region of US$400 billion.

A conservative estimate would be $375 billion in losses, McAfee said, while the maximum could be as much as $575 billion.

“Even the smallest of these figures is more than the national income of most countries and governments and companies underestimate how much risk they face from cyber-crime and how quickly this risk can grow,” the report said.

In South Africa, McAfee said that cyber-crime has an economic impact equal to about 0.14% of the country’s total GDP. With a GDP contribution of close to US$390 billion (R4.1 trillion), this means cyber-crime in SA is costing the country over US$550 million (R5.8 billion) a year.

According to McAfee, the most important cost of cyber-crime comes from its damage to company performance and to national economies. Cyber-crime damages trade, competitiveness, innovation, and global economic growth.

Top cyber-crime losers

# Country Cost as % of GDP
1 Germany 1.60%
2 Netherlands 1.50%
3 United States 0.64%
4 Norway 0.64%
5 China 0.63%
6 EU 0.41%
7 Singapore 0.41%
8 Brazil 0.32%
9 India 0.21%
10 Ireland 0.20%

“Cyber-crime is a tax on innovation and slows the pace of global innovation by reducing the rate of return to innovators and investors. Governments need to begin serious, systematic effort to collect and publish data on cyber-crime to help countries and companies make better choices about risk and policy,” the group said.

The report found that IP theft and innovation cannibalism – notably the “theft” of research and development (R&D) which is used to create new intellectual property (IP) – is the largest source of direct loss from cyber-crime.

Financial crime — the theft of financial assets through cyber-intrusions — is the second largest source of direct loss from cyber-crime, while the theft of confidential business information is the third largest cost from cyber-crime and cyber-espionage.

The fourth largest loss is the opportunity cost – the value of forgone activities—opportunities or benefits that cannot be realized because resources have been expended elsewhere; while the cost of recovery is also not insignificant, ranked fifth.

“The cost of cyber-crime will continue to increase as more business functions move online and as more companies and consumers around the world connect to the Internet,” the report said.

McAfee also projects that the losses from the theft of intellectual property will also increase as acquiring countries improve their ability to make use of it to manufacture competing goods.

“We do not see a credible scenario in which cyber-crime losses diminish. The outlook for the world is increased losses and slower growth,” McAfee said.

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The cost of cyber-crime in South Africa