The economic impact of violence in South Africa

A new study by the Institute for Economics and Peace (IEP) has calculated the global cost of violence, and how much nations pay to contain its effects.

The study, titled the Economic Costs of Violence Containment, reveals that the global costs of “violence containment” approached $9.4 trillion in 2012 – almost 11% of the Gross World Product (GWP).

According to IEP, violence containment refers to any economic activity that is related to the consequences or prevention of violence, where the violence is directed against people or property.

The study found that the direct global cost of violence containment is over $4.7 trillion – and over $9.4 trillion when the peace multiplier is applied.

The peace multiplier determines the extent to which additional expenditure has flow-on impacts in the wider economy.

The study assumes that the multiplier approaches two, signifying that for every dollar saved on violence containment, there will be an additional dollar of economic activity.

“This is the equivalent of $1,300 for each person in the world, and almost double the value of world agricultural production.”

“Were the world to reduce its expenditure on violence by fifteen percent it would be enough to provide the necessary money for the European Stability Fund, repay Greece’s debt and cover the increase in funding required to achieve the United Nation’s Millennium Development Goals,” the IEP said.

Economic impact compared
Economic impact compared

The world’s biggest spenders

The biggest portion of violence containment expenditure comes from military costs (51.2% of total) – with violent crime (15.1%) and internal security costs (13.7%) accounting for the second and third biggest portions of expenditure.

The world’s largest economies are obviously spending the most on violence containment, with the USA ($1.7 trillion) taking top spot, followed by the BRIC nations – China ($354 billion), Russia ($207 billion), India ($186 billion) and Brazil ($176 billion).

Top 10 spenders
Top 10 spenders

However, when violence containment costs are represented as a percentage of a country’s GDP, militant nations come out at the top, led by North Korea (27% of GDP), Syria (24%) and Liberia (23%).

Top 10 spenders - percent of GDP
Top 10 spenders – % of GDP

“Expenditure on violence containment is economically efficient when it effectively prevents violence for the least amount of outlay,” the IEP said.

“However, money that is spent on surplus violence containment, or money that is spent on inefficient programmes has the potential to constrain a nation’s economic growth.”

As Africa’s biggest economy, South Africa has the highest violence containment costs ($51.2 billion), and has one of the biggest violence containment budgets in the world – 17th, globally out of 152 countries.

South Africa is listed 30th in terms of costs as a percentage of GDP (8.5%).

The global cost of violence containment is 2.4 times the size of Africa’s GDP, according to the study.

Impact of violence containment by category
Impact of violence containment by category

Top 10 African countries

Country Cost (US$mil) Cost per capita (US$)
% of GDP
Liberia 670 160 22.7
Libya 20,395 3,175 19.6
Somalia 1,085 115 18.4
Zimbabwe 1,355 105 18.2
Cote d’Ivoire 6,115 305 14.2
Democratic Republic of the Congo 3,615 55 12.0
Sudan 9,385 275 11.5
Central African Republic 425 95 10.4
Lesotho 435 200 10.4
Uganda 5,075 145 9.4

Top 5 African spenders

Country Violence Containment costs (US$bn)
South Africa 51.210
Egypt 35.155
Nigeria 26.835
Algeria 25.775
Libya 20.395

According to the IEP, the figures found in its study were “conservative”, as many categories of violence were not included in costs due to a lack of data.

This includes international spill-over effects of violence, costs related to property or vehicle crimes, as well as preventative measures such as insurance or surveillance.

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The economic impact of violence in South Africa