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How often we hear on the radio “Crime in the last year cost the country X billion rands” or “Nkandla cost the country R210 million rands” or “Something else cost the country Rxxxxx”

Really? What do we mean when we say “Cost the country”?

Money circulates through the economy of South Africa. I buy an ice cream, the ice cream business buys whatever goes into an ice cream, pays for electricity, factory premises, salaries etc. One of the ice cream maker’s employees spends part of her salary on a new dress, the dressmaker makes a profit, a criminal steals the profit and spends the money they stole on a new home, the builder pays salaries, electricity etc and so on and so on, around and around. Did any of that cost the country anything? No!

So what does cost the country? Spend that goes offshore. So when you buy that ebook from Amazon – that cost the country. When a crime syndicate sells drugs into South Africa – that costs the country. When profits from the collection of e-tolls go offshore – that costs the country. Think of the South African economy as being in a closed box. When money goes out of the box without an equal amount of value adding going in, then there’s a cost to the country and only then. Note I said value adding and not just value. Is an IPad value adding? Yes, perhaps it has some educational value, but in itself, it will just end up as a piece of junk in a landfill one day.

There’s another cost to country that happens entirely inside the box. The death or disability of a contributor to the GDP. Why? Because the size of the box is determined partly by the productivity of the people contributing to the GDP. If one of them falls out of the system and is not replaced by an otherwise unemployed person, then the GDP will suffer and that’s a cost to the country. Of course, if the person was, themselves, unemployed then the cost to country is zero.

Does that mean we don’t care? Of course not, but we are talking economics here not humanity.

Lies, damned lies and statistics!

 

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