The mob rule: criminality consumes South Africa

Just a couple of years ago, South Africa's business leaders would have told you their biggest problem was the electricity supply. Relentless blackouts were crushing the economy. Today, a problem with a different kind of power tops the list. The World Bank estimates that organized crime costs the South African economy about 10% of GDP. A recent global ranking put the country seventh out of 193 nations for susceptibility to organized crime, behind places like Myanmar, Colombia, and Mexico. As John McDermott, The Economist's chief Africa correspondent, explains, South Africa has long had a criminal underworld, but increasingly it infects the overworld—the state and formal business.

The three new trends

McDermott identifies three worrying developments that go beyond the trafficking of drugs, people, animals, and rare plants that South Africa is already known for.

First, the illicit economy has ballooned. A growing cornucopia of goods now flows through illegal marketplaces—cigarettes and alcohol are the most common, but it extends to dodgy petrol, copper, and plastics. In isolation, none of these things would break the economy. Added together, the former head of the tax authority told McDermott, the country is losing the equivalent in tax revenue of what it costs to fund the entire health budget.