South African crime rates rose to unacceptably high levels between 1980 and 2006. As a result, vast amounts of funds were devoted to the upkeep of the criminal justice system – correctional services, justice and the police. Although it is necessary to spend a certain amount on the criminal justice system, it is argued in this paper that in the case of South Africa this expenditure was excessive.

The paper starts of by looking at the economic theory of crime. What attracts people to engage in criminal activities and how they make their decisions is some issues that will receive attention. The negative effects of crime on the economy will also be discussed. The paper also looks at the magnitude of crime in South Africa compared to the rest of the world. Crime types that will be discussed include murder, rape, assault, theft, fraud and drug offences. South Africa’s high crime rates compared to other countries internationally will be highlighted.

To combat crime large amounts have been spent on the upkeep of the criminal justice system. This is the direct cost of crime, although certain other costs related to the expenditure on fire arms, security measures such as burglar proofing, value of goods lost and loss of productivity through injury are excluded. An attempt to isolate the percentage of these costs that can be directly attributed to crime is a taxing - if not impossible - exercise. Indirect costs like the negative effect of criminal activities on foreign direct investments and tourism were not included. If anything, the study thus underestimates the total cost of crime.

It was assumed that a certain amount must be spent on the upkeep of the criminal justice system. With the concervative scenario it was assumed that the government expenditure on the criminal justice system should increase with the inflation rate. With the liberal scenario it was assumes that this expenditure should increase at a rate equal to the increase in government expenditure on social services. The amount that was spent over and above the above-mentioned increases was regarded as excessive expenditure. Then it was calculated what could have been bought with this excessive expenditure – the opportunity costs. This was measured in terms of school and housing facilities that could have been provided with those funds. It will be shown that the excess funds could have covered the cost of financing the entire backlog in schooling facilities and a large part of the current housing shortage.