An often-heard argument is that South Africa’s very high crime rate is the main reason for the
country’s small share of business ownership. Combining a fixed-effects model with an
instrumental variable approach, we estimate the effect of crime on self-employment and
business performance using a matched data set of census, survey and police data. In
contrast to previous studies, which focus on perceived rather than actual crime and often
deal with geographically limited areas, we do not find robust evidence that high crime rates
have a negative impact on self-employment. Although the impact of crime is statistically
significant and negative, it is economically small. Moreover, our results suggest a positive
rather than a negative relationship between robbery and burglary and sales and average
business profits. These results suggest that crime may not be in general a serious threat for
small businesses in low and middle-income countries.