High crime rates in South Africa are an important aspect of the business environment and hence they affect the costs of doing business. In this study we employ the regional variation in the incidence of crime and business registrations across local municipalities in South Africa to investigate the effect of crime on the entry of firms. We utilize a unique dataset of business registrations and the incidence of crime from the South African Police Service for 330 municipalities in South Africa. South Africa provides us a valuable case study for this analysis. The relationship between crime and business activity is well-established in the South African literature. The World Bank Enterprise Surveys of South African firms reveal that South African firms are far more likely to rank crime as a major constraint compared to similar upper-middle income countries. Consequently, the costs of crime as a percentage of revenue are higher in South Africa than in comparator upper-middle income countries (World Bank 2010). A survey of firms about constraints to private sector investment in the Johannesburg area highlighted crime and safety as one of the key constraints to doing business (Rogerson and Rogerson, 2010).