Illegal trade is viewed not merely as an economic problem but as a crisis that jeopardizes jobs, public safety, and the future of South Africa. This activity undermines the country's productive economy and deprives the treasury of critical tax revenue.
South Africa's Minister of Finance, Enoch Godongwana, acknowledged during his budget speech in parliament earlier this year that 'the moral cancer of illegal trade threatens our economy,' as it endangers consumers and leads to the loss of billions in state revenue.
As evidence of this existential threat, Godongwana cited recent news that a major South African tobacco company was planning to close its last production facility in the country, which threatened the loss of about 230 jobs in the Heidelberg area. He emphasized that the complex and organized nature of illicit operations requires efforts to curb this trade, ensure prosecution, and dismantle supply chains.
Global Challenge
Counterfeit goods, which are only part of illegal trade, represent a significant outflow of funds from the global economy. According to the latest OECD data, they account for approximately $467 billion in global trade flows. OECD Secretary-General Mathias Cormann stated that illegal trade undermines intellectual property rights, hinders economic growth, and threatens public safety, noting that risks may increase as counterfeiters utilize new technologies to evade detection.
Economic Impact
South Africa suffers enormous economic losses due to illegal trade. Former SARS Commissioner Edward Kisvetter, speaking before parliament earlier this year, estimated that the entire illegal economy in South Africa could be valued between 800 billion and 1.2 trillion rand. Kisvetter suggested that over the past 15–20 years, the illegal economy has grown faster than the formal economy—increasing from about 5% of GDP to 12–15%. He believes this translates to lost taxes ranging from 200 to 300 billion rand, resulting in huge missed opportunities in social housing, old-age pensions, higher education funding, and other government support.
On a human level, illegal trade also poses serious health risks, as food and beverages bypass established regulatory standards, endangering consumer lives. Illicit food and alcohol are linked to numerous outbreaks of disease and deaths.
Coordinated Countermeasures
A recent OECD report calls for continuous monitoring and more coordinated action, including real-time information sharing between customs, police, financial intelligence units, and market surveillance agencies to combat illegal trade. The report also points to the need to strengthen cooperation and share best practices among trade intermediaries, postal and shipping services, free trade zones, and logistics companies to prevent the abuse of their networks.
In the regional context of South Africa, Kisvetter proposed a five-point plan to counter the illegal economy. He recommends establishing a national program to curb activities under the presidency. This plan should include strengthening interdepartmental cooperation through a command center and collaboration platform, initially targeting the supply chains of high-risk tobacco, alcohol, and fuel. Specialized investigative units and courts, increased budgets, expanded investment in technology, data science, and artificial intelligence, as well as a national panel to measure progress, are also necessary.
Although the implementation of these recommendations remains uncertain, it is clear that the illegal economy has already had a devastating impact on South African society, costing lives and livelihoods. At the business level, an industry leaders' alliance highlights the impact of illicit goods on South African society and proposes solutions. The business alliance formed a task force and launched a consumer campaign called "#YourChoiceMatters" in partnership with the Consumer Goods Council of South Africa (CGCSA), urging buyers to purchase legal goods and report illegal trade.
Documentary Series
The alliance recently presented a series of sharp video documentaries highlighting the extremely negative impact of illicit goods. The series "Someone Always Pays" is an in-depth investigation into the human and economic consequences of the illegal economy across several affected industries. CGCSA CEO Zinhle Taikwe stated: "Our message to the people of South Africa is that with illegal goods, no matter how cheap they are, someone always pays." She added that consumers can help change the situation by making purchasing decisions.
Ultimately, as illegal trade grows across the South African economy, it is a problem facing the entire nation, not just legitimate producers. Combating it will require concerted, targeted national efforts, as illegal trade harms not only businesses but also destroys jobs and communities.