South Africa’s illicit economy is estimated at R280 billion a year, with more than 87,000 formal jobs displaced and at least R68 billion in annual tax revenue lost, according to a new ECMX study commissioned by the CGCSA
Image: SARS
South Africa is losing billions of rands in economic activity and tax revenue to illicit trade, with the illegal economy estimated to be valued at R280 billion a year.
This is according to a new report by economic consultancy ECMX, commissioned by the Consumer Goods Council of South Africa (CGCSA). The report found that illicit trade is also costing the economy R126 billion in GDP and displacing more than 87,000 formal jobs.
The study looked at 12 sectors, including alcohol, tobacco, clothing and textiles, food, fuel, mining, pharmaceuticals, gambling, cosmetics and personal care, chemicals, non-alcoholic beverages, and toys and games.
It estimates that the government loses at least R68 billion a year in tax revenue as illicit trade takes business away from compliant companies.
The study drew on official data, SARS and customs records, industry research and regulatory information.
Ilse Fieldgate, head of economic consulting at ECMX, said the impact of illicit trade extends beyond the loss of economic activity.
“In several sectors, illicit trade is closely linked to organised criminal networks involved in customs fraud, smuggling, counterfeiting, money laundering and corruption," Fieldgate said.
"These networks frequently operate across multiple industries, adapting their methods in response to enforcement activity and exploiting weaknesses in border management, regulatory systems and supply chains. As a result, illicit trade represents not only an economic challenge but also a governance and national security concern."
The report found that the impact is being felt across the formal economy, with South Africa’s GDP estimated to be R126 billion smaller as a result of illicit trade.
Compliant businesses are also estimated to forfeit R193 billion in formal production, as demand shifts away from legitimate manufacturers, wholesalers, retailers and other businesses.
CGCSA CEO Zinhle Tyikwe said tackling illicit trade should be treated as an economic priority, rather than only a law-enforcement issue.
“Ultimately, the choice is not simply between tolerating or combating illicit trade. It is a choice between allowing scarce economic resources to continue flowing into the shadow economy, or redirecting them towards productive investment, sustainable employment, stronger public finances and inclusive economic development,” Tyikwe said.
The findings come as the government steps up efforts to tackle the illicit economy. President Cyril Ramaphosa announced a national illicit economy disruption programme during his State of the Nation Address earlier this year.
"We are establishing a national illicit economy disruption programme that brings together key state agencies and other stakeholders, including the private sector," he said.
"Through effective use of data analytics and AI, we will be targeting high-risk sectors like tobacco, fuel, alcohol and other counterfeit products," Ramaphosa said during his SONA address earlier this month.
He also said that the programme will focus on stronger coordination between government departments, faster investigations, and stricter enforcement of existing laws to ensure that illegal operators are held accountable.
"Organised crime is now the most immediate threat to our democracy, our society and our economic development."
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