SARS’ Edward Kieswetter kissed R16.5 billion goodbye in one year

SARS lost out on R16.5 billion in excise duties from the sale of illicit alcohol in South Africa last year, as historical weak enforcement on illegal trade has seen the industry boom.  

Apart from the financial consequences, the spread of illicit alcohol presents a significant threat to public health as its production is unregulated. 

The illicit alcohol sector is also dominated by organised criminal syndicates, which have become increasingly powerful as law enforcement capacity has been hollowed out. 

Alcohol is considered illicit if it is produced illegally outside of licensed and regulated facilities, with the final product not meeting safety standards. It is also illicit if it is sold without the proper collection of taxes, from excise duties to VAT. 

Homebrews, in this case, only become illicit when they are sold to consumers but not if they are consumed for cultural purposes. 

The Drinks Federation of South Africa also pointed out that often well-known brands are counterfeited or smuggled in from other countries, bypassing local excise duties. 

Thus, while these drinks are often safe to consume, they are illicit as tax is not properly collected on their sale and distribution. 

Illicit alcohol enters the market through counterfeit, smuggling, and unregulated local production – often using increasingly sophisticated methods to evade oversight.

The Drinks Federation of South Africa pointed to a 2025 Euromonitor survey to show the impact of the rise of the illicit alcohol industry on the country. 

This study shows that illicit alcohol now makes up 18% of South Africa’s total alcohol market and has surged by 55% since 2017. 

The rise of this industry resulted in SARS losing out on R16.5 billion in excise duties from the sale of alcohol alone in 2024. 

This excludes the potential losses from the improper collection of VAT on those sales and other taxable income generated by the industry. 

The study showed the three main areas in which the state loses out on tax revenue from the sale of illicit alcohol. These are shown below.

• 38% of sales are from counterfeit products, costing the economy R6.27 billion 
• 29% of sales are the result of smuggling, costing R4.8 billion 
• 32% is tax leakage from unregulated local production, resulting in R5.3 billion in losses

These losses are significant in a country facing a financial crisis, with government debt crossing 75% as a share of GDP and it spending R1.2 billion a day to service this debt. 

Illicit trade boom 

Illicit trade in both alcohol and tobacco has soared since the nationwide ban on legitimate sales during pandemic-era lockdowns. 

The South African market for illicit alcohol is historically large and was boosted by many of the same factors that fuelled the rise of the illegal cigarette trade. 

During these lockdowns, when legitimate sales were prohibited, illicit traders had the opportunity to rapidly take market share. 

In particular, they provided cash-strapped consumers with cheaper, more accessible alternatives to legitimate products.

This undid decades-long efforts to formalise the alcohol trade in South Africa and regulate the production of products. 

The Transnational Alliance to Combat Illicit Trade (TRACIT) explained that illicit traders have become entrenched in the local economy. 

Pandemic-era lockdowns opened up the alcohol market to their trade, and now the lower prices charged on illicit goods ensure they remain attractive to consumers. 

Its research showed that illicit alcohol products were, on average, 43% cheaper than their legal counterparts. 

The demand for cheaper, unregulated, illicit alternatives is amplified by high levels of unemployment and reduced disposable income due to inflation.

Furthermore, the issue involves many law enforcement agencies struggling to cooperate effectively. 

TRACIT said the only way to deal with the illicit market is through sustained, concerted efforts between all responsible government bodies, from the police to SARS and the new Border Management Authority. 

These bodies must also be adequately resourced and funded, with the negative effect of state capture severely handicapping their efforts to contain illicit trade. 

TRACIT also recommended that SARS work more closely with the Reserve Bank and the Financial Intelligence Centre to go after the profits generated by illicit trade.