Cyril Ramaphosa’s R100 billion wake-up call

South Africa loses around R100 billion a year in government revenue each year from the illicit economy, which has flourished in the past few years. 

This economy is dominated by the illicit cigarette and alcohol trade. These two subsectors cost the government over R50 billion in tax revenue. 

The revenue is lost from the failure to collect excise taxes from this illegal industry, and the taxes from lost economic activity were legitimate products traded instead. 

This is feedback from the Consumer Goods Council of South Africa (CGCSA), which described this as a wake-up call for the government, which appears to finally be taking action with regard to the surging illicit economy. 

President Cyril Ramaphosa appears to have woken up to this destructive reality in his 2026 State of the Nation Address, which outlined some of the government’s efforts to tackle the scourge. 

“We are also addressing the threat posed by the infiltration of illegal and counterfeit goods to South African jobs and industry,” Ramaphosa said in his SONA. 

“We are establishing a national illicit economy disruption programme that brings together key state agencies and other stakeholders, including the private sector.”

“Through effective use of data analytics and AI, we will be targeting high-risk sectors like tobacco, fuel, alcohol and other counterfeit products.”

This crackdown comes too late for British American Tobacco’s (BAT) Heidelberg plant, which is set to be mothballed at the end of the year as illicit cigarettes make up 75% of the market. 

The CGCSA said this appears to be the first decisive intervention against South Africa’s surging illicit economy, which it estimates cost South Africa R100 billion in lost tax revenue and economic activity every year. 

“The illicit economy is eroding South Africa’s economy and destroying legitimate industries. The planned closure of BAT’s Heidelberg factory, threatening 35,000 jobs, is a stark warning,” it said.  

“The National Illicit Disruption Programme is the wake-up call the country needs and a positive response to a scourge which has become a national crisis, one that must be pursued with the same urgency and coordination as Operation Vulindlela.”

It said that collaboration across government, law enforcement, labour unions, and the business sector is essential to protect citizens from unsafe counterfeit goods and to restore fiscal stability.

Cracking down 

In theory, Ramaphosa’s crackdown heralds a new era where the illicit trade will be effectively tackled in South Africa. In practice, this will be much more difficult to achieve. 

The factors that resulted in the surge of the illicit industry are structural, with the hollowing out of SARS in the 2010s and repeated excise tax increases driving sustained interest from South Africans in the illicit sector. 

The CGCSA has previously warned that South Africans are no longer choosing illicit alternatives due to ease of access, but simply because they are significantly cheaper than legitimate products. 

This has been driven by repeated above-inflation excise tax increases, which make legitimate products largely unaffordable for South Africans. 

As a result, a law enforcement crackdown is unlikely to resolve the root causes of the rise in the illicit economy. 

However, the CGCSA explained that the illicit economy is so large in South Africa that increase law enforcement activity can have a meaningful impact on reducing its size and the impact on legitimate businesses. 

In partnership with more than 20 industry associations, the CGCSA has launched Illicit Economy Task Forces to press for urgent interventions from Government, Parliament and the collective Nedlac social partners. 

These Task Forces, which include brand owners, retailers, manufacturers, logistics providers and leaders across multiple sectors, are mobilising to advance a secure and legitimate South African economy. 

“The effectiveness of these efforts depends on the Nedlac social partners collectively driving enforcement, aligning policy and closing systemic gaps,” it said. 

“Only through genuine multi-stakeholder collaboration and decisive action can South Africa safeguard national revenue, protect jobs across industries, strengthen economic resilience and restore competitiveness in the global marketplace.”

The council called on South Africa to adopt GS1 standards as a cornerstone of the fight against the illicit economy. These standards are already embedded across supply chains in more than 120 countries. 

By enabling unique product identification, standardised data capture and information sharing, GS1 standards empower regulators, law enforcement and businesses to close loopholes exploited by illicit traders.