The dangerous crime costing South Africa billions every year

Finance Minister Enoch Godongwana has raised the alarm about South Africa’s growing illicit economy, which sees the country lose billions in tax revenue every year.

In particular, he highlighted South Africa’s cigarette, alcohol and fuel black markets, adding that the government is clamping down on this illegal trade.

In his Medium-Term Budget Policy Statement (MTBPS) delivered on Wednesday, 12 November, Godongwana outlined South Africa’s growing illicit trade problem.

He said this issue threatens the economy, endangers consumers and robs the fiscus of billions in revenue.

“The growing markets for illicit cigarettes and alcohol pose a serious risk to public health and undermine legitimate businesses,” he said.

“Each year, billions of rands in taxes go uncollected, funds that could have closed our revenue gap and avoided tax increases entirely.”

The minister cited data from the South African Revenue Service (SARS), which estimated that the government has lost around R40 billion in excise revenue to the cigarette black market since 2020.

He explained that the same is true for alcohol and fuel, which have also seen increased trade on the illicit market.

South Africa’s illicit cigarette and alcohol markets ballooned during the Covid-19 pandemic, when government lockdown regulations inhibited the legal sale of these products.

Research from Ipsos has shown that South Africa’s illegal cigarette market is outpacing the legal market, with 59% of stores surveyed selling illicit products.

The SA Tobacco Transformation Alliance has also revealed that South Africans smoked 37 billion cigarettes in 2023, yet SARS only collected tax on 13 billion.

Similarly, South Africa’s illicit alcohol market has boomed, with Drinks Federation South Africa finding that it is now worth R25 billion, making up 18% of the industry.

In his MTBPS, Godongwana said the government is clamping down on this illegal trade. He said that, in the past six months, SARS suspended three licenses for non-compliant tobacco production.

The Financial Intelligence Centre has also provided the taxman with intelligence reports to assist in its crackdown on criminal syndicates.

“Together they have identified illicit markets in tobacco, precious metals, fuel and procurement fraud,” the minister said.

Customs officials must fulfil their duty to prevent criminals from dodging taxes and flooding our markets with dangerous products.”