The South African Revenue Service (SARS) estimates that illicit trade costs the economy R100 billion annually and robs the country of valuable resources.
A report published by Business Unity South Africa (BUSA) said illicit trade is one of the biggest threats to stability and economic growth in South Africa.
It found South Africa faces challenges from illicit trade in alcohol, cigarettes, fishing, mining, counterfeit electronics, pharmaceuticals, food, and apparel.
SARS Commissioner Edward Kieswetter has previously highlighted that illicit trade costs South Africa R250 million daily.
Tax Justice South Africa’s Andy Mashaile said this is not a victimless crime. “Tax dodgers are robbing South Africans of schools, housing, healthcare, and basic safety,” he said.
“The criminals live in luxury using funds that should be used to create jobs and wealth. They do so by stealing the tax they owe to the state purse.”
Tax Justice South Africa said criminals have been allowed to thrive due to corruption and complacency.
Operations have begun to address the problems associated with illicit trade and bring the perpetrators to book.
Earlier this year, SARS’ National Customs Enforcement Team joined forces with the police and defence force to intercept truckloads of illicit cigarettes.
In June, SARS’ Customs Division began to destroy illicit and smuggled cigarettes, valued at R43 million, at the Beitbridge border post.
The illicit and smuggled cigarettes were seized in multi-agency operations and dedicated and intelligence-driven operations as part of the Customs Division’s tobacco strategy.
“This is part of ongoing efforts to enhance the effectiveness of customs in combating illicit trade, particularly in tobacco and cigarette,” SARS said.
“We will use all information gathered by enforcement agencies to follow up and prosecute those who are involved in these syndicated crimes,” Kieswetter said.
“All those who are involved, irrespective of their nationality, will face the full might of the law. We will continue to carry out our enforcement work without fear, favour or prejudice.”
Widespread problems with illicit trade and counterfeit goods
Mashaile told eNCA that the problems of illicit trade and counterfeit goods go well beyond cigarette smuggling to dodge taxes.
He said there are many examples of counterfeit medicine and food that have resulted in South Africans’ deaths.
“Counterfeit baby formula which was manufactured in China killed 100 South African children,” he said. The fake milk formula had virtually no nutritional value.
He said there are many examples of counterfeit products at shops in Dragon City in Centurion, China Mall in Midrand, and Marabastad in Pretoria.
“People will be shocked by the amount of money which is made from selling illicit products and shopkeepers not paying tax,” he said.
Mashaile added that this illegal trade is money stolen from SARS and the country’s fiscus.
To combat the illicit trade scourge, he suggested the extensive use of intelligence from private organisations.
“People with information and providing intelligence don’t want to share it with the police because of fear of retaliation,” Mashaile said.
He said police officers in uniform and with market cars support criminals in places like Dragon City and China Mall.
Private intelligence services are, therefore, better suited to tackle the problems associated with illicit trade in South Africa.