South Africa kissing R30 billion a year goodbye 

Despite a significant clampdown from SARS and law enforcement, the illicit trade of tobacco continues to result in the loss of R18 billion a year in tax revenue. 

When coupled with the illicit alcohol trade, the loss to the fiscus balloons to around R30 billion a year, with other sectors of the economy also experiencing a rise in illegal commercial activity. 

This was revealed in the 2025 Illicit Trade Index from the Transnational Alliance to Combat Illicit Trade (TRACIT), which analysed illegal trade in 158 countries. 

The organisation ranked South Africa 60 in the world for its efforts to clampdown on illicit trade, saying that much work still needs to be done. 

To compile the ranking, TRACIT looks at data from the Organisation for Economic Cooperation and Development (OECD) and the World Customs Organisation. 

It also interviews experts in various countries to analyse the methods used by countries to combat illicit trade and how effective they are. 

South Africa ranks above average on some key metrics such as legislation, regulation, and tax practices, but it struggles to prosecute criminals. 

Crucially, TRACIT also flagged an inability for the country’s law enforcement to crackdown on the masterminds behind criminal syndicates, illict trade enablers within companies and the government, and impose adequate trade supply interventions. 

Another major area for improvement is the prevention of money laundering and illicit financial flows, which enable illegal trade to flourish. 

TRACIT said that South Africa, alongside China and Brazil, has become notorious for harbouring some of the world’s largest markets for illicit products. 

Overall, South Africa ranks above the global average and is far ahead of its African peers, but the illicit trade in the country continues to take its toll on the country’s finances. 

Philip Morris International’s director of illicit trade prevention, Phillipe Van Gils, revealed that around 58% of all sales in the South African tobacco industry are illicit. 

This translates into a R18 billion annual loss for the government in terms of sin tax revenue, with further losses likely incurred from VAT not being levied.

SARS fighting hard

One of the major issues flagged by TRACIT regarding South Africa’s enforcement efforts is the country’s inconsistent application of the law. 

Despite growing enforcement from SARS and other law enforcement agencies, TRACT said the collective level is inconsistent and low. 

This was not always the case, with SARS being immensely effective at combating the illicit trade of goods in the early 2000s. 

In the tobacco sector, a study by BMJ Open shows that the illicit cigarette market comprised 5% of the market in 2009, peaked at 60% in 2021, and decreased to 58% in 2022.

The sharp increase in the 2020s so far has been attributed to the government’s banning of tobacco sales during pandemic-era lockdowns. 

This pushed many smokers to illicit products to satisfy their needs, while also enabling illicit traders to entrench themselves in the local economy. 

Another driver of the adoption of illicit cigarettes has been the steady increase in sin tax on tobacco sales, driving up their cost. 

As a result, many South Africans turn to illicit alternatives for cheaper access to tobacco products. 

Illicit cigarettes can be sold for as little as R5 per box of 20. Research shows that it is not commercially viable for a legal, tax-compliant supply chain to sell a box of 20 cigarettes to the end consumer for under R36.

As a result of the significant price difference between legal and illicit products, legal cigarettes are becoming less affordable to consumers, who continue to migrate to the illicit cigarette market at an alarming rate.

Tighter law enforcement, including dismantling the criminal underground network involved in illicit and counterfeit trade, including asset forfeitures, is needed.