South Africa has one illicit industry worth over R25 billion – and expanding rapidly

South Africa’s illicit alcohol market is growing rapidly and is now worth R25 billion, making up 18% of the industry. As the illicit sector becomes more sophisticated, consumers are increasingly at risk.

Drinks Federation SA has released new research revealing a sharp increase in the illicit alcohol market, conducted by independent research firm Euromonitor International.

This is the third study of its kind, with previous versions conducted in 2017 and 2020. The latest research revealed that the illicit alcohol industry’s volume has grown by 55% in South Africa since 2017.

At the same time, the value rose by 95%. As of 2024, the industry was valued at R25 billion, making up 18% of the market.

Alarmingly, the fiscal loss has increased by 157% during the period. As a result, the National Treasury is also losing R16.5 billion in tax revenue annually to the industry.

Drinks Federation SA CEO Angela Russell pointed out to Newzroom Afrika that, considering the country’s budget currently has a hole of nearly R60 billion, this extra revenue could have gone a long way towards assisting the fiscus.

The report also had some other interesting findings. For example, in 2020, most illicit alcohol was smuggled into the country. Now, however, there’s been a shift towards counterfeit production.

About 31% of all illicit alcohol is now counterfeit, which is concerning due to the health risks. In the same vein, a growing number of increasingly sophisticated illicit alcohol factories are popping up as well.

Russel said that something else that’s different in the 2024 study is the inclusion of consumer insights. Drinks Federation SA surveyed 707 people online.

Alarmingly, 67% said they would still buy illicit alcohol for the lower price, regardless of its origin. Even more concerning is that 49% knew someone personally harmed by illicit alcohol, and 29% knew someone who had died.

Despite this, many would still purchase it because of the price difference. Typically, illicit alcohol is 37% to 44% cheaper than legal products.

Fixing the problem

Russell stressed the importance of clamping down on illicit trade to prevent South Africa from going in the same direction as other countries.

Illicit alcohol accounts for 73% of the market in Mozambique and 69% in Uganda. The illegal tobacco market in South Africa is already larger than the legal one, exceeding 60%.

She explained that fixing the problem will require collective and coordinated action. Fortunately, the Customs Fraud and Illegal Imports task team will be reinstated at NEDLAC.

This task team involves government, industry, and community stakeholders working together. Russel added that tighter controls on ethanol are also needed to prevent diversion into counterfeit alcohol production.

Ethanol is used in the manufacturing process, but once it’s passed on to third-party distributors, it often gets diverted into the illicit market.

Russel explained that there is also a need for stronger punitive measures. At the moment, those caught may only face a relatively small fine and simply return to the market shortly after.

Consumers also need to be careful of the alcohol they are consuming. Illicit alcohol isn’t only something that may be encountered in the informal market, as many people may believe.

On top of this, with manufacturers becoming more sophisticated, it is increasingly difficult to spot illicit alcohol. Russel advised that consumers should look out for the following identifiers when purchasing alcohol:

• Cap: Is it sealed properly, and is the printing clear?
• Label: Is it neatly stuck on, with correct spelling, and is there a proper back label?
• Liquid: Is it hazy or diluted? Are there black particles or strange floating substances?
• Fill level: Is it consistent across bottles?

Customers can also smell and taste the alcohol to check, and if they are still unsure, it is best not to consume the product.

They can also download the app released by the Consumer Goods Council of South Africa, called My CGCSA App. This lets users verify barcodes and report illicit goods and products.