Illicit Trade Surges in SA: 20% of Economy, R100bn LossCigarettes, Alcohol, Counterfeit Goods Boom

South Africa remains a hotspot for trade in illicit and counterfeit goods despite policy reforms and easing inflation, which pushes consumers to seek cheaper products.

Tobacco, alcoholic beverages, and branded apparel are among the top counterfeited and illicitly traded goods locally. Illicit trade is costing the South African economy as much as R100 billion annually , with recent indications suggesting that the illicit economy has grown to around 20% of South Africa’s GDP.

Law Enforcement ‘Under-Resourced’

Lettitia Davids , operations manager for Drinks Federation South Africa, said on Wednesday that “law enforcement is under-resourced” with operations at the prosecution level failing to translate into court convictions.

“We have seen counterfeiting in the alcoholic drinks sector picking up. Re-filling of bottles meant for recycling with illicit products has picked up and our members have been lodging complaints that recycle bottles are not coming back as they are being re-filled with counterfeit products.”

Goods Declared for Export Flooding Back

Apart from this, goods declared for export from South Africa are also flooding back to the local market without paying excise duties. These goods end up being illicitly traded in South Africa at lower prices.

The Informal Economy Factor

Stefano Betti , the Transnational Alliance to Combat Illicit Trade’s deputy director general, said South Africa’s growing informal sector was also fueling trade in illicit and counterfeited goods, while corruption was also providing a thriving ground.

“An informal economy provides good grounds for illicit trade to thrive. No sector is immune to illicit trade in South Africa; the illegal cigarette economy in South Africa has grown rapidly to between 50% and 75% , while the illegal alcohol sector has also grown.”

The Tobacco Industry Fight

Tobacco companies such as Philip Morris International South Africa and British American Tobacco South Africa (Batsa) have been fighting illicit trade on the local market.

Batsa said earlier this year that it was shutting down its only manufacturing plant in SA due to the impact of the illicit cigarette sector, putting over 200 jobs on the line.

In-Transit Fraud

Betti revealed that goods declared as in transit from Durban were being offloaded for illicit trade in South Africa.

Positive Advances

Nonetheless, South Africa has made positive advances to curb illicit trade in the past few months:

• The establishment of the Border Management Authority

• Increased recruitment by the National Prosecuting Authority

• The lifting of SA’s greylisting by FATF

Inflation and Smuggling

Betti said inflationary pressures and smuggling were among the driving factors for the growth in the illicit economy.

“With higher inflation, purchasing power decreases and pushes consumers to the illicit market even when they know that substances they are purchasing are not original.”

“With the porous borders, goods from low tax jurisdictions are able to move to higher tax jurisdiction where they will sell for lower.”

The Cost

South Africa lost R16.5bn in excise taxes in 2024 , with SAPS officials also revealing that police confiscated counterfeited goods worth R1bn this week.

Worryingly, “some of the money from illicit trade and counterfeited goods is funding organised crime” in the country.

E-Commerce as a Vehicle

Youngs Mapenzi , a customs official from Namibia, said e-commerce was also providing a fertile ground for growth in the trade of counterfeit goods.

He added that a lot of counterfeited and illicit products were being shipped to land-locked countries such as Zimbabwe, Zambia, and Botswana from key ports and corridors such as Walvis Bay.

The Bottom Line

R100 billion. 20% of GDP. Cigarettes, alcohol, clothing. Law enforcement stretched. Organised crime funded.

The illicit economy is boomingand South Africa is paying the price.