As we observe International Customs Day, it is opportune to reflect on the erosion of economic and social integrity through a topical issue that reared its ugly head when a well-known business announced its disinvestment from South Africa due to the proliferation of illicit trade. We face a silent, insidious threat caused by illicit trade, which undercuts our economy, fuels corruption and hollows out legitimate industry. From black market cigarettes and illegal alcohol to counterfeit goods, fuel adulteration and smuggled gold, this shadow economy is no longer peripheral — it is structural.
Globally, illicit activity is estimated to account for up to 5% of GDP; in South Africa, research suggests that it could be as high as 12%-15% of the formal economy. Its effects are visible in battered industries, lost jobs, social erosion, weakened governance and billions of rand syphoned from the fiscus every year. Take the tobacco sector as a cautionary tale.
Once a robust industry supporting tens of thousands of jobs, it has been devastated by illicit trade. Today, about three out of every four cigarettes sold in South Africa are illegal — untaxed and often produced or smuggled by organised crime syndicates. The result is stark: the state loses about R25bn a year in tobacco taxes, legitimate manufacturers cannot compete with dodgy R8-a-pack specials, and thousands of farm and factory workers have lost their livelihoods.
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Just this month, South Africa’s last major cigarette manufacturing plant announced its closure, citing the impossibility of competing against a flood of illicit cigarettes. When illegal trade wins, compliance loses — and criminal networks celebrate. But illicit tobacco is not an isolated failure; it is a gateway into a far wider criminal economy.
The same networks that trade illicit cigarettes frequently diversify into illegal mining, gold smuggling, illicit alcohol, counterfeit goods and complex money‑laundering schemes. Tobacco profits are reinvested into other illicit sectors using shared logistics routes, compliant retailers, cross‑border channels and shell companies. This interconnectedness is the defining feature of South Africa’s illicit economy.
And it is not just tobacco. The liquor industry reports that illicit alcohol now makes up almost a fifth of consumption, costing the fiscus over R16bn annually and exposing consumers to unsafe products. Fuel adulteration syndicates cheat motorists, damage infrastructure and evade fuel levies at scale.
Illegal mining and gold smuggling generate enormous illicit financial flows, often laundered offshore through trade‑based mechanisms. Meanwhile, counterfeit goods — from electronics and clothing to pharmaceuticals — flood the market, undermining legitimate business and endangering lives. These are not victimless crimes: they degrade public services, fuel violence in communities, distort markets and corrode trust in the rule of law.
So what is being done? More than is sometimes acknowledged. In recent years the South African Revenue Service (Sars) has significantly rebuilt its enforcement capability across the illicit‑economy spectrum. Customs enforcement has shifted towards intelligence‑led, risk‑based interventions: using advanced analytics to flag suspicious consignments; deploying scanners, CCTV and targeted inspections at ports of entry; and matching trade, tax and financial data to expose evasion and laundering schemes.
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