A new report by the Transnational Alliance to Combat Illicit Trade (TRACIT) has exposed the devastating impact of South Africa’s thriving underground economy, revealing losses of billions of dollars in tax revenue and posing severe risks to public safety.
The report highlights how illicit trade—spanning tobacco, alcohol, pharmaceuticals, and wildlife trafficking—has become deeply entrenched, diverting sales from formal channels and starving the government of critical tax income.
Economic and Human Toll
“If fewer products are sold through legal channels, the government can only tax what it sees, meaning massive revenue losses,” the report states. Beyond economic damage, illicit trade has deadly consequences for consumers. The report cites fatalities linked to counterfeit food products sold in informal spaza shops as a grim example.
Global Criminal Networks at Work
Authorities warn that South Africa is battling sophisticated international syndicates. “We’re dealing with networks that have tentacles across the world,” said a representative from the National Consumer Commission, emphasizing cross-border collaboration with regulators in the U.S., Europe, and SADC to dismantle these operations.
Slow Progress, Hope for Reform
While efforts to combat illicit trade have seen some progress, including alignment with 2023 Financial Action Task Force (FATF) findings, challenges remain. South Africa is reportedly on the verge of exiting the FATF’s “grey list”, a positive step toward restoring financial credibility.
To accelerate progress, TRACIT is proposing a regional summit in South Africa to strengthen coordination between customs, law enforcement, and businesses. “Criminals have had years to perfect their networks. We need to catch up,” the report notes.
A Long Road Ahead
Experts stress that tackling illicit trade is not just an economic imperative but a moral one—protecting both the economy and vulnerable citizens. While no quick fix exists, partnerships between TRACIT, Business Unity South Africa (BUSA), and the government signal a growing commitment to reform.
As South Africa prepares for the proposed summit, the fight against illicit trade remains a critical priority, demanding sustained effort and international cooperation.
