Illicit trade drains billions from South African public services, study warns

Between R800 billion and R1.2 trillion: that is the estimated size of South Africa’s underground economy, a shadow sector that has grown faster than the formal economy over the past 15 to 20 years, expanding from roughly 5% of gross domestic product to between 12% and 15%. The human cost is measured in services that never get built. Somewhere between R200 billion and R300 billion in taxes go uncollected every year, money that could otherwise fund social housing, old-age grants, tertiary education, and other critical state services that ordinary South Africans depend on.

Finance Minister Enoch Godongwana put it plainly during his budget speech to parliament earlier this year. “The scourge of illicit trade threatens our economy. It endangers consumers, and robs the fiscus of billions in revenue,” he said. His warning carried a concrete illustration: a major South African tobacco company announced plans to close its last manufacturing facility in the country, eliminating around 230 jobs in the Heidelberg area. One factory. Hundreds of families. A community destabilized by trade that operates outside the law.

Additional reference context is available at https://www.timeslive.co.za/news/2026-08-19-illicit-goods-an-existential-threat-to-the-south-african-economy/.

The threat extends well beyond lost jobs and tax revenue. Illicit goods bypass established safety regulations, placing consumers at direct risk. Unregulated food and alcohol products have been linked to numerous health crises and deaths. When counterfeit goods flood markets, they hollow out the protections that regulatory systems exist to provide. Citizens buying what they believe to be legitimate products may instead be purchasing items that pose genuine dangers to their health and safety.

South Africa is not alone in facing this. Counterfeit goods account for approximately $467 billion in global trade flows, according to the Organisation for Economic Co-operation and Development (OECD). As OECD secretary-general Mathias Cormann has noted, “Illicit trade threatens public safety, undermines intellectual property rights and hampers economic growth.” The risks are intensifying as counterfeiters adopt new technologies to evade detection.

What changed the conversation locally is the growing recognition that enforcement cannot remain fragmented. The OECD has called for real-time information sharing among customs authorities, police, financial intelligence units, and market-surveillance bodies. Stronger cooperation among trade intermediaries, postal and shipping services, free-trade zones, and logistics firms is equally necessary to prevent their networks from being exploited for contraband.

Within the Southern African region, former South African Revenue Service commissioner Edward Kieswetter has proposed a five-point plan. It centers on a presidency-led national-disruption programme that would establish inter-agency collaboration through a command centre and shared platform. Initial efforts would target high-risk value chains in tobacco, alcohol, and fuel. The plan also calls for dedicated prosecution teams and courts, increased budgets, scaled-up investment in technology and artificial intelligence, and a national dashboard to track progress.

Meanwhile, business leaders and consumer advocates are not waiting. A sector alliance has formed a task force and launched a consumer campaign called #YourChoiceHasPower, developed in partnership with the Consumer Goods Council of South Africa (CGCSA). The campaign encourages consumers to purchase legitimate goods and report unlawful trade. The alliance has also premiered a documentary series titled Someone Always Pays, which investigates the human and economic toll of the illicit economy across multiple industries.

“Our message to South Africans is that with illicit goods, no matter how cheap they are, someone always pays,” says CGCSA CEO Zinhle Tyikwe. “But consumers can help to turn the tide against this scourge through the purchasing choices they make.”

The challenge is fundamentally a public one. Illicit trade does not merely harm individual companies; it destroys jobs, destabilizes communities, and erodes the tax base that funds essential services.

Whether the proposed reforms, from Kieswetter’s command centre to the CGCSA’s consumer campaign, will be implemented at the scale the crisis demands remains an open question. The underground economy did not reach R1.2 trillion overnight, and dismantling it will not happen in a single budget cycle.