An eye-watering amount of potential state revenue being lost through illicit trade, according to one of South Africa’s top business organisations.
Tax authorities put the loss at nearly R100 billion a year, and it is one of the biggest threats to stability and economic growth, says Business Unity South Africa (BUSA). The organisation has just published a report Organised Crime, Corruption and Illicit Trade: Spotlight on South Africa, compiled by the Transnational Alliance to Combat Illicit Trade (TRACIT).
“The magnitude of the losses is staggering, draining revenue and resources from an economy that could usefully benefit from increasing investment in infrastructure and improving living conditions for citizens,” the report says.
“For example, the South African Revenue Service (SARS) estimates that illicit trade costs the South African economy R100 billion (USD5.9 billion) every year. In terms of lost tax revenues, Business Leadership South Africa (BLSA) estimates that the country loses around R250 million (USD15 million) a day.”
The report says illicit trade is happening in multiple areas, including alcohol, cigarettes, fishing, mining, counterfeit electronics, pharmaceuticals, food, and apparel.
The proliferation of illicit trade poses a “top 5” risk to the South African economy, according to the World Economic Forum (WEF).
Although South Africa’s regulatory bodies, institutions and enforcement agencies are well rounded and in line with international standards, persistent capacity constraints and skills shortages impede effective enforcement.
“Even though SARS (the SA Revenue Service) is rebuilding capacity to address illicit trade, vacancies and lack of expertise remain acute.”
The report does not specifically mention poultry, where illicit trade is a long-standing concern. Under the poultry master plan, a task team including SARS has been formed to combat illicit chicken imports and to detect and prevent any instances where high-tariff consignments may be wrongly labelled as lower-tariff products, resulting in lost revenue to the fiscus.
The report says South Africa should consider appointing an independent and specialised “Anti-Illicit Trade Coordinator” with high-level authority, strengthen co-ordination with neighbouring states, and improve public awareness of the threats posed by illicit trade.
