It’s not often the subject of press headlines or television news broadcasts; fiscal deficits, sovereign debt levels, and sluggish economic growth are the usual attention grabbers.
But there’s a parallel crisis operating in plain sight, and it’s draining our country’s economic lifeblood at a scale that is now threatening the core functions of the State.
Recent data released by the Consumer Goods Council of South Africa (CGCSA) revealed that South Africa’s illicit market has exploded to a staggering R280 billion. Where once it was a few illegal cartons of cigarettes here, and a suspiciously-sourced case of whisky there, illicit trade now spans nearly every critical sector of our economy.
No longer run by disconnected groups of informal traders selling knock-off goods, this shadow economic activity is organised, sophisticated and capital intensive. It operates supply chains that run parallel to legitimate enterprises, directly undermining them and depriving the National Treasury of close to R68 billion in tax revenue every year. It also strips around R126 billion from our GDP, and is responsible for the loss of almost 90 000 jobs to date.
The message from industry leaders is clear: South Africa’s illicit economic activity has evolved far beyond being merely a problem for our law enforcement and legal systems. As CGCSA CEO Zinhle Tyikwe pointed out at the recent CGCSA Crime Risk Seminar in Johannesburg, it is now a direct challenge to our national security, sovereign security, and long-term competitiveness.
According to the CGCSA, most of the loss happens across four key sectors:
- Mining (R60 billion) – well supplied with heavy equipment, private security and a well-established network of multinational buyers, illicit mining operations target both active and abandoned sites.
- Gambling (R55 billion) – using a combination of both online and physical platforms, illegal gambling exploits the gaps in regulations and siphons capital away from the compliant, tax-paying entertainment sectors.
- Alcohol and tobacco (R85 billion combined) – The sale of alcohol and cigarettes was banned during Covid, but all that did was spawn illegal supply routes that have since become permanently entrenched. Six years later, illicit cigarettes account for between two thirds and three-quarters of all tobacco consumption in South Africa.
- Fuel, pharmaceuticals, clothing and FMCG – cargo hijackings, extortion rackets and bustling production lines churn out fake goods faster than a politician breaking a campaign promise, consistently raising the cost of doing business for legitimate logistics networks.
It’s institutional sabotage, powered by highly organised syndicates operating across provincial and international borders.
These insidious criminal networks use advanced technology to commit commercial fraud and acts of cybercrime, as well as physical intimidation and extortion, to infiltrate formal supply chains. Forged documentation is all in a day’s work for these syndicates, who seem to bypass customs checks with impunity, allowing them to undercut tax-compliant manufacturers by as much as 40%.
How can legitimate businesses compete against illegal operations that don’t pay excise duties and bypass labour laws and industry safety regulations? No wonder we’re seeing a desperate decline in local manufacturing, coupled with dwindling investment capital and fewer long-term formal sector employment contracts.
But the loss of corporate revenue is only one aspect of this crisis. The R68 billion that should have gone into State coffers in the form of taxes would have helped to fund desperately-needed public infrastructure, as well as education, healthcare and social care.
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Filling the gap left by this uncollected revenue means the government has to once again look to compliant citizens and businesses – most of whom are already being squeezed as tightly as it’s possible to be.
Over and above this, fake goods pose very real dangers to buyers attracted by their lower price point:
- Fake pharma, alcohol and cigarettes are often spiked with industrial chemicals, such as acetone, methanol or even arsenic. These can cause illness, permanent disabilities, or, in extreme cases, death.
- Unregulated fuel is blended with substances that can damage vehicle engines.
- Fake electrical goods often pose a fire or electrocution threat.
- Profits generated from illicit trade directly fund broader criminal enterprise networks, including gun-running, municipal extortion mafias, and public sector corruption.
The rise of the illicit economy has also created a structural crisis for South Africa’s labour markets and human capital.
The recent Econometrix (ECMX) study commissioned by the CGCSA shows that in addition to directly displacing over 90 000 formal jobs, compliant manufacturers have lost around R193 billion in production. They cannot afford to simply absorb this loss, so retrenchments and a shrinking hiring market are the unfortunate results.
Low- and semi-skilled labourers are most at risk, forced to seek out highly vulnerable informal roles. Nowhere is this clearer than in artisanal, small-scale mining.
Driven by a triple whammy of systemic poverty, youth unemployment, and the allure of fast financial returns, thousands of zama zamas descend into hazardous, abandoned shafts without even a faint whiff of safety protocols or the most basic training.
It’s a toxic mix of sheer desperation to survive and the dangerous allure of a quick pay-out in an economy that offers them few alternatives.
How many people now earn their living on the wrong side of the line? Nobody knows. We can count those 87,000 displaced formal jobs, but no official study has counted the jobs illicit trade has absorbed.
The best clue to the size of this workforce comes from illegal mining alone. The Institute for Security Studies puts the zama zama workforce at around 30,000, and they are reportedly organised by some 200 criminal syndicates. By September 2024, police operations had already arrested nearly 14,000 people linked to illegal mining.
That is just one sector. Now multiply it across cigarettes, alcohol, fuel, counterfeit goods and illegal gambling. The shadow economy is quietly running its own recruitment drive, and nobody is keeping the books.
As ECMX's Ilse Fieldgate notes, workers who move into illicit supply chains lose access to minimum wages, collective bargaining, unemployment insurance and pension benefits. Every one of those recruits is a worker the formal economy has lost, and a worker with no protection at all.
So, as always, my question now is: what can we do? And, as always, my answer starts with: we have to move beyond reactionary enforcement.
Reclaiming our formal economy by dismantling sophisticated, multi-national crime rings will take a strategic pivot:
- Public enforcement agencies like SARS, SAPS and the NPA must establish permanent, integrated task forces to work in partnership with private sector specialists. Business leaders have the real-time supply chain telemetry and market data to track and help prosecute complex commercial fraudsters.
- We must modernise regulatory enforcement and deploy digital tracking infrastructure across all points of entry into South Africa to stop illegal imports.
- We need to disrupt financial flows to shut down financial clearing channels and strangle money laundering schemes.
We have made a few timid, but promising starts, but as the Transnational Alliance to Combat Illicit Trade’s 2025 Illicit Trade Index reveals, South Africa is a stark study in contrasts when it comes to tackling this type of crime.
While we score reasonably well on paper, ranking 4th in Africa and 60th out of 158 countries overall, and scoring strongly for trade controls, customs and border management, the real breakdown happens on the ground. Structural vulnerabilities like systemic corruption, money laundering, cyber security gaps, and institutional erosion consistently undermine official enforcement.
This friction exposes the inescapable truth: strong laws mean very little when enforcement is uneven. We have to move past static legislation and aggressively target the specific institutional weak points where illicit networks actually operate.
We can no longer afford to view illicit trade as an isolated problem for specific sectors or high-profile brands. If your business produces, moves, imports, or buys physical goods, you are in the splash zone.
Accepting that is not paranoia – and anyway, we all know that just because you’re paranoid doesn’t mean they’re NOT out to get you! But in all seriousness, while no risk framework is bulletproof, real operational resilience comes down to finding your blind spots early, tightening your internal controls, and shutting down supply chain leaks before someone else profits from them.
