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SA's illegal alcohol trade costs R16bn in lost tax revenue
SA's illegal alcohol trade costs R16bn in lost tax revenue

TimesLIVE

time6 days ago

  • Business
  • TimesLIVE

SA's illegal alcohol trade costs R16bn in lost tax revenue

South Africa's illicit alcohol market has grown by 55% over the past seven years, outpacing growth of the legal alcohol market, and is now worth R25.1bn. This has prompted a call from the Drinks Federation of SA (DF-SA) for collaboration between the government and the private sector to fight the growth of illicit trade in alcohol which has cost the government R16.5bn in lost tax revenue. Benjamin Rideout, research consultant at Euromonitor International, said nearly one in five alcoholic drinks sold in SA is illegal. 'Unlike some countries where home brews are the issue, SA is facing large-scale counterfeiting. The situation demands better control over production inputs like ethanol and much stronger enforcement.' The chair of DF-SA and CEO of SAB, Richard Rivett-Carnac, said illicit alcohol distorts the market and undermines trust in legitimate brands. 'In a tough macroeconomic environment, consumers are looking for bang for buck, goods that are affordable and the price gap of between 37% and 70% between illicit and legal alcohol makes illicit products more appealing, especially in low-income communities. He said 67% of surveyed consumers in the Euromonitor study, for instance, said they would knowingly buy illicit alcohol due to the lower price.' Moreover, he said illegal alcohol is a growing threat to South Africa's economy and public health. 'It drains billions from public funds, threatens jobs, and weakens the formal legal, taxed alcohol industry. Understanding the drivers of illicit alcohol growth and its magnitude is a step in the Right direction but we need stronger collaboration with the industry and government to really start removing the incentives that allow for the illicit market to thrive and intensifying enforcement.' During a panel discussion, Dr Shamal Ramesar, head of research at DF-SA, said 'communities are at risk, and the economy is the biggest loser when we delve into the pervasiveness of illicit alcohol. Recent testing with the University of KwaZulu-Natal found that many illegal products contain dangerous substances like methanol, which can cause serious harm. Unless we shut down illegal producers and educate consumers, lives will continue to be at risk.' DF-SA also announced a new national awareness campaign to help South Africans recognise illegal alcohol and understand the risks. The campaign will include tools for traders and consumers, tips on spotting fake products, and information on how to report them.

How you could be drinking counterfeit alcohol without knowing
How you could be drinking counterfeit alcohol without knowing

The Citizen

time04-06-2025

  • Business
  • The Citizen

How you could be drinking counterfeit alcohol without knowing

A recent study has shown the illicit alcohol trade has increased by 55%, costing the South Africa roughly R25 billion in lost tax revenue. Illicit alcohol traders are making a fortune selling knock-off liquor to unsuspecting and desperate patrons. Euromonitor International, in partnership with Drinks Federation South Africa (DFSA), this week revealed the runaway popularity of the illicit alcohol trade. Between traders prioritising profits and consumers choosing cheaper options, the country is missing out on just over R10 billion, excluding Value-Added Tax (VAT), on untaxed spirits alone. Almost 20% of all alcohol Euromonitor's most recent study, conducted over the last six months, was presented to industry leaders virtually on Wednesday. To gauge how illicit alcohol was distributed and consumed, the global research firm surveyed the product's prevalence in retail and independent traders, as well as the habits and preferences of consumers. Through desk research, store visits and surveys across multiple geographic and income demographics, Euromonitor illustrated how the illicit trade makes up 18% of the country's overall alcohol market. This 18% amounts to the consumption of 773000 hectolitres — or 77 million litres a year— with an estimated price tag of R25 billion. 'This is largely driven by counterfeit and illicit brands. This is because counterfeiting and illicit brands target premium spirits such as whiskey, as well as premium vodkas and gins,' stated Euromonitor International Project Manager Benjamin Rideout. This translated into R16.5 billion in lost tax revenue, with South Africans' preference for white and dark spirits contributing to roughly R10 billion of the tax shortfall. 'If these drinks were taxed correctly and sold legitimately, this is what the tax value would be,' explained Rideout. Increasing fiscal loss Euromonitor stated that illicit traders were purchasing and manufacturing counterfeit labelling and packaging at an 'industrial scale'. While the main driver of lost tax revenue was counterfeit and illicit brands, which are replica and unbranded products, smuggling and tax leakage were the next highest causes. Smuggling of legitimate products is done via land, air or sea, while tax leakage was classified as compliant liquor that is intentionally misclassified or underdeclared. Having conducted the same study in 2017 and 2020, Rideout said the illicit alcohol trade in South Africa had grown in volume consumed by 55% in the last seven years. 'It has almost doubled in value terms, which is a function of inflation in general. Finally, the fiscal loss has increased by 157%,' Rideout said illicit alcohol was predominant in informal channels, but there was a growing trend of availability in retail and online sales. 'What this means is that the illicit market has established a distribution network, and we know this to be the case, particularly in Gauteng and KwaZulu-Natal. 'On average, illegal alcohol is 37% cheaper than legal alcohol per litre. In some cases, this discount can go as high as 70%, depending on the category and the brand,' he stated. 'Crime against the state' Euromonitor noted that the financial benefits to traders and buyers were given greater consideration than the potential health risks considered by either party. Convenor of the National Liquor Traders Council Lucky Ntimane said it was an outlets' responsibility to ensure they maintained high standards or risk ruining their reputations. 'We also know the catch of illicit alcohol is the price, so people don't really ask a lot of questions. The essence of illicit and counterfeit alcohol is that it is cheaper. 'However, a person who sells counterfeit, knowingly or unknowingly, they run the risk of their business not being supported,' Ntimane told The Citizen. Traders caught selling illicit alcohol can be subject to a fine of up to R500 000 or between one and three years in prison, depending on the volumes sold. Rideout stated that policing challenges included 'resource allocation and state capacity,' while Ntimane suggested a firmer hand needed to be taken with illegal traders. 'Because illicit and counterfeit alcohol robs the state of an income, maybe it should be classified as a crime against the state. In that way, the government can clamp down hard on these unscrupulous dealers, but also harsher sentences can be meted out,' concluded Ntimane. NOW READ: Budget speech: Here's how much more you'll have to pay for alcohol and cigarettes

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