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IOL News
10 hours ago
- Business
- IOL News
South Africa's illicit trade crisis: Tobacco, alcohol, and fashion industries under siege
Illicit trading has emerged as a staggering threat to various industries in South Africa, with the black market for both cigarettes and alcohol reaching unprecedented levels. Illicit trading has emerged as a staggering threat to various industries in South Africa, with the black market for both cigarettes and alcohol reaching unprecedented levels. Illicit trading has emerged as one of the most pressing issues facing South Africa, pervading various sectors of the economy and costing the nation billions in lost tax revenue. At the forefront of this crisis are illicit cigarettes, now reaching record high levels in terms of market presence. Research conducted by Ipsos reveals a shocking statistic: more than 76.7% of shops across the country now sell cigarettes below the minimum tax threshold applicable on a standard pack of 20. This trend coincides with Finance Minister Enoch Godongwana's aim for the South African Revenue Service (SARS) to collect an additional R20 billion in tax revenue for the financial year, an effort aimed at circumventing new tax measures in the upcoming 2026 budget. Johnny Moloto, Area Head of Corporate & Regulatory Affairs for BAT South Africa, stressed the urgency of the situation. 'With the clock ticking for SARS to collect at least an extra R20bn, these results from Ipsos show the need for immediate steps to plug the leaks in tobacco tax collection,' he emphasised. Moloto further revealed that the illicit cigarette trade costs the country an estimated R28bn annually, equating to R100m lost every working day, surpassing SARS's entire additional collection target. 'Despite increased enforcement activity over the past year, including more raids and product seizures, illicit products remain as available as ever, suggesting that current tactics are failing to address the root causes of tax evasion. Our analysis indicates that the illicit cigarette trade costs South Africa approximately R28bn annually – R100m every working day – representing more revenue than SARS's entire additional collection target. Eliminating this leakage would protect law-abiding taxpayers from bearing additional tax burdens,' said Moloto. While illicit cigarettes have been noted as a growing concern, the Drinks Federation of South Africa (DF-SA) released new research revealing a sharp increase in the illicit alcohol market, which has grown by 55% in volume since 2017. Conducted by Euromonitor International, the research highlights the growing threats illegal alcohol poses to public health and safety, as well as the significant loss of national tax revenue. 'This study is a wake-up call. Communities are being exposed to harmful, unregulated alcohol, and the country is losing billions in revenue. It is urgent that government, industry, and civil society work together to tackle this issue head-on,' warned Dr Shamal Ramesar, Head of Research at DF-SA. Ramesar urged collaboration among government, industry, and civil society to tackle this pressing issue effectively and further called for coordinated action to promote responsible consumption, shut down illegal producers, and raise public awareness regarding the inherent dangers of illicit alcohol. Eustace Mashimbye, CEO of Proudly South African, also highlighted how the prevalence of these illegal practices is crippling the already-stressed local fashion industry. 'For the local fashion industry, illicit trade has domino effects: It leads to job losses in the value chain of the fashion industry, distorts the market by forcing local producers to compete unfairly with illicit traders who incur lower production costs, encourages widespread copyright infringements, deprives the creatives of their hard-earned revenue, compels legitimate entrepreneurs to compete with illegal traders who sell similar but substandard products without complying with safety, health or environment-related requirements, breeds precarious employment where labour regulations are disregarded, deprives the fiscus of much-needed tax revenue, and puts downward pressure on wages and salaries in the fashion industry labour market,' Mashimbye stated. In light of these challenges, industry leaders rallied to march on behalf of the fashion sector, submitting memorandums to the Department of Trade, Industry and Competition (DTIC) and the National Clothing Retail Federation (NCRF). These memorandums were a clarion call for authorities to intensify efforts against counterfeit goods to safeguard jobs and local production. At the Buy Local Summit and Expo, Mashimbye expressed the importance of protecting South Africa's invaluable fashion industry, estimated to be worth over $11bn (R197bn). 'We not only have a moral obligation to protect the sector; it makes economic sense to do so,' he said. In its commitment to combat the increasing threats posed by illicit trade, SARS has reiterated its dedication to revenue collection and facilitating legitimate trade. According to the agency, the illicit economy undermines the rule of law, erodes public trust, and enacts a substantial toll on national security. 'The illicit economy is a global phenomenon that threatens South Africa's society, economy, and national security. Tax evasion, smuggling, illegal transactions, illicit manufacturing, and fraud undermine the rule of law, erode public trust, distort markets, deprive governments of revenue, and enable corruption and organised crime. The pervasiveness of these illicit activities in our country demands that all enforcement agencies work jointly to curb their harmful practices. The illicit economy is complex and requires a whole-of-government response among public entities, the private sector, civil society, and international partners.' SARS revealed it is working with other law enforcement agencies to combat the scourge of the illicit economy. Saturday Star
IOL News
04-07-2025
- Business
- IOL News
Value of illegal booze market continues to grow, but not as fast as the legal sector
A legal shebeen in Alexandra township, Johannesburg Smuggling has dropped from one in three purchases of alcohol to one in every five, a new report by Euromonitor International in conjunction with the Drinks Federation of South Africa has found. Image: Nicola Mawson Fake booze volumes are growing faster than what smugglers are bringing into the country, although the value of sales in the illicit market are not gaining pace as fast as the legal one, with the cost of legal alcohol having been pushed up by price increases. This is according to the latest research from Euromonitor International in conjunction with the Drinks Federation of South Africa (DF-SA). It found that the market for illicit alcohol accounts for a fifth of total alcohol sales in South Africa. 'The drivers of illicit alcohol have changed over the last four years, with counterfeiting growing at the expense of smuggling. Since 2017, the market share for counterfeiting alone has grown from 24% to 31%. Its category value has almost doubled from R4.9 billion in 2017 to R9.8bn 2024,' their report said. In the report, they attributed this to the fact that demand has tapered off since the end of the COVID-19 pandemic and the resultant lockdown that saw sales of alcohol and cigarettes banned, leading to people turning to buying these items from providers who sourced them from over the border. Smuggling has dropped from one in three purchases to one in every five, the research found. 'However, counterfeit and illicit brands have grown substantially since the pandemic, becoming the largest illicit category by volume in 2024,' it said. Richard Rivett-Carnac, South African Breweries CEO and chairman of DF-SA said that the sale of illegal booze is 'not just a public health concern, but a direct threat to fiscal revenues and formal businesses that contribute significantly to the economy and job creation'. The legal alcohol sector supports around one in 31 jobs and generates over R100bn in tax revenue annually, said Rivett-Carnac. 'When illicit traders avoid tax, undercut the market, and exploit vulnerable consumers, we all lose, he said. Illegal booze cost the economy R16.5 billion last year, up from R11.3bn four years previously, when South Africa was in lockdown. The bulk of this amount came from illegal sales of spirits. When Finance Minister Enoch Godongwana presented Budget 3.0 in May, he was faced with a revenue hole of R75bn. The report stated that enforcement continues to be a challenge as both the South African Revenue Service and the South African Police Service 'have reported capacity and resource constraints, especially the illicit trade task team which deals with all illicit goods, not only alcohol'. However, it said that trade sources indicate that the greater involvement by industry in identifying culprits and working together with law enforcement agencies has resulted in positive outcomes. IOL
The Citizen
02-07-2025
- Business
- The Citizen
Report reveals 1 in 5 alcoholic drinks are fake: Here's how to spot them
As the problem worsens, so does the concern: Can you really trust what is in your glass? Are you sure your drink is real? A growing number of South Africans are unknowingly drinking fake alcohol. A report by Euromonitor has revealed shocking data about the country's illicit alcohol market. One in five alcoholic drinks contains illicit alcohol, meaning millions may be unknowingly putting their health at risk. This dangerous rise in fake alcohol is a serious threat to people's health and a heavy blow to the economy. Billions of rands are lost each year in tax revenue and legitimate business, as fake alcohol floods the market. As the problem worsens, so does the concern: Can you really trust what is in your glass? Illicit alcoholic drinks impact The Drinks Federation of South Africa (DF-SA) led a panel discussion to explore the findings of the report released in June and how consumers can be protected from fake alcohol. Chairperson of DF-SA and CEO of SAB, Richard Rivett-Carnac, broke down the effects that illegal alcohol has on the country. If billions from public funds are lost due to the growing rate of the illicit alcohol market, jobs in the industry will be lost. '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.' ALSO READ: Police seize R1.5m fake alcohol in KZN, one arrested How much illicit alcoholic drinks cost the country Euromonitor's report has revealed that the illicit alcohol market has grown by 55% between 2017 and 2024, a growth rate of 6%, outpacing the growth of the legal alcohol market. The illicit alcohol market is worth an estimated R25.1 billion and has cost the government R16.5 billion in lost tax revenue. Dr Shamal Ramesar, head of research at DF-SA, highlighted that communities are at risk, and the economy is significantly impacted due to this market. '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.' Protecting people Acting Commissioner of the National Consumer Commission, Hardin Ratshisusu, said it is important to make people aware of the illicit alcohol market; in doing this, more people will be protected from fake and unsafe products. He highlighted that people have the right to know what they are buying and consuming. 'Tackling this issue takes teamwork through better information-sharing, stronger partnerships, and public education.' To find out how illicit alcohol was distributed and consumed, Euromonitor 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 773 000 hectolitres — or 77 million litres a year— with an estimated price tag of R25 billion. ALSO READ: SA loses R30 billion in revenue due to illicit trade in cigarettes and liquor Counterfeiting is a big problem Benjamin Rideout, research consultant at Euromonitor International, stated that illicit alcohol in the country is no longer a minor issue. 'Unlike some countries where homebrews are the issue, South Africa is facing large-scale counterfeiting. The situation demands better control over production inputs like ethanol and much stronger enforcement.' Jan-Harm Swanepoel, Partner at Adams & Adams, highlighted the importance of organised crime in fighting against the problem. 'We have the legal tools to fight, but what is now needed is alignment and action.' Symptoms of poisoning from fake alcohol According to Interpol, the below are the symptoms of poisoning from fake alcohol: Confusion Loss of coordination Vomiting Irregular or slow breathing Blue-tinged or pale skin Low body temperature (hypothermia) Stupor (being conscious but unresponsive) Unconsciousness (passing out). How to spot fake alcohol Think about the '4 Ps': Place: Only buy your alcohol from reputable and licensed retailers, bars, and supermarkets. Do not buy alcohol from unlicensed market traders or from customers in bars. Price: If the product is being sold significantly below its normal price or does not appear to include normal taxes on liquor, then it is likely fake. Packaging: Check for poor-quality packaging, spelling mistakes, and unusually shaped bottles. Look for the contact information and address of the manufacturer. If it is missing, the alcohol is fake. Inspect the seal on the bottle. If the seal is broken or damaged, the contents may have been compromised and are not safe to drink. Check for fake bar codes. If you have an app on your mobile device that scans barcodes, scan it and see if it lists the correct product. Product: Beware of bad smells! If it smells like paint stripper or nail polish remover, then it's likely to be one of these products. If it contains particles or sediment, or the contents have separated in the bottle, then the product is likely to have been thinned with tap water. NOW READ: Budget 3.0: Alcohol and cigarette prices will increase — here's by how much
IOL News
02-07-2025
- IOL News
Counterfeit alcohol trade surges
Gauteng police recently acted on a tip-off, leading to the closure of an illegal alcohol manufacturing facility in Jeppestown. Image: Gauteng SAPS/X The escalating crisis of counterfeit goods in South Africa has intensified calls for urgent measures to combat organised crime, following a series of high-profile arrests linked to illicit alcohol trade syndicates. Recent statistics reveal a staggering 55% increase in illegal alcohol volumes since 2017, prompting officials and activists alike to classify the situation as a national crisis. Last month IOL reported that the Drinks Federation of South Africa (DF-SA) found that the volume of counterfeit alcohol in the country reached 773 000 hectolitres in 2024. This surge has coincided with several police operations aimed at dismantling the networks behind these illegal products after Gauteng police, on Monday, acting on a tip-off conducted a raid in the city centre which led to the closure of an illegal alcohol manufacturing facility in Jeppestown. During this operation, authorities uncovered millions of rands worth of counterfeit alcohol, including fake whiskey, vodka, and gin, as well as counterfeit labels and packaging worth R3.5 million. Colonel Dimakatso Nevhuhulwi of the Gauteng police confirmed that six suspects were arrested, including a man who presented a dubious liquor license from Mpumalanga. "Upon arrival at the said premises, the team was met by a man who claimed to be the owner of the business and further produced a liquor license which was for a Mpumalanga-based establishment. Following a search of the property, the team discovered the manufacturing and production of whiskey, vodka, and gin, including the reprint of counterfeit labels and packaging," stated Nevhuhulwi. At the weekend, police in Bloemfontein in the Free State confirmed the arrest of six foreign nationals after confiscating counterfeit goods valued at more than R19 million during raids in the CBD. Reacting to the raids in the Free State, National police spokesperson, Amanda Van Wyk, revealed that the search and seizure warrants were executed in accordance with the Customs and Excise Act at targeted shops. The arrests in Bloemfontein and Johannesburg were preceded by the arrest of a 31-year-old man who was arrested last week for allegedly manufacturing and illegally distributing counterfeit alcohol at his home in Klaarwater, Mariannhill, west of Durban. During the raid, KZN police confiscated counterfeit vodka with a street value of R250 000, which was found being manufactured at the site. At the time, police spokesperson Captain Carmen Rhynes indicated that members of the provincial organised crime, the provincial drugs and firearm unit, and the provincial counterfeit goods unit were instrumental in the arrest. "Members of the Provincial Organised Crime Unit (Narcotics), assisted by the Provincial Drug and Firearm Unit and the Provincial Counterfeit Goods Unit, acted on intelligence-driven information regarding the manufacturing and illegal distribution of counterfeit alcohol, specifically vodka, in the Klaarwater area in Mariannhill, Durban. They executed a search warrant at the identified premises and a suspect of 31 years of age was found on site and placed immediately under arrest for the contravention of the Liquor Act and the Counterfeit Goods Act," Rhymes said. Reacting to the latest incidents of illicit proliferation of counterfeit booze, anti-crime activist Yusuf Abramjee said that SARS estimates the proliferation of illegal alcohol costs the country's economy over R11 billion in lost annual excise tax revenue. "The illicit alcohol trade is completely unregulated, and apart from the massive revenue losses, this leads to numerous social issues. People are being sold dodgy alcohol that potentially contains fatal ingredients. It isn't regulated, and criminals don't care what they're selling as long as they make a profit. Meanwhile, criminals are stealing the taxes that are meant to pay for vital services such as schools, hospitals, and housing," Abramjee stated. Abramjee has attributed the increase to a lack of stringent law enforcement efforts within and across SA borders, which he said contributes directly to the flows of illicit goods on the back of the recent COVID-19 pandemic which destroyed various industries. "The main problem is the lack of adequate enforcement by authorities and a growing lack of faith in the rule of law. Between 2016 and 2019, just R26 million worth of alcohol was seized by SARS. Since then, the sales bans imposed during the COVID-19 pandemic have entrenched illicit networks. The SA Liquor Board Association (SALBA) estimates that more than one in five bottles sold in SA is illicit. The problem is even worse in the tobacco industry, as illicit cigarettes are even easier to distribute and trade illegally," he added. Cape Times
TimesLIVE
01-07-2025
- 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.
