Melitta Ngalonkulu
6 minute read
13 May 2020
7:30 am

The daily hustle of the booming black market

Melitta Ngalonkulu

You might think there would be a stock clearance sale, but there isn’t.

Picture for illustration. Some of the illicit cigarettes police have seized. Photo: supplied.

There’s almost no point calling it the black market because it’s pretty visible to just about anyone who cares to look.

On a Friday afternoon, two suburbians leave the leafy streets of Bryanston and make their way to Soweto to buy alcohol.

Ask why, and they openly tell you that that’s where their latest “plug” (‘connection’) is.

The journey to quench the ‘thirst’ for alcohol starts with a WhatsApp text that includes the latest price list of the types of alcohol available. The selection changes every week as suppliers sell whatever they have been able to get their hands on.

If you take too long to decide whether you want to make a purchase, say a few hours, you might just find it out of stock — that’s how fast merchandise moves in the underground economy during the coronavirus lockdown.

You might think there would be a stock clearance sale, but there isn’t. Prices are inflated by 100% or more compared to the usual retail price, and consumers are willing to empty their pockets to get their ‘fix’.

And in truth, it’s really not that much of a hassle for the consumers.

“The experience was easier than we anticipated,” said one of the buyers I spoke to. “The supplier got alcohol from another supplier, and they do drop-offs to clients.

“They [the supplier] were clearly making a lot of money from this trade and there’s a demand … they were also inundated with clients wanting drop-offs.”

This ‘willing buyer’ did not mind travelling to Soweto to buy an unknown brand of gin for R300 and three litres of Fourth Street wine for R200 because in the suburbs “it costs R450”.

A typical black market price list in the time of Covid-19. Image: Supplied

In the black market, whether you are a supplier, the go-between or a consumer, it’s not that easy to get stock due to the lockdown regulations and the fact that police are roaming the streets looking for those who dare to defy the new law that prohibits the selling and buying of alcohol and tobacco. But where there is a will, there is a way …

Word-of-mouth approach (not always successful) Image: Supplied

Black market liquor and tobacco entrepreneur Rakhir Patel [not his real name] is running a successful business from his apartment thanks to the lockdown regulations.

Aware that the regulations would prevent him from continuing with his usual job in sales, and anticipating that people would run of their ‘poison of choice’ prior to the lockdown being lifted, he stocked up on alcohol and cigarettes before lockdown came into effect on March 27. But his stock soon ran out, and he had to look for suppliers.

“Depending on the supplier, like when the ban first started, it was easy to find stock because most people had and were willing to sell their stock,” he told Moneyweb.

“As the lockdown continued and the supply ran low it started getting much harder, and now we try to find a new supplier every day because if you do find one, that supplier will only be able to supply you once-off due to no more stock availability.

“Sometimes we go for weeks without new suppliers who will give you a reasonable price,” he said.

“Most of the suppliers want to sell [cigarettes] to you for R1 200 per carton, which is madness.”

Willing buyer, willing seller … some black market customers don’t even try to negotiate. Image: Supplied

And when stock does become available, he said, it is gone within minutes.

“Once we do get stock for the right price and advertise it, the stock is sold out within the same day – and the search for a new supplier begins the next day,” said Patel.

“This is for your higher-priced brands of stock [cigarettes]. There is cheaper stock available on the lower brands estimated to be around R600 a carton, which is still madness.”

If this prospective customer was trying to negotiate a better deal, their words fell on deaf ears. Image: Supplied

But Patel himself understands that demand has increased, and that equals more money for him.

“Most people are now smoking the cheaper brands just to survive,” he said.

Patel is not the only one trying to make some money from this lockdown.

Those with taverns, pubs and home cellars are trying to get rid of their stock in order to generate some income during this time when the economy is on halt.

Law enforcement

National police spokesperson Brigadier Vishnu Naidoo said he is not in a position to say whether or not there has been an increase in the number of ordinary civilians committing crimes by buying and selling tobacco or alcohol. But the South African Police Service (Saps) knows where the hotspots are, and they have been working towards making arrests.

“We have made arrests on the sale of liquor or cigarettes, and at times both,” said Naidoo.

“These successes were achieved from routine checks, roadblocks, the information we received, and through intelligence.”

The economics of it all

Mike Schüssler, chief economist at economists.co.za, says the black market represents about 7% of the economy as recorded by Statistics SA, but he believes it is much bigger than that. “I believe it is much bigger, like double or even triple the estimates.”

He says Stats SA is doing research, which he believes was to be published this year, extensively looking at the illegal economy in terms of tobacco, alcohol, gold from illegal mines, and prostitution.

Right now the black market is evidently doing far better than it was previously, and the sad reality is that none of that money will contribute positively towards the economy.

“The growth in [the trade of black market] cigarettes is not part of the economy, even if it grows,” says Schüssler.

“I think the informal economy is very important and probably did not see the decline that much as formal businesses did as they are used to operating ‘under the radar’, but I still think this part also declined as some things are just in short supply.”

The ‘good’ informal economy affected

Schüssler highlights that other parts of the informal economy that are well known have been affected by the lockdown, as many have had to shut down their operations.

“The shebeens cannot operate and taxis have fewer passengers. [The] informal [sector] took many hits, while the formal, small and medium [businesses] took bigger hits, with some sectors closed for 57 days – like travel, hotels, B&Bs and the like, while the rest of the economy is on day 47-odd,” Schüssler says.

He adds that most businesses have, on average, two months reserves to last them, leaving some with no income once those reserves run out.

“I suspect many will close in these categories. Even if we open the economy, the money may not be there.’

The name of the black-market dealer has been changed as he spoke to Moneyweb on condition of anonymity. 

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