Sars loses between R200 billion and R300 billion annually in uncollected tax revenue due to the illicit trade economy.
For illustrative purposes. Picture: iStock
Children could be paying the price as the illicit toy trade continues to grow, raising concerns about the safety and quality of products reaching little ones.
The head of the South African Toy and Game Association (Sataga), Farrel Frank, warns that a surge in counterfeit and non-compliant toys is putting children at risk, as consumers may buy products that have not undergone the required safety checks.
He spoke at an event hosted by the Consumer Goods Council of South Africa (CGCSA) on Thursday. Various industry leaders attended to raise awareness of the dangers of participating in the illicit economy.
Toys sold in the open
Illicit goods are not only counterfeit but also include smuggled products, unsafe consumables and prohibited substances. Most of the time, these illicit goods are not of good quality nor in line with the regulatory standards, a concern raised by Frank.
“These counterfeit products are completely unregulated, they pose severe health and safety risks,” he said.
Counterfeit products bypass strict safety tests, so they may contain toxic ingredients, incorrect doses or dangerous bacteria that can cause poisoning, organ damage or treatment failure.
He also raised concerns about how counterfeit toys, including gaming and other children-related illicit goods, are sold openly. Frank said one can buy these products even at malls and shopping centres.
Seizure of children-related party items
He touched on the recent seizure operation conducted by the organisation in conjunction with the South African Police Service and multiple brand holders.
61 000 counterfeit party and party-related goods intended for use at children’s birthday parties were seized at a business premises in KwaZulu-Natal. The estimated retail value of the seized counterfeit products is conservatively between R6 million and R8 million.
“Of significant concern was the manner in which certain products were packaged and transported to customers, including the use of previously utilised pesticide boxes and packaging materials,” said Frank.
“This posed a serious and imminent health and safety risk, particularly given that the intended end users of these products were children.”
Children’s lives at risk
He noted that counterfeit toys, games, party goods and children’s products often bypass critical health and safety regulations, quality control processes, and compliance testing. “Such items may contain hazardous substances, toxic residues, unsafe materials, choking hazards, and other dangerous defects that place children at unnecessary risk.”
Frank added that the fight against illicit goods is not limited to certain sectors, but applies to the entire country.
Head of Corporate and Regulatory Affairs at British American Tobacco Sub-Saharan Africa, Johnny Moloto, said the issue of illicit trade has been around for decades. He pointed out that illicit products make up about 75% of the country’s cigarette market and render local manufacturing unviable.
British American Tobacco South Africa (BATSA) announced earlier in the year that it will end local cigarette manufacturing and shut down its sole production facility in Heidelberg, Gauteng. Moloto said the company and the industry have long requested action on illicit goods, but their requests fell on deaf ears until they were left with only one option: closure.
Alcohol industry next
Moloto warned that alcohol brands will soon face the same option BATSA did. CEO of Drinks Federation of South Africa (DF-SA), Angela Russell, said the industry is starting to feel the pain of illicit goods.
She said illicit alcohol accounts for 18% (nearly one in five) of all drinks sold in the country. Research commissioned by the organisation and conducted by Euromonitor International reveals that illicit alcohol costs the country an estimated R16.5 billion in lost tax revenue annually.
Consumption volumes surged by 55% between 2017 and 2024, growing from 498 000 to 773 000 hectoliters.
CGCSA CEO Zinhle Tyikwe called on South Africans to stand united and fight the illicit economy. Citing that this is not about companies fighting to make revenue, but also to keep creating job opportunities and keeping people safe.
The South African Revenue Service (Sars) loses between R200 billion and R300 billion annually in uncollected tax revenue due to the illicit trade economy. This staggering loss equates to roughly R250 million every single day
