SA loses R30 billion in revenue due to illicit trade in cigarettes and liquor

South Africa loses about R30 billion in revenue every year due to the illicit trade in cigarettes and liquor according to a new report, almost three times as much as government wanted to collect by increasing VAT.

According to the Transnational Alliance to Combat Illicit Trade (Tracit) report for 2025, published today, South Africa is doing worse now than in 2019 and 2023 in combating illicit trade and other illicit economic activities across sectors, including alcohol, tobacco, foodstuffs, agrichemicals, pharmaceuticals, counterfeiting, mining and wildlife trafficking.

The Transnational Alliance to Combat Illicit Trade (Tracit) is an independent, private-sector initiative established to drive change and mitigate the economic and social damages of illicit trade by strengthening government enforcement mechanisms and mobilising businesses across the industry sectors most affected by illicit trade.

Business Unity South Africa (Busa) launched the report in partnership with Tracit. The report is important because it examines the scale, complexity and socio-economic consequences of illicit trade in South Africa and proposes urgent, coordinated steps to address it.

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SA’s scores for efficiency in combating illicit trade

South Africa was placed at 60 out of 158 countries and 4 out of 47 African countries surveyed for the report, but the country’s real problem with controlling illicit trade is illustrated by its score out of 100, which decreased from 62 in 2019 to 60 in 2023 and now to 52.4 in 2025. This score measures the country’s efficiency in combating illicit trade and other illicit economic activities.

Although South Africa’s score was higher than the global average of 49.9 and the average for Africa of 40.8, the breakdown of the score clearly shows that while the country is better at some aspects of combating the trade in illicit goods, it is sorely lacking in others.

South Africa’s trade customs and border control scored 79.6, its regulatory framework and enforcement 70.4, and the taxation and economic environment 62.8.

However, supervision over supply chain intermediaries only scored 21.6, and sectoral illicit trade indicators 31.6, highlighting systemic gaps in oversight, regulation, and inter-agency coordination.

This table shows how South Africa compares to the global and African averages:

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The serious threat to SA’s stability, governance and international standing

According to the report, illicit trade continues to pose a serious threat to South Africa’s economic stability, governance and international standing.

Despite its position as Africa’s most industrialised economy and a prominent member of global forums such as the G20 and Brics, the country remains vulnerable to pervasive illicit activities across critical sectors that undermine legitimate businesses, erode public revenues, distort trade flows and deepen inequality.

The report points out that while there have been promising developments, such as increased budget allocations to Sars, expanded inter-agency enforcement and new efforts to formalise the informal economy, progress remains uneven and difficult to sustain.

The report says South Africa’s continued placement on the Financial Action Task Force (FATF) grey list underscores persistent shortcomings in anti-money laundering and counter-terrorism financing frameworks.

“Illicit trade is not merely a criminal or enforcement issue but a systemic threat with far-reaching economic, fiscal and governance implications. It erodes investor confidence, endangers public health and fuels broader organised criminal activity.

“Now is a critical opportunity for the new administration to advance meaningful reforms, strengthen institutional capacity and demonstrate regional leadership.

“By tackling corruption, modernising regulatory systems and enhancing enforcement capabilities, South Africa can reclaim lost tax revenues, rebuild trust in its institutions and protect the foundations of sustainable economic growth.”

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Recommendations for SA to tackle illicit trade

The report makes these recommendations for South Africa to tackle the problem of illicit trade:

• Strengthen inter-agency coordination by appointing a national Anti-Illicit Trade Coordinator and aligning efforts across Sars, the police, the National Prosecuting Authority and regulators.
• Tighten controls on money laundering and enhance financial intelligence to dismantle the funding of illicit trade networks.
• Develop a coherent and predictable tax policy framework that avoids market distortions and reduces incentives for illicit activity.
• Modernise regulatory frameworks to address vulnerabilities in e-commerce, digital trade and high-risk product categories.
• Combat corruption within customs, law enforcement and judicial systems to restore institutional integrity and enforcement credibility.
• Raise public awareness and build public-private partnerships to boost education, brand protection and joint enforcement initiatives.

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The threat to economic recovery and public safety

“Illicit trade remains one of the biggest threats to South Africa’s economic stability and growth. Despite some governmental efforts, the scope and depth of the problem require sustained political will and comprehensive strategies to address the underlying issues.

“By addressing these issues head-on, South Africa can reclaim significant tax revenue, boost investor confidence and support its broader economic and social development goals,” the report says.

Esteban Giudici, TRACIT director of programmes, says the study highlights the continued threat illicit trade poses to South Africa’s economic recovery, public safety and institutional integrity.

“Despite authorities’ efforts to address illegal trade, corruption and money laundering, illicit trade remains deeply entrenched and highly damaging.

“If left unchecked, it will continue to rob the government of vital revenue, distort legal markets and deter both domestic and foreign investment.”

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SA at crossroads to dismantle illicit networks for trade

In particular, the 2025 report emphasises how inflation, high unemployment, organised crime networks and lingering post-pandemic effects have exacerbated the illicit economy, while new digital platforms and smuggling channels are also intensifying the challenge,” TRACIT director-general Jeffrey Hardy says.

“South Africa stands at a crossroads. Now is the time for bold policies and strong enforcement to dismantle illicit networks.

“That is why this year we went a step further and proposed a structured Public-Private Partnership (PPP) to support South African and regional authorities in their fight against illicit trade.”

TRACI is working closely with partners in South Africa to bring the proposed Public-Private Partnership model to life in the coming months.