Illicit trade, exacerbated by the national lockdowns, is threatening jobs and legal businesses in South Africa as consumers look to cheaper deals amid the economic fallout from the Covid-19 pandemic. Photo: File
Illicit trade, exacerbated by the national lockdowns, is threatening jobs and legal businesses in South Africa as consumers look to cheaper deals amid the economic fallout from the Covid-19 pandemic. Photo: File

Thriving illicit trade threatens jobs in SA

By Given Majola Time of article published Feb 4, 2021

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DURBAN - Illicit trade, exacerbated by the national lockdowns, is threatening jobs and legal businesses in South Africa as consumers look to cheaper deals amid the economic fallout from the Covid-19 pandemic, Abraham Nelson, the Consumer Goods Crime Risk Initiative executive head, said yesterday.

Nelson, speaking at the Business Leadership South Africa (BLSA) and Business Against Crime South Africa webinar yesterday, said the thriving illicit economy was growing to the detriment of legal businesses, posing a health risk, loss to the fiscus and job losses.

“This is leading to unsustainable legit businesses. Many retailers are affected by these and they include cigarettes, alcohol, pharmaceuticals and apparel industries. These pose a health risk, loss to the fiscus and job losses,” said Nelson.

BLSA said with the country’s economic stability hanging in the balance due to the unavoidable ripple effect of the coronavirus global pandemic, it was now more prudent than ever that solutions, actions and collaborative opportunities to curb illicit trade were tabled to mitigate “this rampant form of crime”.

National lockdowns have led the SA Revenue Service (Sars) to lose billions due to the illicit trade of alcohol and tobacco. According to BLSA, illicit trade has been the bane of South Africa’s economy since before the pandemic. For example, the textile industry has become a key focus area for Sars due to under-declaration of customs value in this sector having increased from R5.2 billion in 2014 to R8.52bn in 2018.

A study from the Research Unit on Economic and Excisable Products found that 30 percent of cigarettes consumed in 2017 were likely to be illicit.

Nelson said that while the country’s legislation was sufficient to fight this scourge, the challenge was with its enforcement. He said the legislation needed reviewing because their punitive measures were not a deterrent.

“Some syndicates are caught, but within a month or so they are trading again. There are groups within assisting the syndicates. As it is, there is also no collaboration within law enforcement agencies because they are all doing their own thing and none is talking to the other. There is also a lack of involvement of businesses and communities,” he said.

BLSA chief executive Busi Mavuso said the organisation was working with Sars’ illicit trade unit to restore it to a position whereby it effectively dealt with this problem. Mavuso cautioned that undoing the damage could, however, “take longer than it took for this scourge to thrive”

Tobacco Producers Development executive director and spokesperson of South African Tobacco Transformation Alliance Zacharia Motsumi said the tobacco industry now employed around 8 000 people from an initial 14 000 to 15 000. due to some companies that were selling at below the minimum collectable tax price.

“This leads to money being lost to the fiscus on a daily basis. This money could go to procuring vaccines, education and health,” said Motsumi.

South African Liquor Brand Owners’ Association chief executive Kurt Moore said that proper enforcement of legislation was required as at present both Sars and the police focused more on legal traders.

Justice South Africa and anti-crime activist Yusuf Abramjee said that South Africa needed to follow the money, since there was a lot of money lost through illicit trade.

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