The Shadow Economy: The rise of ‘fake’ food in South Africa

As the cost of living continues to soar and with people looking to save every cent where they can, the illicit trade in so called ‘fake food’ has boomed. Picture: ANA Pictures

As the cost of living continues to soar and with people looking to save every cent where they can, the illicit trade in so called ‘fake food’ has boomed. Picture: ANA Pictures

Published Aug 17, 2023


Fake food or expired food?

That is the question countless South Africans grapple with each day as they make that decision to buy that cheap tin of baby formula from a street side vendor or that cheap can of beans from the local spaza shop.

As the cost of living continues to soar and with people looking to save every cent where they can, the illicit trade has boomed.

However, many products are being manufactured in makeshift factories with labels from established brands being slapped on them.

Retail experts and even government health officials who have raided establishments selling goods at below the market price have noted that some goods being sold are not necessarily “fake” as is often bandied around on social media but “grey” products - products smuggled into South Africa illegally where no import taxes have been paid.

So serious is the problem of people reporting “fake food” on social media that in 2018, the Health Department issued a statement that aimed to clarify the confusion between counterfeit food, fake food, expired food, best-before date and sell-by date.

According to the Department of Health, there are three dates recognized by the Codex Alimentarius Commission (this is the WHO and FAO that control matters pertaining to food consumption around the world).

Best-before date: This is for long shelf life dry or canned products. It is used for stock rotation and is not an indicator of safety.

Sell-by date: This has been used for perishable food which is usually stored in a refrigerator. The meaning and implications of this date has caused so much confusion globally that in July this year the Codex Alimentarius Commission has discontinued the use of this date. It is no longer relevant

Use-by / Expiry date: this is the ‘expiry date’ as we know it. It means that food is no longer palatable after this date. For perishable food, this means it can no longer be consumed.

The other confusing terms are

Counterfeit goods: these are goods manufactured and sold under another companies brand name. The term ‘fake food’ has been used by social media to refer to food that does not contain food substances – for example ‘plastic food’ or ‘bread that does not dissolve in water’.

South Africa is however grappling with a formidable related adversary - the illicit trade in goods.

This shadow economy encompasses everything from alcohol and cigarettes to counterfeit electronics and pharmaceuticals.

According to the Transnational Alliance to Combat Illicit Trade (TRACIT), South Africa confronts challenges from illicit trade on multiple fronts. The sectors most affected include alcohol, cigarettes, fishing, mining, counterfeit electronics, pharmaceuticals, food, and apparel.

The World Economic Forum (WEF) has even identified the proliferation of illicit trade as a "top 5" risk to the South African economy.

According to a report from TRACIT, under the leadership of President Ramaphosa, South Africa has initiated measures to counteract illicit trade.

These efforts underscore the government's commitment to eradicating this illegal activity. However, the vastness and intricacy of illicit trade present formidable challenges to South Africa's ongoing economic development.

While South Africa boasts robust regulatory bodies and enforcement agencies that align with international standards, the primary challenges lie in the application of laws, capacity shortages, and inter-agency coordination.

There's a conspicuous absence of a strategic, overarching anti-illicit trade framework, leading to sporadic and often politically-driven initiatives.

According to a report by The Star, Tax Justice South Africa (TJSA) said if it were not for the increase in illicit goods being sold on the streets, at tuck shops, or in other areas, the country’s fiscus could afford an additional R12 billion for education, R6.5 billion for health, and another R6.5 billion for community development initiatives every five months.

At the centre of the illicit trade, TRACIT noted was corruption who acted as a significant enabler for illicit trade, especially within law enforcement and border control agencies.

Allegations of corruption, police misconduct, and collusion between law enforcement and criminal groups are rampant. A highlighted incident in November 2022 saw the arrest of six police officers in Limpopo for accepting bribes, ensuring a "safe passage" for smugglers carrying illicit cigarettes.

Economic Implications

The illicit trade not only crowds out legitimate economic activity but also deprives the government of crucial revenue. This lost revenue could have been invested in public services, further exacerbating the nation's economic challenges.

The TRACIT report implores the South African government to prioritise addressing the structural issues of inflation, unemployment, and corruption that allow illicit trade to thrive.