The black market in South Africa is growing at such an exponential rate that it is now beginning to compete with the legal sales of alcohol, cigarettes, textiles, and even pharmaceuticals.
This is according to Abraham Nelson, head of the crime risk initiative who represented the Consumer Goods Council of South Africa (CGSA) at the #CurbIllicitTrade webinar yesterday.
It was hosted by Business Leadership South Africa (BLSA).
The Covid-19 outbreak forced many industries to revisit the paralysing impact of the boom in illicit trade on economies and livelihoods, said the webinar moderator and journalist, Karima Brown.
“The alcohol sector trade is still severely restricted under adjusted level three. Sectors are constrained in many ways, (making room) for more opportunities for people to try and push systems of legality,” she said.
If you think it is a victimless crime to buy a counterfeit handbag or a cheaper cigarette option with questionable traceability, you would be sadly mistaken, Brown added.
“It is the same value chain that is costing the country millions of jobs, and trades humans as if they are cattle.”
‘The Covid-19 mafia’
We live in a country where most people are unemployed, said BLSA chief executive Busi Mavuso.
Therefore citizens turning to the black market to feed their families was not a surprising occurrence.
“We have lost R1.2 billion in as far as excise duties are concerned… If ethics were high in this country, we would not be faced with a problem of illicit trading.
“We are seeing an exacerbation of illicit trade at a time where our economy is at its weakest.
“The cigarette and alcohol ban only fuelled the fire. We know that the loss to the fiscus was about R35 million a day as a result of the tobacco (sales) ban alone.”
“It is a false narrative that many shebeen owners are unlicenSed.”
Highlighting the extent of the impact of the illicit trade, eNCA’s Crime Watch anchor and founder of Tax Justice South Africa (TJSA), Yusuf Abramjee, said perpetrators have grown increasingly brazen and arrogant in their dealings.
Last month, TJSA visited 40 supermarkets, spaza shops and corner cafés to investigate the pricing of a 20-pack cigarettes.
Traders of tobacco products must pay a minimum collectable tax of R 20,01 on a box of 20 cigarettes, Abramjee said.
“Out of 40 stores, 39 of the shops we visited were selling cigarettes for under R 20,01. Anything under R 20,01 can be deemed illicit and illegal.”
The black market, Abramjee said, is now simply out of control.
“Money earned from the illicit trade is not being paid to SARS at a time where government says we have no money for vaccines. We do not have money for doctors…
“It is daylight robbery. It is looting. In the tobacco industry, we are losing about R8 billion a year a year going right to the pockets of these criminals.”
The chairman of the South African Tobacco Transformation Alliance (SATTA), Zacharia Motsumi, said illicit traders were blatantly, “stealing food from the bellies of our children.”
“People have lost their jobs. Ask yourself what happened to those depending on workers in the tobacco industry?”
SATTA represents the legal tax paying tobacco value chain. Before the lockdown, illicit cigarettes were between 20% and 28% of capacity, and 100% while the ban was in place, said Motsumi.
“After the banning of cigarettes, the illicit trade is currently operating at 30% to 35% capacity.”
SATTA called on government to ratify the World Health Organisation protocol that seeks to eliminate tobacco trading on the black market.
“With the money lost, we could’ve used it to buy vaccines. We could’ve used it to subsidise our education system, which is appalling.
“This is money we could be using for our health system. These people are taking our money and funding their criminal activities,” Motsumi lamented.
Supply and demand
Meanwhile SARS and the police spend a disproportionate amount of time focused on the legal trade, argued Kurt Moore, chief executive of the South African Liquor Brand owners Association (SALBA).
As long as there is supply and demand for illicit products, it will continue to trickle into economies. To deal with the scourge of illicit trading requires a multifaceted approach, he suggested.
“It’s a false narrative that many shebeen owners are unlicensed. The moment you shut licensed traders down, you are giving illicit traders carte blanche to do whatever they like.”
“We are seeing an exacerbation of illicit trade at a time where our economy is at its weakest.”
Nelson clarified that the country had sufficient legislation but lacked severely in the implementation of laws to deal with the severity of the black market.
“There’s the criminal procedure act, tax laws, we have an immigration act. In terms of legislation, the country is covered.
“Punitive measures are not a deterrent. Syndicates who were punished are back on the block within a month and half trading product again.
“There is a major lack of enforcement, but I am also not throwing that onto the front door of law enforcement. I think enforcement of laws is dependent on everybody in this country.
“The reality is law enforcement agencies do not have the resources to deal with every situation,” said Nelson.