Illicit trade one of biggest threats to economic growth, says Busa

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The magnitude of potential state revenue being lost through illicit trade is an issue that must be addressed, says Business Unity South Africa (Busa).

With tax authorities estimating the loss at nearly R100 billion a year, it is one of the biggest threats to stability and economic growth, says the organisation, which has just published a report, Organised Crime, Corruption and Illicit Trade: Spotlight on South Africa, compiled by the Transnational Alliance to Combat Illicit Trade.

“The magnitude of the losses is staggering, draining revenue and resources from an economy that could usefully benefit from increasing investment in infrastructure and improving living conditions for citizens,” says the report.

“For example, the South African Revenue Service (Sars) estimates that illicit trade costs the South African economy R100 billion every year. In terms of lost tax revenues, Business Leadership South Africa estimates that the country loses around R250 million a day.”

According to advocacy group FairPlay, the report says illicit trade is happening in multiple areas, including alcohol, cigarettes, fishing, mining, counterfeit electronics, pharmaceuticals, food, and apparel.

The proliferation of illicit trade poses a “top 5” risk to the South African economy, according to the World Economic Forum.

“Although South Africa’s regulatory bodies, institutions and enforcement agencies are well rounded and in line with international standards, persistent capacity constraints and skills shortages impede effective enforcement.

“Even though Sars is rebuilding capacity to address illicit trade, vacancies and lack of expertise remain acute.”

The report does not specifically mention poultry, says FairPlay, where illicit trade is a long-standing concern. Under the poultry master plan, a task team including Sars has been formed to combat illicit chicken imports and to detect and prevent any instances where high-tariff consignments may be wrongly labelled as lower-tariff products, resulting in lost revenue to the fiscus.

The report says South Africa should consider appointing an independent and specialised “Anti-Illicit Trade Coordinator” with high-level authority, strengthen coordination with neighbouring states, and improve public awareness of the threats posed by illicit trade.

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