In a year already marked by economic strain and fiscal shortfalls, illicit trade is quietly looting the economy, with R100bn vanishing into a black hole last year alone. It’s an immense figure, but for many South Africans, sadly this is just another line in a budget speech; another problem for economists to debate and try and fix.
Yet for the township spaza shop owner, the small-scale alcohol distributor clinging to survival or the local wholesaler watching profits vanish, this is anything but a huge number. For them, it’s the difference between staying open and shutting down. It’s a hidden tax crippling South Africa’s small and medium enterprises (SMEs), the pulsing backbone of our economy.
SMEs must stay the course. Resilience is built on transparency, clean operations, solid bookkeeping and traceable supply chains
A big part of the problem is that national conversations around illicit trade have, for too long, centred almost entirely on the billions in lost tax revenue. While that’s a critical concern, it distracts from a more urgent reality — the relentless erosion of honest small businesses struggling to survive in an increasingly lawless market.
SMEs, already operating under tight margins, face licensing hurdles, tax obligations, and regulatory oversight. Their illicit competitors, meanwhile, flourish in the shadows, undercutting prices with counterfeit or smuggled goods, and often with little or no consequences. This is not a condemnation of the informal economy or the honest trader simply trying to make ends meet, but an urgent call to address those who deliberately break the law and undermine fair competition.
Recent data from the Consumer Goods Council of South Africa paints a stark picture. From sneakers, clothing and cosmetics to alcohol, tobacco, electronics, and even essential medicines and food, a wide range of sectors are being hammered by counterfeit goods. In nearly all cases, the fake products often sell for less than half the prices of legitimate ones.
We live in an era where consumers are increasingly driven by price over quality, as seen in the explosive growth of platforms such as Shein and Temu, and as a result, law-abiding small businesses are being backed into a corner and forced to make some harsh choices. Either slash your prices and bleed losses, or stick to the rules and watch your customer base disappear.
Cutting corners, and futures
The problem of illicit trade goes far deeper than lost market share or shrinking profits. At its core, it erodes the foundational belief that running a business ethically, transparently, and by the book will pay off. Instead, we’re seeing a dangerous race to the bottom, where those who play fair are punished, and cutting corners becomes a competitive edge.
In today’s hustle-driven culture, where quick wins are often celebrated over long-term growth, there is a worrying trend among newer generations of entrepreneurs who see cutting corners or trading illicitly as a faster route to profit. Why invest in compliance when non-compliance pays more, and faster?
These ripple effects are far-reaching. Often the smallest, most vulnerable enterprises that lack the resources or scale to cushion any blow are the first to be hit, and hardest too. Each legitimate SME forced to close its doors due to unfair competition means lost jobs, stalled growth, and weakened local economies.
The government’s recent R4bn allocation to the South African Revenue Service to tackle illicit trade is a welcome, if overdue, move, but this fight isn’t just about reclaiming tax revenue. It’s about protecting the viability of SMEs, a sector that employs more than 60% of South Africa’s workforce and contributes 34% to our GDP. If the counterfeit economy continues to thrive, we won’t just be losing revenue, we’ll be dismantling the very lifeblood of our economy.
It is crucial that policymakers do more and do it quickly. Every rand lost to illicit trade is a missed opportunity: a business that couldn’t expand, an entrepreneur who couldn’t hire, a community that remains stuck. What’s needed is a co-ordinated national response including robust enforcement, visible crackdowns, public education campaigns, and direct support for law-abiding small businesses.
At the same time, SMEs must stay the course. Resilience is built on transparency, clean operations, solid bookkeeping and traceable supply chains.
The fight against illicit trade is ultimately a fight for our entrepreneurs, for the integrity of our economy, and for the future we all want to build. And it’s a fight we cannot afford to lose.
• Mtwentwe is MD of Vantage Advisory and host of the SAICABiz Impact Podcast.
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