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Opinion Piece

Why illicit trade hurts us

By March 11, 2020September 28th, 2020No Comments

Country losing R100 billion a year, which could be used to improve social services for all – by Yusuf Abramjee, 11 March 2020

WE’VE all heard the argument that a guy caught with a truckload of cut-price smuggled trainers has done nobody any real harm.

“Times are tough. Everyone loves a bargain. The clothing giants can take care of themselves. The buyer saves cash, the seller makes a buck. Everyone’s a winner. Right?”

Well, no. You couldn’t be more wrong.

The smuggled trainers – and the people who buy and sell them – are part of an international epidemic that is crippling South Africa and depriving our most vulnerable citizens of essential services.

That epidemic is illicit trade – the illegal buying and selling of not just trainers, but everything from alcohol to pharmaceuticals, tobacco, minerals, fuel and even food.

SA Revenue Service (Sars) commissioner Edward Kieswetter said last week that South Africa was losing R100 billion annually to the illicit economy.

Criminals are pocketing money that should be paid to the state in the form of excise duties and VAT. Legitimate operators are losing business, meaning they end up paying less tax. Jobs in the legal sector are lost, meaning there are fewer workers and less PAYE to boost national coffers.

Kieswetter stresses that “this is not a victimless crime”.

He says that tax crime “directly affects the poorest of the poor who are dependent on basic services including the social security safety net for old age pensioners, child grants and for tertiary education support targeting needy students as well as providing health services, among others”.

In short, the young, the needy and the vulnerable are suffering because the money that should help them is being pocketed by criminal kingpins.

The commissioner’s R100bn figure is a mind-boggling sum. It breaks down to more than R250 million being stolen from the economy every single day. This is money desperately needed to build a better South Africa for all.

Two weeks ago, Finance Minister Tito Mboweni had the unenviable task of setting a national Budget in the most testing of times, facing record unemployment, a stagnant economy and the growing prospect of a rating downgrade.

How he must have wished he had access to that stolen R100bn.

For example, he could have spent:

  • An extra R36bn on learning and culture – that’s 468 new schools and salaries for some 30 000 more teachers.
  • An extra R18bn on peace and security – that’s the salaries of almost 45 000 more police officers and an increase of more than 18% in law court and prison funding.
  • An extra R19.5bn on health – that’s 12 new hospitals and the salaries of almost 5 100 extra nurses and nearly 5 300 doctors.
  • An extra R12bn on economic development – that’s equivalent to almost a 25% increase in road infrastructure spending.
  • An extra R14.5bn on social development – that’s a 17% increase in funding for old age grants.

It is blindingly obvious that every decent citizen has an interest in ensuring that we curb the illicit economy. But how do we go about that?

I decided last year to found Tax Justice South Africa as an NPO, with my fellow directors Makali Lepholisa, former commissioner for customs in Lesotho, and Andy Mashaile, an Interpol Turn Back Crime ambassador.

We are campaigning to expose the destructive impact of illicit trade and urging authorities to bring the criminals to justice.

The new regime at Sars is already producing positive results on this front. But more must be done.

I get regular messages on the subject and a typical one recently came from a member of the public despairing at the counterfeit goods being sold in his community. This person said they had contacted Sars, Home Affairs and the SAPS but still nothing had been done about it.

We need a fully functioning tip-off line to make it easier for these crimes to be reported and we must ensure our law enforcement agencies treat these crimes as matters of urgency. I am happy that the Consumer Goods Council of SA will be launching a hotline soon.

We must ensure that the special units dealing with these crimes are properly funded by the government. Another problem is that warehouses for seized goods are full to overflowing. There is a real danger that the smuggled trainers – and cigarettes, drugs and alcohol – that are seized by vigilant officials will actually find their way back on to the market via less scrupulous colleagues.

We need a practical solution, and more rights for the officials to destroy seized goods faster and more effectively.

I am participating in dialogues on illicit trade organised by Business Leadership SA. Some expert minds will be wrestling with how to combat this scourge.

Every day we can all do our own part by recognising the evil injustice of illegal trade, calling out the wrongdoers and demanding that authorities follow the money, catch the crooks and lock them up.

This article was published the Cape Argus and The Mercury