South Africa’s illicit economy is becoming an increasingly costly challenge for the country, between R200 million and R300m in tax revenue alone, with illegal mining, counterfeit goods and illicit trade depriving the fiscus of revenue, undermining legitimate businesses and putting jobs and consumers at risk.
The problem extends well beyond the theft of products or minerals. Across sectors, illicit activity is creating parallel markets that operate outside the formal economy, bypassing taxes, regulations, legitimate businesses and the broader industrial ecosystems that support economic development.
South Africa’s illicit economy is estimated to account for between 12% and 15% of the economy.
The scale of the challenge has prompted major businesses across sectors to join forces through the Consumer Goods Council of South Africa to launch an initiative aimed at confronting illicit trade and highlighting the role consumers can play in supporting the formal economy.
Illegal mining is one of the most visible manifestations of the problem.
For decades, South Africa has grappled with illegal mining, particularly at abandoned and disused mining operations where undocumented miners enter in search of remaining mineral deposits.
The consequences extend beyond the safety of the miners involved. Legitimate mining companies and the state lose revenue from minerals extracted outside the formal system, while the country also loses the economic activity that would have been generated through legal mining operations.
Illegal mining costs more than the mineral
Bongani Mankewu, Director of InfraFIN, said the policy response to illegal mining needs to distinguish between genuine artisanal and small scale miners and organised criminal operations.
“The policy question of addressing illegal mining needs to be approached differently from the usual ‘Illegal mining is a crime, therefore suppress it’ framework,” Mankewu said.
He argued that South Africa needs to consider how legitimate small scale and artisanal mining could be integrated into the formal economy while actively combating organised criminal mining.
“The policy question is not whether illicit mining should continue to be illegal, it shouldn’t, but rather how to integrate small scale and genuine artisanal mining into the formal economy while actively combating organised criminal mining. That distinction is significant,” Mankewu said.
According to Mankewu, the economic damage caused by illegal mining goes beyond the value of minerals extracted.
A properly organised small scale mining industry could create demand for mining equipment, electrical systems, geological services, surveying, engineering and financial services.
That would create a broader mining related industrial ecosystem, with economic activity extending beyond the mine itself.
Illegal mining bypasses much of this ecosystem.
“As a result, the country loses not only the mineral; it loses the industrial development associated with the mineral,” Mankewu said.
The formal mining industry also creates a chain of taxable activities, meaning that when mineral extraction occurs outside the formal economy, the state loses more than the immediate tax associated with the mineral itself.
Illicit trade threatens businesses and jobs
The broader illicit economy is not confined to mining.
Illicit and counterfeit goods are also costing South Africa jobs, undermining local manufacturing, exposing consumers to potentially unsafe products and depriving the fiscus of billions of rand in revenue.
The CGCSA initiative seeks to bring businesses together to highlight the scale of the problem and encourage a coordinated national response.
The argument is that combating illicit trade cannot be left to individual businesses or law enforcement agencies alone.
Alcohol data raises questions about illicit market estimates
The challenge of measuring the illicit economy is particularly evident in the alcohol industry.
Corné van Walbeek, Director of the Research Unit on the Economics of Excisable Products, examined claims about the growth of illicit alcohol sales in South Africa.
The legal alcohol industry has continued to perform strongly despite a difficult macroeconomic environment. However, the industry has cited a 55% increase in illicit alcohol sales between 2017 and 2024.
Van Walbeek examined the 2025 Euromonitor report commissioned by the Drinks Association of South Africa, which is frequently cited as the basis for the claim.
Van Walbeek argued that these sources did not establish either the size of the illicit alcohol market or its rate of growth.
Instead, he said, the research primarily reflected industry perspectives and consumer perceptions about illicit alcohol.
“The illicit alcohol market is a real concern, and it must be taken seriously. But serious policy decisions require serious evidence. We cannot use a number simply because it is widely repeated when the research behind it does not actually establish that number,” Van Walbeek said.
For Mankewu, bringing genuine artisanal and small scale mining into the formal economy could form part of a more effective response to illegal mining, provided that organised criminal activity is tackled separately.
For Van Walbeek, reliable evidence must underpin policy responses to illicit trade, particularly where estimates of the size of illegal markets are used to justify significant interventions.
ashley.lechman@nationalmg.co.za