South Africa is losing ground in its fight against criminal syndicates operating across illicit markets, with illegal trade now deeply embedded in key sectors of the economy, according to Business Day. The warning follows British American Tobacco’s decision to shut its Heidelberg manufacturing plant, citing the dominance of illegal cigarettes, which the company estimates now account for about three-quarters of domestic sales.
Revenue authorities say illicit trade has shifted from isolated criminal activity into a structural parallel economy spanning tobacco, fuel adulteration, illegal mining and gold smuggling, as well as counterfeiting and money laundering. Once a significant employer and tax contributor, the legal tobacco industry has been weakened by the scale of untaxed products flooding the market. The National Treasury estimates that the state loses between R18 billion and R28 billion a year in tobacco excise revenue alone, while compliant manufacturers struggle to compete with packs sold well below the statutory minimum tax threshold.
BAT’s withdrawal from local manufacturing reflects the commercial pressure created by this environment, as production becomes unviable against an underground market supplied through organised syndicates and porous borders. Research by Ipsos, commissioned by the company, indicates that illicit cigarettes are now widely available, with almost eight in ten retailers reportedly selling illegal products. A large majority of those surveyed were found to be offering cigarettes below the minimum collectible price, signalling extensive tax evasion and weak enforcement at the point of sale.
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Authorities say tobacco is not an isolated case but a gateway into a wider criminal economy. The same distribution networks are often used to move illegal gold, adulterated fuel and counterfeit goods, while profits are recycled through shell companies and cross-border financial flows. This interconnected structure allows syndicates to diversify risk and expand operations rapidly when enforcement tightens in one area.
Fuel fraud has emerged as another major drain on public finances, with nearly R4 billion in annual losses estimated from diesel adulteration and smuggling. Joint operations involving the South African Revenue Service, the police and the National Joint Operational and Intelligence Structure resulted in 23 raids across Gauteng, Mpumalanga and KwaZulu-Natal last year. These actions led to the seizure of close to one million litres of contaminated diesel, in some cases found to contain more than 60% paraffin, undermining both tax collection and engine safety standards.
Regulators have also targeted tobacco production licences, suspending several facilities found to be non-compliant, while the Financial Intelligence Centre has supplied intelligence to support investigations into syndicates involved in tobacco, precious metals, fuel and procurement fraud. Since the 2020/21 financial year, recovery efforts linked to illicit trade have generated about R85 billion for the fiscus, reflecting an increase in enforcement capacity and inter-agency cooperation.
Despite these gains, officials acknowledge that enforcement remains reactive in the face of the scale and adaptability of organised crime. Border controls remain uneven, penalties often fail to deter well-resourced operators, and corruption at ports, factories and distribution points continues to undermine progress. Criminal groups are able to reroute supply chains quickly when seizures occur, limiting the long-term impact of individual operations.
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The finance ministry has also warned that illicit markets in cigarettes, alcohol and fuel are expanding, eroding the tax base at a time when public finances remain under strain. Analysts say the growth of the underground economy not only weakens revenue collection but distorts competition, discourages legitimate investment and entrenches criminal influence in retail and logistics networks, as reported by Reuters.
Without stronger border management, tougher penalties and sustained coordination between tax authorities, police and financial intelligence units, the illicit economy is likely to remain a permanent feature of South Africa’s commercial landscape. The current trajectory suggests that while recoveries have improved, criminal syndicates retain the capacity to scale faster than the state’s ability to dismantle their operations, according to Ipsos.