President Cyril Ramaphosa said in his 2026 State of the State address that South Africa would deploy advanced technologies such as artificial intelligence and data analytics to crack down on counterfeit and illegal goods.
“We are establishing a National Illicit Economy Disruption Program that brings together key state institutions and other stakeholders, including the private sector,” Ramaphosa said. “By effectively leveraging data analytics and AI, we will target high-risk areas such as tobacco, fuel, alcohol and other counterfeit products.”
The announcement follows growing concerns about the impact of illegal trade on South Africa’s economy. British American Tobacco announced earlier this year that it would close its only cigarette manufacturing plant in the country, citing continued growth in the illicit tobacco market.
The facility was operating at approximately 35% occupancy and was no longer viable. The closure will result in the loss of 230 direct jobs and is expected to have widespread impacts across the value chain, affecting farmers, distributors and retailers. Industry estimates suggest that the livelihoods of up to 35,000 people could be indirectly affected.
Business Leadership South Africa chief executive Bisi Mavuso said the closure was a self-inflicted jobs crisis caused by policy and enforcement failures.
He said the situation had worsened during the coronavirus pandemic, when bans on the sale of legal tobacco and alcohol were introduced and later ruled unconstitutional, while enforcement powers were diverted elsewhere. This has allowed illegal distribution networks to expand and persist.
Subsequent increases in excise taxes on legal products widened the price differentials that illegal traders took advantage of. Packs of illegal cigarettes are now being sold for less than the combined excise and value added tax applicable to legitimate products, bypassing health warnings and age restrictions. National Treasury estimates that the state is losing about R30 billion a year in lost tax revenue as a result.
Mavuso warned that the proposed regulatory changes could further harm the legitimate industry. Congress is currently considering legislation to regulate tobacco products and electronic delivery systems, including measures such as plain packaging. Critics, including BAT and public policy researchers, argue that some provisions could unintentionally strengthen criminal networks by making it harder to distinguish between legal and illegal products.
Mavuso said the challenge goes far beyond tobacco. According to the South African Beverages Federation, illicit alcohol sales have increased by around 55% in volume since 2017, and it is estimated that one in five bottles of alcoholic drinks now comes from illegal sources.
Counterfeit medicines, electronics, cosmetics, clothing and food are also prevalent. The Consumer Goods Council of South Africa estimates that the illegal economy currently accounts for around 10% of gross domestic product.
“These illegal activities feed organized crime networks involved in illegal mining, construction-related extortion and other serious crimes,” Mavuso said, adding that the profits fund activities ranging from cash-in-transit heists to more sophisticated criminal enterprises.
He said industry groups have submitted multiple proposals to address illegal trade, but many remain unimplemented for years.
Mr Mavuso called for urgent measures, including more staffing at the South African Revenue Service to strengthen its anti-illicit trade team, a specialized police force trained to investigate organized crime, and the prioritization of cases by the National Prosecuting Authority.
“Every month of delays means more factories operating below viable capacity, more jobs at risk and criminal networks becoming more entrenched,” she said.
