Illicit economy worth up to R1.2 trillion - SARS
The South African Revenue Service (SARS) says South Africa’s illicit economy has expanded dramatically over the past two decades, costing the country hundreds of billions of rand in lost tax revenue and requiring urgent structural reforms across government.
Speaking during a parliamentary briefing on the 2026 National Budget, SARS Commissioner Edward Kieswetter told lawmakers that organised financial crime has grown faster than the formal economy, posing a major threat to fiscal stability and state capacity.
Kieswetter said estimates suggest the illicit economy now accounts for between 12% and 15% of gross domestic product — a sharp increase from about 5% two decades ago.
He warned that the scale of the problem translates into massive revenue losses for the state.
"In the last 15 to 20 years, the illicit economy has actually grown faster than the formal economy… If you translate that into numbers, it means the size of our illicit economy is anywhere between 800 billion and 1.2 trillion rand, and if you translate that into taxes, it’s between 200 and 300 billion that we are not collecting."
He said the figures underscore a “strong business case” for coordinated national action to disrupt criminal networks operating across sectors and borders.
Call for president-led enforcement programme
Kieswetter told Parliament that fragmented enforcement efforts across departments have weakened the country’s response to illicit trade, corruption and organised tax crime.
He said government agencies often operate in silos without a unified system to measure progress or coordinate strategy.
"Each department is pursuing its narrow mandate, but we don’t have a national dashboard that measures whether we are making progress on dealing with crime, corruption and the illicit economy."
To address this, SARS has proposed a president-led national illicit economic disruption programme aimed at improving accountability and coordination across multiple ministries and enforcement bodies.
He also called for the creation of a central command platform to strengthen inter-agency collaboration and support intelligence-driven enforcement.
Border control, targeted enforcement and prosecution reforms
Kieswetter emphasised that current spending patterns do not adequately address systemic weaknesses, particularly at borders and within high-risk supply chains.
He proposed that the government allocate funding to integrated projects rather than fragmented departmental initiatives.
"We are proposing that money is allocated to a project — for example fixing the borderline between South Africa and Mozambique so that when we walk away we know we’ve actually fixed something substantially and demonstrated what a smart modern border would look like."
He said enforcement should initially focus on high-risk sectors such as tobacco, fuel and alcohol, where illicit trade significantly undermines legitimate economic activity and tax collection.
The commissioner also recommended specialised prosecution units and dedicated courts to fast-track cases linked to illegal trade and seizures.
"At the moment a lot of our seizures get caught up in a long process and so it creates uncertainty dedicated prosecution and courts would strengthen enforcement."
International example and compliance pressure
Kieswetter suggested South Africa could consider stronger compliance measures used in other countries to improve tax collection.
"Australia recently introduced an order that prohibits you from travelling. When you get to the airport, they check whether you owe the tax authority any debt, and they say you can’t afford a holiday if you haven’t paid your taxes. Maybe we should think of some of those things."
Funding pressures and structural under-resourcing
The SARS commissioner warned that the revenue authority remains structurally underfunded despite growing demands on its enforcement capacity.
He said funding growth has not kept pace with inflation, limiting investment in technology and specialised skills.
"Our allocation over the last seven years has grown by about 3.7% on average per year in an inflation environment that has grown by 5.4 % more than 70% in salaries, so we are crowding out true institutional investment."
Kieswetter said SARS estimates South Africa’s overall tax gap at about R500 billion, including unpaid VAT and personal income tax.
"We are confident when we say that SARS is still structurally underfunded and unless we address that we will not close the tax gap, that’s more than three times the primary surplus that we are not collecting."
He said additional funding would be used to expand enforcement capacity and modernise systems.
"If you gave us two and a half billion extra we would accelerate the investment of people we need forensic investigators and analysts that can deal with syndicated crime we also need to accelerate our investment in technology and data science."
Technology and long-term reform
Kieswetter stressed that strengthening SARS as an institution remains central to improving revenue collection and protecting the country’s fiscal integrity.
He said sustained investment in data-driven enforcement would allow government to respond more effectively to complex financial crime networks.
"The sustainable value comes from the structural improvement of our revenue administration capability, which will support fiscal integrity in the future."
He noted that SARS has collected R12.9 billion through targeted debt recovery initiatives, but warned that the nature of tax debt is becoming increasingly complex, involving organised syndicates and large corporate cases.
Kieswetter said tackling the illicit economy and strengthening revenue administration are essential to protecting South Africa’s economic sovereignty and long-term financial stability.
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