A report by market research company Euromonitor International reveals that the illicit liquor market in South Africa grew by a compound yearly growth rate of 10% in volume terms in 2020, compared with 2017, largely spurred on by Covid-19 regulations that banned its sale during infection peaks.

Commissioned by the South African Liquor Brandowners Association (Salba), the Beer Association of South Africa (Basa) and Vinpro in 2021, the report sought to better understand the illicit market during the pandemic – a time when opportunists took advantage of a depressed legal market.

Salba CEO Kurt Moore says the total share of illicit alcohol in 2020 was estimated to be worth R20.5-billion and comprised 22% of total alcohol volumes. “[This means] one in five bottles are potentially illicit products. This is unacceptable.”

According to Salba, the growth in demand for illicit alcohol in 2020 was a direct consequence of the prohibition of alcohol sales.

Nonetheless, Moore admits that the report identified several other reasons for the growth of the illicit market, including significantly weak regulatory enforcement; and inadequate punitive measures and enforcement, which have incentivised crime syndicates to ramp up their smuggling and counterfeit operations, thereby compounding the rise of illegal traders.

Overall, Salba explains that the expansion of the illicit trade has had a devastating social impact on citizens’ health and wellbeing, as well as fuelled organised crime syndicates, which have increasingly become more firmly entrenched and sophisticated.

South Africa’s “rampant” illicit market is also compounded by “stringent regulations” on the legal sale of alcohol, including high real increases in alcohol excise taxes, Salba reveals in a statement.

This, combined with a weakening macroenvironment where unemployment increased to 34.5% this year, along with increasingly high inflation rates, have subsequently fuelled the demand for cheaper illicit products.

Salba also notes that the illicit alcohol trade sales by volume had overtaken the entire combined wine and cider sectors.

“If we consider that our cider market is second only to the UK, and we are the eighth-largest wine producer in the world, having illicit volumes that exceed the cider and wine market is a significant shift,” he says.

Moore adds that Salba is deeply concerned about the safety risks associated with the consumption of illegal concoctions and the commercial growth of an illicit alcohol network. 

“Unregulated alcohol is not subject to stringent quality control measures [and is] not adequately policed. Many of these illegal alcoholic concoctions contain dubious ingredients which are unfit for human consumption and may be lethal if ingested. We urge both liquor outlets and consumers to purchase their preferred products from trusted sources.”

Further, Salba also points out that the rise in illicit trade is also stalling South Africa’s economic recovery, with Euromonitor estimating that, in 2020, the South African Revenue Service lost R11.3-billion to illicit alcohol trading.

Salba says the broader alcohol industry remains committed to working with government, as it has been for years, including the South African Police Service and the South African Revenue Service, to find solutions to the problem, such as operating within a well-regulated space with adequate support from law enforcement.

Salba urges consumers and traders to call the Consumer Goods Council hotline on 0800 014 856 to report any suspicion of illicit activity.