TRACIT calls on government to fight illicit trade

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JEREMY MAGGS: A very warm welcome to you and let’s start with this, the Transnational Alliance to Combat Illicit Trade (TRACIT) has published a new report on illicit trade activity in South Africa. Just by way of numbers, the South African Revenue Service (Sars) estimating that the practice costs the South African economy, something in the region of R100 billion a year in the form of lost tax revenue. I’m in conversation now with Esteban Giudici, a policy advisor for the organisation, and a very warm welcome to you. So you are saying that illicit trade is a huge factor influencing growth and stability in South Africa. R100 billion as I’ve said, is a staggering figure, isn’t it?

ESTEBAN GIUDICI: Hello, good afternoon to your audience and to you. Jeremy, it’s a pleasure for us to be here and talking about these very important issues that have global relevance and specifically for South Africa. You mentioned it correctly. It’s a problem that is linked to organised crime, to corruption, and particularly in the case of South Africa, we can see the impact that it’s having in the country’s economy and in its position internationally.

As you may be aware of, on February 24 2023, the Financial Action Task Force (FATF) has grey listed the country of South Africa. This means that the monitoring on this country is going to be [raised] because there are many measures that the country needs to take to avoid problems like money laundering, financing of terrorism or illicit financial flaws. From TRACIT, we have demonstrated that there is a direct correlation with illicit trade and this criminal phenomenon.

JEREMY MAGGS: Is it your understanding that the situation has got worse in the two years post the pandemic in South Africa?

ESTEBAN GIUDICI: Well, Jeremy, it’s not our understanding, those are facts, unfortunately. During the pandemic, as [with] many other countries, South Africa grappled a lot, lots of human suffering, you know it well. But particularly pertinent that we have, and we have showcased it in a report, was that it’s related to the provision laws. In particular, we have provisions on excise products subject to excise, and here I’m talking about alcohol and tobacco … this was a direct driver for the elicit markets, for the creation of an elicit market that now is rooted in the country’s economy and it’s more difficult to curb and to combat.

JEREMY MAGGS: Do you think that the South African government is taking this issue seriously enough?

ESTEBAN GIUDICI: Well, let me tell you that yesterday when we launched the report, we had the opportunity to talk with SAPS (South African Police Service), specifically with the forces, the Hawks. We also had the opportunity to talk with representatives of the treasurer, who are directly working with the Financial Action Task Force, and they duly took note of everything that we said. They are aware that there is a problem.

We know that there are many other problems in South Africa, but what we are trying to convey to the government is that solving the problem of illicit trade is only going to help the country to solve all the other structural issues.

For instance, the 8% of inflation, which in comparison to countries like Turkey, Argentina, or Lebanon, it doesn’t seem to be that much. But let me tell you that not long ago, these countries that I mentioned, they were also [at] 8% of inflation. This is a problem that needs to be tackled now, and the way to do that is fighting illicit trade. I like to believe that the government has had a good reaction yesterday and that they’re going to follow up with us and we are in South Africa to do that.

JEREMY MAGGS: Part of the solution you are suggesting, and it’s good to hear that you have a positive response to the way in which South African authorities are accepting the report, part of the solution you say is to ramp up implementation of enforcement measures and increase transparency and cooperation between the public and the private sector to improve enforcement action. To that end, you’re recommending the appointment of an interagency anti-illicit trade coordinator. All of this is very good, but it takes capacity and skill and money to set something like that up. Do you believe that we can do it?

ESTEBAN GIUDICI: Absolutely, yes. Jeremy, we have seen in a specific cases like Panama, there was a big problem with alcohol, and during the administration of President (Juan Carlos) Varela, this was before the pandemic, I don’t want to talk particularly about his government, we have no specific connotations about it. We are talking about a specific case. There was a big problem with illicit alcohol, and resources were invested to do all the things that you just mentioned – awareness raising, also giving funds to the police, and also implementing policy measures that are wise for instance, in everything that has to do with rationalisation of tax.

Because illicit trade, it’s such a complex phenomenon, it’s important to tackle it from every relevant dimension.

It’s not only a problem of enforcement, it’s also a problem for the financial sector and for these kinds of policies. But if these things are done, the improvements [are] going to be seen in a medium term, not in a very long term, and it’s going to be fast. All these are going to be resources that are going to go back to society and specifically to the most vulnerable sectors of society. That’s why it’s interesting to undertake in these ways.

JEREMY MAGGS: You raised two industries – one is alcohol, and one is tobacco. In South Africa, these are two sectors though that are riven with corruption. It’s going to be very difficult to make any indentation on those two sectors, surely?

ESTEBAN GIUDICI: Well, it has happened. We all know it, it’s public information, but it’s not all the industry like that, most of the legitimate industry, they are duly paying their taxes. They are contributing to the cost, they do what they have to do and this goes back to the society. I know that there is a problem. We know that there is a problem with corruption, as there is all over the world. But it takes determination from civil society, that is what we represent from TRACIT, and it also takes the leadership for the government to tackle these problems. It’s difficult, yes, but otherwise, what are we going to do? Just let things be. No, we are here to tackle it.

There are many international tools to do it. I think that South Africa can take [hands] of international organisations and NGOs like TRACIT, that we try to catalyse this movement and also use other multilateral organisations like [the] United Nations. I mentioned the Financial Action Task Force, and the good thing about this is that if we curb corruption, the country is going to keep on receiving the investments that the country deserves because South Africa, it’s a great country. It’s an amazing country and needs to get strong again, it’s going to stand up again. That’s going to happen if we do the right things.

JEREMY MAGGS: Well, thank you very much indeed, and the warning certainly has been sounded. Esteban Giudici, thank you very much.