The country’s informal economy, driven in large parts by the spaza shop industry, which has recently come under fire for its sale of expired and poisonous foods, is reported to be worth more than R750 billion even though it pays little to no tax to the government.
Some reports indicate that this industry also funds terrorism and human trafficking.
According to “Daily Investor”, South Africa’s informal economy is estimated to be worth R750bn, with only 60% to 70% of businesses in the sector said to be paying tax.
This was revealed at the recent launch of Lesaka Technologies’ South African Informal Economy Digitalisation Index.
According to informal economy expert GG Alcock, most businesses in the sector are not registered taxpayers but contribute significantly to VAT receipts, with the largest portion of the informal economy made up of small spaza shops who do not pay tax.
“The dominant portion of the informal economy is composed of small neighbourhood shops, responsible for a noteworthy market valuation of R180bn. Conversely, the alcohol trade within the informal economy, including licensed taverns and bottle stores, stands as a remarkable contributor to South Africa's fiscus due to its formal registration, totalling an estimated worth of R110bn,” Alcock said.
Last year, media reports suggested that the US embassy in South Africa had more than once raised its concerns over the issue of terrorism funded through the informal economy, including the spaza shop economy.
This resulted in the blacklisting of four individuals and eight companies as terrorist financiers for Islamic State (ISIS) after a report by “The Economist” showed that ISIS was using South Africa to add to its war chest.
This year, South Africans reacted with shock following the greylisting of the country by the Financial Action Task Force (FATF) for its failure to abide by international standards in combating money laundering and other serious financial crimes.
President Cyril Ramaphosa said the listing of South Africa as a “jurisdiction under increased monitoring” was cause for concern, but not as bad as it had been reported.
“We have gone through a rigorous process of addressing the issues that FATF has raised with us. The fundamentals are in place and we know what we need to do to get off the grey list. We are determined to do this as quickly as possible. This is important not only for our international standing, but also for our own ability to fight these crimes in our country.”
Last month, following the death of more than 10 children who allegedly consumed poisonous snacks and other foodstuff across the country, Minister in the Presidency Khumbudzo Ntshavheni indicated that the government would crack down on illegal spaza shops.
Ntshavheni announced that an audit of spaza shops in villages and townships was imminent.
She said the Cabinet was concerned by the recent poisoning of young children in particular, who allegedly ate goods purchased from spaza shops and vendors.
Ntshavheni said by-laws were to be introduced in municipalities aimed at tightening the monitoring of spaza shops, especially those owned by foreign nationals.
“There will be immediate inspections of businesses, in particular spaza shops, by the Departments of Labour, Health, Small Business Development and Home Affairs immigration inspectorate to enforce compliance with applicable by-laws. Spaza shops will also have to register with municipalities and traditional authorities,“ she said.
Non-governmental organisation Food Forward SA (FFSA), said more needs to be done to ensure that food sold at spaza shops is safe for human consumption.
Andy du Plessis, managing director at FFSA, said this is why they have called for an urgent change to current regulations.
“We are calling for an urgent change in regulations to protect and preserve the health of our children. The introduction of labelling regulations could revolutionise the availability of food, especially nutritious food, and offer our children better access to safe, healthy food,” he said.
The Star