Illicit trade is mostly viewed as an intellectual property issue. However, when the different layers are peeled back, the surfaced reality is that of governance, supply chain and risk management weaknesses that affects businesses across different industries and every sector.
For many, the term “illicit trade” immediately brings to mind counterfeit luxury goods. However, in reality, it encompasses a range of fraudulent activities intended to circumvent legal and regulatory frameworks for commercial gain. The Organisation for Economic Co-Operation and Development (OECD) highlights illicit trade as ‘the illegal production, movement and sale of goods and services, spanning activities such as the trade in counterfeit goods, smuggling, wildlife trafficking and illegal logging’.[1] This industry’s competitive advantage is therefore not built on innovation, healthy business competition or better products. On the contrary, it is geared to operate outside the rules that regulate legitimate business practices. It undermines fair competition, distorts markets and puts compliant businesses at a disadvantage.
One of the biggest misconceptions about illicit trade is that it only relates to the intellectual property rights of an affected brand owner. As alluded to above, the consequences of illicit trade are felt across the economy and by more stakeholders than just the brand. All stakeholders ultimately bear the cost, whether it be through reduced consumer confidence, distorted competition, increased compliance costs or weaker economic growth.
Every day, businesses invest considerable resources in meeting regulatory requirements, maintaining product quality, paying taxes as well as protecting and enforcing their intellectual property. Yet many compete with illicit trade, a parallel economy that operates by an entirely different set of rules – if any at all. Illicit trade is a complex global challenge that affects almost every sector of the economy, disrupting legitimate markets, eroding public trust and creating opportunities for organised criminal networks to flourish. Its effects extend well beyond intellectual property. It influences economic growth, public safety, investor confidence and the integrity of the markets in which businesses operate.
The growth of global trade has brought significant benefits for businesses and consumers alike. Goods move across borders efficiently, supply chains span multiple jurisdictions, and e-commerce has changed the way goods reach the market. These global developments have in turn created opportunities for criminal networks to expand their reach and adapt their methods and South Africa is not exempt.
South Africa is one of Africa’s largest economies[GC1] [2] and plays an important role in regional and international trade; serving as a gateway for the movement of goods across the continent, it is an attractive target for criminal networks involved in illicit trade. The impact can be seen across various sectors including tobacco and alcohol, pharmaceuticals and fast-moving consumer goods. These activities undermine legitimate businesses, deprive the fiscus of much needed revenue and puts consumers at risk through products and practices that may not comply with safety, quality or regulatory standards.
Supply chains are complex and organisations rely on multiple suppliers, distributors, logistics providers and third-party service providers. While these networks create efficiencies, they also create opportunities for exploitation where oversight is lacking. In practice, vulnerabilities are not always the result of sophisticated criminal schemes but often arise from assumptions. Assumptions such as suppliers having been adequately vetted or that controls remain effective without considering the ever-changing South African business climate.
The frightening reality is that by the time illicit goods enter the market, the damage has often already been done. Combatting illicit trade is not solely about enforcement but about understanding business risk. Therefore, asking whether the risks could have been identified earlier is a critical question.
A proper response by business, therefore, is to do an introspection. During such exercise, pointed questions would be:
- Where are we exposed?
- Would we recognise the vulnerabilities if they existed?
- Are our existing processes and controls sufficient to identify vulnerabilities before they result in financial loss, reputational damage or regulatory scrutiny?
These three questions are commercial questions that are increasingly becoming the questions that boards and executive teams fail to ask as part of their broader approach to risk management. Based on the author’s experience, organisations have been found wanting not because they ignored risks, but because they failed to recognise how seemingly minor weaknesses across different areas of the business could collectively create significant exposure. The ultimate failure materialised as a result of weaknesses that appear insignificant in isolation. The extent of the resultant damage was only appreciated when the individual weaknesses were considered collectively.
Knowing where goods originate from, understanding how they move through the supply chain, conducting due diligence on suppliers and third parties, protecting intellectual property, strengthening procurement processes and regularly assessing emerging risks all contribute to stronger control mechanisms. In today’s increasingly interconnected business environments, resilience is built not only through strong controls but also through informed decision-making and a proactive approach to risk management.
A general, but fatal mistake many businesses make is to assume that someone else is managing the risk. Businesses that challenge the assumption will be better equipped to not only protect their operations but also the integrity of the markets in which they operate.
One of the most valuable shifts an organisation can make is to not view illicit trade as an issue that affects only certain industries or brands. Any business that is involved in the manufacture, import, export, distribution or procurement of goods has the potential to be affected. Recognising that reality is the first step towards managing risk effectively. Organisations cannot eliminate every risk, but they can improve their ability to identify vulnerabilities, strengthen governance and proactively respond before such vulnerabilities are exploited.
[1] The Organisation for Economic Co-Operation and Development (OECD) (2026), Illicit Trade Available at: https://www.oecd.org/en/topics/policy-issues/illicit-trade.html (Accessed: 4 July 2026)
[2] The World Bank Group (2026), South Africa Available at: https://www.worldbank.org/ext/en/country/southafrica#tab-economy(Accessed: 9 July 2026)
[GC1]Can we not insert a footnote for a source?
