Nearly R80 billion passes through the country’s points of entry illegally every year, putting South Africa as one of the countries on the continent with high illicit financial movements.
“A significant amount of cash was detected leaving the South African borders to foreign jurisdictions and this is estimated at R80 billion per annual in Illicit Financial Flows (IFFs),” State Security Minister David Mahlobo said on Tuesday ahead of his Budget Vote.
A transaction is illicit when the funds are illegally earned, transferred or utilised with the most common methods including trade mispricing, bulk cash movements and smuggling.
Some have been arrested at OR Tambo airport with money which has not been declared.
In the period under review, the threat posed by the illicit mining of precious metals and related crimes also continued. This was shown by the displacement of illicit activities to the previously unaffected provinces such as KwaZulu-Natal and the targeting of Chrome mines in Limpopo.
Minister Mahlobo said this was exacerbated by the weakening of the rand which resulted in the sharp increase in gold prices in both legal and black markets thus increasing incentives for illegal miners.
“Over the years, it is clear that the South African economy has been affected negatively by decades of transfer pricing and other forms of illegal capital flight by multinational companies, especially those who operates in the extractive industries.”
The threat of IFFs was also brought into sharp focus by the AU High-Level Panel in 2015 which is chaired by former President Thabo Mbeki which found that it impacts negatively on development countries by reducing their domestic revenues, tax revenue needed to address poverty.
Within this context, the Minister has reaffirmed focus on providing economic intelligence which supports the government in dealing with threats to the illicit economy.
“We have also extended our focus to include exploration of economic opportunities to the benefit of our people. In this regard, we look forward to working with the Treasury, SARS, DTI and the Financial Intelligence Centre in curbing this scourge.”
With regards to corruption, the Minister said the government will continue to root it out within the public service and private sector through the Anti-Corruption Task Team, which comprises of various law enforcement agencies.
“Corruption poses a serious and direct threat to our reconstruction and development initiatives, good governance, service delivery, and ultimately stability, particularly at local level.”
For the period to end of March 2017, freezing orders to the value of R610.5 million were obtained resulting in an overachievement of 2%. For the same period, 87 successful prosecutions were obtained against government officials.
Other plans in place to address this, include an enhanced vetting process to improve the integrity particularly of those in the employ of government, as well as those in state-owned enterprises.
The Minister announced that they are in the process of digitising the vetting process, while finalising the intelligence regulations that will enable the conduct of vetting as a compulsory requirement.