JOURNAL OF GLOBAL TRADE, ETHICS AND LAW

Volume 3 Issue 2, 2025

DIFFERENTIATED GOVERNANCE, DISTRIBUTIVE

JUSTICE: ETHICAL PATHWAYS FOR SOUTH

AFRICA’S INFORMAL-ILLICIT NEXUS

Siyabonga P. Hadebe1*

1 Faculty of Law, Maastricht University, Maastricht, The Netherlands, motapo@icloud.com.

*Corresponding Author

Abstract. South Africa’s economy is marked by dualism, comprising a globally

integrated formal sector and a substantial informal economy that provides

livelihoods for millions excluded from formal employment. In contexts of

persistent unemployment, informal work becomes a necessity for survival rather

than a choice. However, state policy often incorrectly conflates this economic

necessity with illicit markets. This conflation functions as state-engineered

sovereignty, exercised through selective enforcement, regulatory ambiguity and

epistemic practices that marginalise informal livelihoods while facilitating

organised criminal economies. Using a critical political economy lens, this paper

examines two cases: the COVID-19 alcohol and tobacco bans (2020) and Cape

Town’s extortion economies (2023-2024). Drawing on policy analysis, case

studies and quantitative data on market disruption, tax losses and price volatility,

it demonstrates that sudden prohibitions and broad enforcement measures

destabilise legitimate informal activities, expand illicit markets and undermine

state legitimacy. The study concludes that it is crucial to differentiate, both

analytically and normatively, between survivalist informality and illegal

organised trade to rebuild a decolonised social contract grounded in distributive

justice and risk-proportionate governance. Such a framework recognises

subaltern livelihoods as elements of economic citizenship, treating dignity as a

prerequisite for inclusion rather than a consequence of incorporation.

Keywords: Differentiated Governance; Distributive Justice; Illicit Trade;

Informal Economy; State Legitimacy; State-Engineered Sovereignty

JEL: O17, O55, K42, H26, I38

Journal of Global Trade, Ethics and Law

ISSN 2977-0025 (Online). Published under Creative Common (CC) BY 4.0 license.

https://doi.org/10.70150/e4skga17

Durham &

Thunmann

Siyabonga P. Hadebe, 2025

1. Introduction

1.1. The Duality of South Africa’s Economy and Governance Conundrum

The structure of South Africa’s economy is characterised by a deep and enduring

dualism, where a sophisticated, capital-intensive formal sector integrated into global

value chains coexists with a vast and diverse shadow economy, used here descriptively,

comprising both survivalist enterprises (the informal sector) and illicit forms of trade

(Irish-Qhobosheane 2024a). This divide is a direct legacy of apartheid’s exclusionary

economic architecture, a legacy compounded by the failure of post-apartheid growth

strategies to achieve inclusive development (Hausmann et al. 2023). With official

unemployment at 33.2% and youth unemployment at 62.2% in the second quarter of 2025

(StatsSA 2025a), millions of people rely on informal activities, including street vending,

home-based services, cross-border trading and artisanal mining (Etim and Daramola

2020). Statistics South Africa estimates that the informal economy provides primary

employment for about 3.3 million people, or 19.8% of the workforce (StatsSA 2025c).

When factoring in dependents and broader informal activities, this sector supports

approximately 13.4 million people (FinMark Trust 2024). These survivalist forms of

labour provide income in the absence of formal alternatives, but are persistently

“marginalised and overlooked” (Etim and Daramola 2020, 212).

In contrast, illicit markets, such as counterfeit alcohol, smuggled tobacco and

uncontrolled mining, are extensive and highly capitalised, exploiting state incapacity and

regulation gaps (Irish–Qhobosheane 2024a; National Treasury 2024; Thomas 2021).

While both spheres operate in the shadows of the formal economy, their moral,

operational and economic characters are fundamentally distinct. The informal sector

represents a realm of survival and resilience, while illicit trade represents one of predation

and profit. A study by Ngarava et al. (2022) found that COVID-19 lockdown shocks

negatively impacted listed firms in this space, revealing potential vulnerabilities that

predatory actors can exploit. This presents a significant dilemma for post-apartheid

governance. While the informal-illegal link may provide the poor with life-saving

assistance, it is simultaneously undermining the legitimacy and authority of the state.

Nonetheless, it is also common for public discourse and state policy to treat these distinct

moral and operational economies as the same. This stance persists despite clarification by

the 17th International Conference of Labour Statistics that illicit businesses, such as drug

dealing, fall outside the definition of the informal sector (Etim and Daramola 2020).

This paper argues that the blending of informal and illicit economies is not an analytical

mistake or capacity failure but rather a deliberate form of governance. This structural

design allows the state to manage populations by selectively applying the law, creating a

zone of disorder where its power is reconfigured through opacity (Agamben 2005; Roy

2005). While politically convenient, the blending of the informal economy with illicit

trade is analytically flawed and ethically unsustainable. The problem is clearly visible in

Cape Town, where a “menacing shadow economy” extorts money from businesses (Irish-

Qhobosheane 2024a, 2), demonstrating predatory illicit trade that must be distinguished

from, not conflated with, survivalist informal economy activity. Yet, the very size and

Siyabonga P. Hadebe, 2025

significance of the informal sector are sites of intense political struggle, with competing

data sources revealing a fundamental conflict over which economic activities are counted

as legitimate (Ohnsorge and Yu 2022; Rogerson 2000). As explored in Section 5, this

statistical contest is not only a technical struggle but also a biopolitical struggle over

economic visibility and value.

Figure 1: The Statistical Duality of South Africa’s Labour Market

Source: StatsSA (2025c). Quarterly Labour Force Survey, Quarter 2: 2025.

Non-official sources estimate that informality accounts for approximately 30% of the

business landscape, with Micro, Small and Medium Enterprises (MSMEs) comprising the

majority of informal businesses. These estimates encompass all informal economic

activity and related livelihoods, indicating that the sector sustains up to 42% of the

workforce (FinMark Trust 2024). Official data show that the sector’s contribution to GDP

exceeds 5% (StatsSA 2021). It also accounted for 19.8% of total employment in the

second quarter of 2025 under a narrow definition (StatsSA 2025c). Depending on the

definition of unemployment used, there have been, on average, between 2 and 3.3 times

as many unemployed people as persons employed in the informal sector since 2008. This

ratio demonstrates that the informal economy is not an automatic absorber of the jobless

(Burger and Fourie 2019). Macroeconomic evidence indicates that significant entry

barriers prevent this transition (Burger and Fourie 2019), rendering it a precarious haven

for those already inside but a fortress for many outside. This divergence in measurement

reflects a political contest over how economic informality is defined and valued

(Ohnsorge and Yu 2022; Rogerson 2000), a theme explored in depth later in this paper.

Siyabonga P. Hadebe, 2025

1.2. Operational Realities and Theoretical Framework

In relation to the mainstream economy, survivalist sectors function as “rebellious

economies” (Roy 2005, 148) and fill the regulatory void left by an exclusionary state.

While sharing some of these features, illicit trade exploits regulatory vacuums and funds

criminal syndicates. It also deepens institutional decay, a crisis reflected in South Africa’s

ranking of 60th out of 158 countries on the industry-linked TRACIT Illicit Trade Index

(TRACIT 2025a, 2025b). Irish-Qhobosheane (2024a, 2) argues that the Western Cape has

“a long history of gang violence and extortion.” This reality has given rise to competing

systems of power, leaving street vendors vulnerable to frequent harassment or arrest. By

contrast, smuggling operations are allowed to thrive under the protection of institutions

(Beetham 2013; Chipkin and Swilling 2022). The pandemic clearly exposed this

contradiction: even well-meaning state measures, such as the ban on tobacco and alcohol

(March–August 2020), unintentionally expanded illicit markets overnight, increased

health risks and cost the state billions in lost tax revenue (National Treasury 2024; Vellios

et al. 2024).

Moreover, municipalities and state restrictions ironically criminalised law-abiding

persons and empowered illegal networks (Kotzé 2023). The fiscal impact is

substantial: official tax-gap estimates confirm a significant loss of state revenue,

while industry-funded assessments are used illustratively to describe sectoral disruption

rather than to establish baseline figures (DFSA 2025). Given that many illicit consumers

of alcohol also reported affordability as the main reason for their offence (Mashamaite

2024), both scenarios show how rigid, poorly calibrated enforcement fuels exclusion,

erodes state authority and blurs the line between survival and organised crime. As a result,

blanket enforcement during the 2020 crisis eroded public trust, criminalised survivalists,

created opportunities for illicit actors and worsened public health risks for the poor

(Seekings 2022; Witt and Nagy 2021). This inconsistency fractures the state’s authority.

When citizens witness the state harshly evicting a street vendor while turning a blind eye

to a protected smuggling ring, it reveals a sovereignty that is not just weak but complicit.

While the traditional legitimacy of the state is closely linked to legal and bureaucratic

authority (Beetham 2013; Guzman 2007), post-colonial critiques argue that this may not

be enough to upgrade the informal sector (Grindle 2004).

Indeed, in post-colonial states, such as South Africa, where the state has historically

been an instrument of exclusion, legitimacy is partially dependent on perceptions of fair,

responsive and representative governance (Ferguson 2006; Mamdani 1996). When the

state fails to provide this, informal traders establish parallel governance structures, such

as street committees and informal credit systems, to fill the void left by the state. This act

of societal organisation forces the state into an unstable dialectic of tolerance, co-optation

and repression. As this paper will argue, untangling this nexus requires a fundamental

ethical shift: the state must learn to distinguish acts of sheer necessity from systems of

organised exploitation. Failure to do so carries substantial social, economic and human

costs, as demonstrated in the sections that follow.

Siyabonga P. Hadebe, 2025

1.3. Research Outline

Building on Roy’s (2005) view that informality is an assertion of state power rather

than a “state of exception,” this paper advances a differentiated governance framework

(see Figure 3) to disentangle the informal-illicit nexus. After establishing an ethical and

theoretical position (Sections 2-3) and examining the colonial continuities and terrains

constructed by the state that shape this context (Sections 4-5), it analyses systemic drivers

and implications of predatory trade (Sections 6-8) and offers nuanced ethical pathways in

Section 9. Finally, the discussion concludes that this differentiated approach is crucial to

shifting the exercise of state authority from repression to post-colonial and inclusive

sovereignty, which is essential for producing a decolonised post-apartheid social contract.

2. Data and Methodology

This paper uses a critical political economy framework to analyse the governance of

the nexus between South Africa’s informal and illicit economies. The research design

triangulates qualitative analysis of policy documents, academic literature and case studies

with quantitative data from both national and international sources. The research employs

a comparative case study approach to examine the informal-illicit nexus through two

distinct cases: (a) the COVID-19 Alcohol and Tobacco Bans (2020) and (b) Cape Town’s

Extortion Economies (2023-2024). The 2020 bans served as a critical juncture that

revealed the state’s failure to differentiate between survivalist, informal and predatory

illicit markets, as evidenced by impacts on revenue and public health (Vellios et al. 2024).

Conversely, the Cape Town extortion case demonstrates the entrenched reality of a

mature illicit economy, where violence and corruption thrive amidst persistent

governance gaps (Irish-Qhobosheane 2024a). Triangulation assesses both policy-

induced and structurally embedded market failures.

The study’s primary contribution is conceptual and qualitative, advancing a critical

political economy analysis of governance in the informal-illicit nexus. This conceptual

framework is substantiated and given empirical weight through the rigorous integration

of quantitative evidence. To achieve this, a variety of data on the size of markets,

employment, losses of taxes and health impacts (2019–2025) were gathered and

triangulated from various sources, including primary quantitative data and reports

published by national official institutions such as Statistics South Africa (StatsSA), South

African Revenue Service (SARS) and the National Treasury, international organisation

reports such as the World Health Organisation (WHO), independent research such as the

Global Initiative Against Transnational Organised Crime (GI-TOC) and academic

literature. To maintain data integrity, all quantitative figures and monetary values, such

as market values, tax losses and contributions to GDP, are presented as outlined by the

source (with the collection year clearly identified) with no inflation adjustments applied.

This provides the reader with a sense of the context, justifications and methodology

behind the data.

Siyabonga P. Hadebe, 2025

It is important to note that the data exhibited methodological divergence in measuring

illicit and informal activities. To address this divergence, a clear hierarchy for

adjudicating between the sources was identified, as follows: (i) Official primary data; (ii)

Peer-reviewed academic studies; (iii) International organisation reports; (iv) Independent

non-governmental organisation (NGO) reports; (v) Industry-funded reports (to be used

with caution and qualified in the main text, primarily to contextualise sectoral impacts

and upper-bound estimates rather than to define baseline or global scale); and (vi) Quality

journalism (for illustrative quotes, but admittedly not core statistics). Where

inconsistencies were found in the quantitative data for a variable, such as the illicit share

of the tobacco market, the metric was presented as a range to indicate the uncertainty.

Notably, data on illegal trade and the shadow economy more generally were affected by

“a lack of reliable data” (Vellios and van Walbeek 2024, 17). Tables 1 and 2 have been

constructed with precise, cell-by-cell citations. A detailed codebook of variables, a case

selection rationale and a data harmonisation protocol are provided in Appendix A to

ensure transparency and replicability.

The analysis is grounded in Rawlsian theories of justice (Rawls 1971) and post-colonial

critiques of state sovereignty (Mamdani 1996; Roy 2005), utilising distributive justice

and the decolonisation of governance as central analytical frameworks.

3. Ethical Frameworks: Survivalism vs. Predation

From an ethical perspective, survivalist informality is generated through structural

exclusion and the need to secure livelihoods amid South Africa’s conditions of high

unemployment, poverty and inequality. Street vendors, artisanal brewers and informal

miners do so in search of legitimacy in territories of exception (Roy 2009; Sotomayor

2015), where informal economies substitute for missing governance. For example,

traditional homebrewing of beer often poses low health risks when regulated by

community norms (Rogerson 2019). This informal survivalism embodies the moral ethics

of Ubuntu, ‘umuntu ngumuntu ngabantu’ (I am because we are), in which informal credit

is applied to sustain communities abandoned by the state (Boswell 2016). This standpoint

enters into a critical and complementary dialectic with Rawlsian notions of distributive

justice.

While Rawls (1971) emphasises institutional fairness and distributional equality, the

communitarian philosophy of Ubuntu offers a pre-institutional moral foundation for

governance. This relational ethics shifts the focus from mere procedural justice to a

mandate that the state recognise the intrinsic dignity of the informal actor as a

precondition for legitimate governance (Hofmeyr 2025). Thus, this fundamental respect

for personhood must extend into the economic realm, challenging the punitive,

exclusionary justifications of colonial-era fiscal governance that historically and in its

modern form, criminalise poverty (Boswell 2016). The state systematically denies this

dignity by rigidly categorising legal status to demarcate legitimacy from criminality. Safit

(2013, 78) emphasises the “ethics of survival” as a defining element of humanity during

Siyabonga P. Hadebe, 2025

systemic breakdown, stressing relational responsibility. The pandemic’s real shock was

not just the virus, but also the state’s response. When 648,000 formal jobs vanished

overnight (StatsSA 2020), the state’s prohibitions effectively criminalised the only

remaining survival strategies for millions, transforming economic necessity into a moral

choice between starvation and illegality. Therefore, ethical governance must be rooted in

this fundamental recognition before any push for formalisation can be considered just.

In sharp contrast, predatory illicit trade has a singular goal: maximising profit by

exploiting a relationship with the state through violence (Irish-Qhobosheane 2024a). For

extortion syndicates and smuggling networks, violence is not a matter of primordial

criminality but a weapon they use to sever community bonds. Furthermore, it not only

breaks the community apart but also reactivates the ancestral trauma of colonial

subjugation (Fanon 1963). Survivalists foster collective resistance, while predators

weaponise social fragmentation through violence to exert control, creating a predator-

prey asymmetry. For example, the alcohol ban mistakenly equated survivalist home-

brewers with predatory suppliers of toxic methanol-laced alcohol. This action sparked a

fear-driven polarisation that ultimately atomised social trust and worsened the public

health crisis (Kotzé 2023). Predatory violence becomes an anti-Ubuntu paradigm,

systematising a de-socialisation process that severs community bonds and social trust,

characterising survivalist informality (Hofmeyr 2025).

4. The Coloniality of Informality: Beyond Rational-Legal

Authority

While Max Weber envisioned the modern state as holding a monopoly on legitimate

violence within a rational-legal framework (Guzman 2007), the current South African

government must manage an informal economy that the apartheid regime intentionally

created to marginalise and disempower (Bhandar 2018; Rogerson 2000). Rather than

simply indicating state failure, informal economies operate under a selective and

inconsistent legal framework. Thus, the state gets to regulate some actors while leaving

others, particularly elites or criminal networks, largely unchecked (Rogerson 2000; Roy

2005). Through statutes such as the 1913 Natives’ Land Act that facilitated the

dispossession of Black communities, the central project of the apartheid system was

to validate its purpose by establishing a permanent, legally codified informal periphery

(Mamdani 1996). Contemporary governance operates through a modality that perpetuates

the selective non-enforcement of law, where some are punished and others are

empowered to act outside legal boundaries. This continuity explains the enduring colonial

power structures and contributes to a credibility crisis that lies beneath the post-apartheid

state’s purported rational-legal authority.

South Africa’s incoherent institutional architecture means that the state does not

effectively wield the Weberian monopoly on legitimate power (Guzman 2007). This

failure is quantifiable in an illicit economy that drains at least an estimated ZAR 100

billion annually, according to official SARS tax-gap estimates. Industry-linked

Siyabonga P. Hadebe, 2025

assessments, such as TRACIT, are used illustratively to corroborate scale rather than to

establish baseline magnitude, highlighting the resulting fiscal strain and public service

delivery pressures (SARS 2020; TRACIT 2023). This scenario arises not only from an

institutionally weak state but is also part of a causal chain which originates from

apartheid, which systematically excluded Black people from formal engagement with the

economy. While the legitimacy of post-colonial states depends on inclusivity (Ferguson

2006; Mamdani 1996), South Africa remains constrained by colonial laws governing

survivalist informality, leaving it vulnerable to control by corrupt and illicit economies.

The outcome is the intensification of historic precarity for Black and marginalised

workers, who are positioned within the global precariat, a class characterised by unstable

earnings and limited protections (Standing 2011). This pervasive and long-term precarity,

a persistent condition in the Global South (Meagher 2019), highlights critical gaps in

contemporary labour laws and underscores the need for a renewed focus on building state

capacity and promoting labour rights protections.

4.1. Historical and Structural Foundations of Informality in the Global South

Informality is an enduring legacy of colonial labour frameworks (Meagher 2019).

Colonial regimes systematically dismantled indigenous economies and established

racialised labour systems. This framework ensured that formal protections and benefits

were secured exclusively for settler communities, relegating subjugated populations to

precarious, survivalist work (Mamdani 1996). Contemporary neoliberal policies,

including privatisation, austerity and deregulation, function as post-colonial

reconfigurations of this exclusion, expanding the “reserve army of labour” essential to

capital accumulation (Falavina and Ulbricht 2025). Far from being marginal, these

informal spaces constitute strategic resilience: marginalised communities utilise social

networks and adaptive knowledge to navigate economic apartheid, subverting regulatory

frameworks designed to suppress autonomous local economies.

Informality is, thus, a structural inevitability within systems built on inherited

hierarchies of economic personhood. In reproducing the “coloniality of power” (Ndlovu-

Gatsheni 2013), state practices perpetuate inequalities that persist beyond formal

decolonisation, embedding racialised hierarchies and dependency into governance and

policy. Through this mode, the state enacts what Sabelo Ndlovu-Gatsheni (2013) calls the

“myths of decolonisation,” as post-apartheid institutions replicate colonial rationales by

relegating Black communities to zones of non-being, while enabling elite extraction. Key

actors in the informal economy, such as ‘pirates’ (taxis) and ‘disturbers’ (spaza shops),

continue to face serious barriers due to punitive laws and invisibility in statistics

(Desrosières 1998; Mongwe 2024). As a result, the state’s sidelining of Black economic

activity increases patterns of colonial exclusion, which in turn weakens state credibility

and deepens the governance crisis.

Conventional policy narratives position informality as a purposeful circumvention of

state regulation and claim that its formalisation is essential to creating egalitarian,

regulated markets (Chen 2012; Perry et al. 2007). However, these efforts tend to fail

Siyabonga P. Hadebe, 2025

because state authority relies on the very ambiguity that formalisation would erase

(Skinner 2018). This state indeterminacy is not a legal lacuna but a mechanism for social

control, created to keep populations in perpetual negotiation with power (Rogerson 2000;

Roy 2005). This is quite evident, for instance, through the state’s intentional selection and

sanctioning of legitimacy, where it mediates the illegal elite land grabs while

simultaneously ordering squatter camps to be demolished for access to the same land. As

a result, informality persists because the state relies on the shadow economy to sustain

clientelist networks and avoid redistributive duties (Sarkar and Sinha 2022). Within this

state of exception, relational practices of informal labourers and their self-organisation

can be understood as subaltern agency and alternative forms of infrastructures (Roy

2005). Nevertheless, this precarious autonomy is constantly undermined by state

harassment and evictions, which resuscitate the motivations of dispossession that the

post-colonial state claims to interrupt.

4.2. Informality as a Selective Suspension of Law

Empirical evidence shows that attempts to formalise informal property systems are not

simply a technical matter but sites of intense political contestation (Sotomayor 2015). The

persistent criminalisation and marginalisation of informality by post-colonial states,

despite its role in sustaining millions, demonstrate the enduring operation of colonial

governance paradigms (Rogerson 2000). This means that formalisation policies

promoting registration, standardisation and taxation impose a Eurocentric fiction of order

that disregards the lived realities of informal actors (Ferguson 2006). Viewing informality

through an Agambenian lens reveals why these formalisation efforts, such as the

International Labour Organisation’s Recommendation no.204 on Transition from the

Informal to the Formal Economy, consistently fail (ILO 2015). They mistakenly attempt

to integrate activities that the state’s sovereign power has deliberately placed in a zone of

legal indifference. This is not benign neglect but active exclusion: it involves enforcing

bureaucratic models alien to local practices while maintaining the racialised property

rights, land dispossession and financial exclusion that create informality (Bhandar 2018).

Ultimately, formalisation policies that impose a Eurocentric model of property and

order inevitably fail because they attempt to regulate activities that the state’s sovereign

power has deliberately placed in a zone of legal indifference. The resulting

marginalisation stems not from innocuous neglect but from active structural exclusion.

The criminalisation of informality exposes the coloniality of state sovereignty, where

actions like demolishing informal settlements re-enact the antiquated practices of

dispossession from the past. Within this state of exception, informal actors nonetheless

build alternative social infrastructures, such as kin-based credit systems, which constitute

a form of subaltern political agency (Chatterjee 2011; Roy 2005). Recognising this

agency is the first step towards a governance model that does not merely seek to

formalise, but to integrate justly.

Siyabonga P. Hadebe, 2025

5. The Indeterminate State of South Africa’s Informal Economy:

Measurement, Legitimacy and Ethical Governance

The conceptual and statistical indeterminacy of South Africa’s informal economy is a

critical indicator of deeper, unresolved biopolitical struggles for economic legitimacy

(Agamben 2005; Foucault 2009). A public dispute over unemployment figures in mid-

2025 demonstrated that they are not neutral. In this instance, a Capitec Bank executive

claimed a “real” 10% unemployment rate based on transaction data, which directly

contested StatsSA’s official unemployment rate exceeding 30% (Khumalo 2025;

Magubane 2025), revealing how measurement methodologies become sites of political

contestation. The labour minister urged the collection of more nuanced data to capture

informal livelihoods, while the trade minister stressed the sector’s long-understated role

(Magubane 2025). However, StatsSA (2025b) defended its adherence to ILO standards,

which formally include informal work, such as street vending, home-based services and

unregistered micro-enterprises, within employment tallies. This methodological

stalemate signals a far more serious crisis. The epistemic visibility of informal work

remains disputed, even when technically “counted,” because survivalist activities

frequently evade rigid survey instruments that require structured hours, tax IDs or formal

business registration (Khumalo 2025).

As argued, this measurement conflict represents a biopolitical struggle over whose

labour is counted and valued. From a post-colonial perspective, the ‘othering’ of the

informal sector through statistical erasure or marginalisation can be seen as a form of

epistemic violence (Spivak 1988). State-sanctioned metrics have historically dismissed

the survival strategies of subaltern groups as illegitimate, thus reinforcing a neocolonial

economic order that sustains racialised hierarchies of economic personhood (Bhandar

2018; Quijano 2000). Informality is, therefore, not merely a zone of transgression but, as

Agamben (2005) indicates, a space where the law is intentionally suspended or

misapplied, leading to the deliberate precarisation and depoliticisation of work (Pons-

Vignon and Freund 2025). Consequently, the act of statistical contestation becomes a

struggle over economic legitimacy and visibility within the post-apartheid state context.

Metric

Value

Source &

Year

Methodology Notes & Context

Official Unemployment

Rate (Q2 2025)

33.2%

(8.4 million)

StatsSA

(2025c)

ILO standard definition: persons aged

15-64 without work, took active steps

to find work in last four weeks, and

available to work.

(Note: excludes discouraged work-

seekers)

Expanded Unemployment

Rate (Q2 2025)

42.9%

(12.6 million)

StatsSA

(2025c)

Includes discouraged work-seekers

who have given up looking for work.

Working-Age Population

Not Employed

25.0 million

(59.8% of

working-age

StatsSA

(2025c)

Computed as 8.4 m (officially

unemployed) + 3.4 m (discouraged

work-seekers) + 13.2 m (other not

Siyabonga P. Hadebe, 2025

pop. of 41.8

million)

economically active). Represents

total joblessness among the working-

age population.

Youth Unemployment (15-

24 years, Q2 2025)

62.2%

(4.9

million)

StatsSA

(2025c)

Official rate for this age cohort,

highlighting the acute crisis.

Employment in the

Informal Sector (Strict

definition: Informal sector

(non-agricultural) as a

share of total employment,

Q2 2025)

19.8% of

total

employment

(3.3

million)

StatsSA

(2025b)

Those employed in businesses that

are unregistered or have fewer than

five employees. Excludes private

households and agriculture.

Informal Sector

Contribution to GDP

(2021)

5.1%

StatsSA

(2021)

Measured via production and income

approaches. This is a conservative,

supply-side estimate.

People Sustained by

Informal Livelihoods

(Broad Definition and

unofficial 2024)

~13.4

million

FinMark Trust

(2024)

Includes informal business owners,

their dependents, and those engaged

in informal work outside the strict

‘sector’ definition.

Table 1: Defining and Measuring South Africa’s Informal Economy

Unemployment statistics direct governance to recognise some labour as valuable while

rendering other work invisible (Desrosières 1998). As expected, alternative data

challenges the official narrative. Primaresearch identifies a gap of 12.1 million between

the officially employed population (16.8 million) and credit-active consumers (28.9

million) (Ismail 2025), indicating that a substantial number of people have dependable

income streams not captured by the Quarterly Labour Force Survey (QLFS). Other

studies estimate that employment could be 4-6 million higher, placing the unemployment

rate at around 10–17% (Alcock 2025; Ismail 2025). This finding is consistent with

research indicating that the unemployment rate would drop to around 7% if informality

were reflected in income data (Asmal et al. 2024). Alongside Capitec’s claims, this

highlights the limitations of the QLFS’s small-scale survey data (30,000 households)

compared to the broader, risk-verified records of credit providers (Ismail 2025; StatsSA

2025b, 2025c). This statistical erasure makes it easier to label millions of livelihoods as

‘illegitimate,’ blurring the essential moral distinction between survival and predation that

this paper argues is crucial.

As Figure 1 below illustrates, the country’s unemployment rate remains alarmingly

high, well above that of Kenya (5.4%), Mexico (2.7%) and Brazil (7.6%), and even higher

than in conflict-affected states such as Somalia (18.9%) and Yemen (17.1%) (World Bank

2025). This disturbing pattern demonstrates how regulatory hostility suppresses and

criminalises informal economic activity (Joffe 2025). Joffe (2025) argues that South

African cities should go beyond tolerating informality and integrate it into broader efforts

to address the employment crisis, given its central role in job creation and poverty

Siyabonga P. Hadebe, 2025

alleviation. This policy incoherence materialises in the daily realities of street vendors,

who find the city a patchwork of ‘spaces of exception’ (Roy 2003). Their right to occupy

a sidewalk hinges not on a clear permit, but on the fluctuating discretion of local officials

and police. This unstable governance deepens racialised inequality: expanded

unemployment stands at 47% for Black South Africans, compared with only 11.2% for

Whites (StatsSA 2025c). The continued existence of such disparity demonstrates how

statistical invisibility structurally reproduces apartheid-era exclusions. In this context, the

informal economy remains both a fragile means of survival and a terrain of vulnerability

induced by the state.

Figure 2: Unemployment rates of selected countries (% of total labour force)

Source: ILO Modelled Estimates database (ILOEST), via World Bank (2025). [Visualised by author]

The structural underpinnings of this crisis are best elucidated by Asmal et al. (2024),

whose research identifies South Africa’s central labour market dilemma. They

demonstrate that the mean middle-income country ratio of wage employed to informally

employed to unemployed is 45:45:10 for every 100 individuals in the labour force (45 are

in formal wage employment, 45 are in informal jobs and 10 are unemployed). In contrast,

South Africa’s ratio is 50:20:33. This critical insight reveals that South Africa’s

unemployment problem is not primarily a failure to generate formal jobs, since it has an

above-average rate of generating wage employment relative to its peers. However, the

crisis is rooted in its unusually low levels of informal employment (see 1.1 above). The

South African economy “does not close its labour market through high levels of low-

barrier-to-entry informal employment” (Asmal et al. 2024, 2) and leaves a substantial

residual of workers unemployed. As Asmal et al. (2024) note, the informality conundrum

Siyabonga P. Hadebe, 2025

requires reframing it not as a lack of formal jobs but as the deliberate suppression of the

informal economy.

6. Illicit Trade as State-Crafted Terrain Within the Shadow

Economy

Neoliberalism maintains colonial hierarchies through calculated doublespeak,

promoting free trade, human rights and other cross-border benefits, while simultaneously

enabling illicit financial flows, tax avoidance and resource extraction that subordinate the

Global South (Thomas 2021). This condition imitates the colonial use of “free trade” to

justify plunder and the slave trade that impoverished the African continent. Contemporary

mechanisms, such as the dominant, stringent Intellectual Property (IP) regime that

criminalises Global South producers, worsen this dependency. Similarly, the dispute over

the return of looted artefacts valued in the billions has “frozen in time” (Gbadamosi 2022),

limiting people’s ability to achieve cultural and economic sovereignty within a global

system of rules unevenly distributed under the guise of market liberalisation. Thus, illicit

trade is not a “fluke or empirical contingency but a feature of capitalism’s DNA” (Fraser

2014, 57) and produces “illicit peasantries” (Gutiérrez-Sanín 2021, 2577).

As a subset of the shadow economy, illicit trade involves “multiple crimes and

commodities, including the theft, diversion, adulteration, counterfeiting and production

of substandard goods, all acts which can occur at multiple points along a supply chain”

(Shaw and Reitano 2020, 1). This activity does not operate in opposition to the state but

functions as a strategic extension of state power. In urban areas, informality is not a

residual condition but is actively produced through ambiguous land tenure and regulatory

voids (Roy 2005). In the South African context, this is particularly evident in sprawling

informal settlements and rapidly developing peri-urban areas on the outskirts of major

urban centres. Nowhere is this policy-shaped environment more materially apparent than

in South Africa’s peri-urban fringes, which are apartheid’s neglected spatial legacies

where normative fluidity allows elite land grabs and worsens the conditions of precarity.

Declarations from the Western Cape provincial government confirm the systemic and

economically devastating nature of this predatory illicit trade. At the June 2025 Multi-

Sectoral Anti-Extortion Summit, Premier Alan Winde stated that extortion had stalled

approximately ZAR 400 million worth of provincial infrastructure projects by late 2024,

labelling it a “blight on society” that “strangles economic growth” (Western Cape

Government 2025). This official acknowledgement, citing a specific and substantial fiscal

impact, underscores that extortion is not a peripheral issue but a central threat to the

formal economy and public service delivery, directly validating analyses of it as a mature,

predatory illicit economy (Irish-Qhobosheane 2024a).

Townships and informal settlements function as critical epicentres where

institutionalised exclusion and legal negligence directly enable illicit trade. Shaped by

apartheid-era segregation and forced removals, these areas are characterised by insecure

land tenure, weak governance and poor infrastructure that encourage illegal markets.

Siyabonga P. Hadebe, 2025

However, illicit trade is not confined to townships; it occurs across South Africa (Van der

Zee et al. 2020). Across peri-urban areas and beyond, the informal economy is a

significant contributor to economic activity. It also functions alongside equally pervasive

illicit activities that drain valuable resources from the formal economy, stifle

entrepreneurship and diminish government revenues. Criminal syndicates capitalise on

lax border controls and regulatory gaps, dominating spaza shops and flooding

communities with substandard or hazardous products while evading taxes (TRACIT

2025a).

In these zones of non-being, regulatory ambiguity paradoxically allows elite actors to

seize land, whether through land grabbing or illicit, unplanned construction, while

consciously ignoring planning rules and taxes (Fanon 1963). The state of exception

sustains the victimisation of the poor, increases lawlessness and neglects marginalised

communities. Thus, illicit economies operate through “shadow governance,” as state-

produced spaces in which informality functions as a technique of rule and legality is

selectively suspended within a routinised state of exception and are facilitated by state

institutions, corporate actors and their interlinked networks (Nili and Hwang 2020, 1099;

Thomas 2021). For instance, Cape Town’s extortion economy thrives on institutional

capture. Investigations into the “construction mafia” highlight that the efficacy of the

state’s response is severely undermined by documented police complicity, creating a

functional protection umbrella for criminal syndicates (Irish-Qhobosheane 2024a).

In Shadow trades: The dark side of global business, Thomas (2021) maintains that

multinational companies purposefully take advantage of convoluted supply chains to

increase neo-colonial exploitation through labour trafficking and hazardous waste

disposal. This illicit trade is prevalent in the Global South, where loose regulation and

weak enforcement make it easy to mask it within legitimate business practices. This

situation reflects the concept of “deviant globalisation” by Gilman, Goldhammer &

Weber (2011), which is linked to legitimate business. A more nuanced theoretical

approach labels this phenomenon as “dependence”: neoliberal capital accumulation is

entirely reliant on and cannot sustain itself without the exploitation of nonmarket social

relations and socio-environmental gaps (Fraser 2014). This topology is materially evident

in South Africa’s peri-urban fringes, where the state’s engineered neglect creates the

perfect terrain for these illicit circuits to flourish, replicating colonial patterns of

extraction in a neoliberal guise.

7. The Vicious Cycle: Systemic Drivers of Shadow Economies

A complex interplay of regulatory failures, weak enforcement and socio-economic

hardship fuels South Africa’s shadow economy (Etim and Daramola 2020). These

prohibitions functioned as a repackaged apartheid apparatus, effectively criminalising

survival in marginalised Black communities while simultaneously opening vast profit

avenues for criminal syndicates (Pitt and Van Dyk 2023). For example, sales of

homebrewed beverages increased sharply, while counterfeit alcohol reached an

Siyabonga P. Hadebe, 2025

estimated upper-bound market share of 31%. These figures, derived from industry-linked

seizure and survey data, are corroborated by independent media and academic analyses

highlighting significant market displacement during the prohibition period (Dare et al.

2023; TRACIT 2021). Similarly, the illicit cigarette market share is estimated to have

expanded from approximately 22% to as high as 39%, with the range

reflecting significant methodological divergence between academic and industry-funded

sources.

A study by Ngarava et al. (2022) of listed firms in the tobacco and alcohol sectors

demonstrated that these lockdown shocks induced significant structural breaks and

increased volatility in their financial performance. This firm-level evidence provides

quantitative confirmation of the market reconfiguration and disruption that predatory

networks exploit. Complementing this signal, Parry (2025) shows that alcohol sales, a

proxy for consumption, fell sharply during the 2020–2021 bans and returned to pre-ban

levels by 2022, indicating a temporary policy shock rather than sustained demand

suppression. As detailed in Table 2, the alcohol and tobacco prohibitions had immediate

and severe consequences. More than a simple departure from the law, these bans led to a

largely unregulated market, driven by a collapse in public trust and a resultant surge in

informality. The COVID-19 prohibitions laid bare the mechanics of this strategy. The

state’s sudden withdrawal from regulating legal markets was not a lapse in judgment; it

was a dramatic enactment of its power to create vacuums, which predatory actors were

perfectly positioned to fill (Gastrow 2021).

Systemic weaknesses and corruption bolster criminal economies. Although sanctions

for illicit trade exist, they are insufficient compared to potential profits, creating a low-

risk, high-reward scenario. In Cape Town, extortion rackets penetrate workplaces such as

nightlife, construction and transport sectors, employing violence and intimidation to exert

undue influence (Irish-Qhobosheane 2024a). Gangs also use porous borders to transport

drugs, weapons and other illicit commodities. Affordability is a key driver of illegal

alcohol consumption, reflecting a market shaped by economic hardship. The failure of

local enforcement to combat these activities weakens state authority and services,

allowing criminal groups to flourish. Predatory economic enterprises capitalise on

poverty, marginalisation and oversight failures, further undermining public institutions

meant to serve public interest and intensifying the social crisis (Bonello, Reitano and

Shaw 2021; Gastrow 2021).

Extortion, a serious crime carrying a minimum 15-year sentence, involves obtaining an

advantage through unlawful pressure (Irish-Qhobosheane 2024a). This compelled form

of consent lies at the heart of the invisibility and normalisation of extortion. Out of fear,

shame or intimidation, many victims remain silent, enabling extortion to

become normalised as a routine “cost of doing business” (Bonello et al. 2021; Irish-

Qhobosheane 2024a). This self-reinforcing normalisation then drives more frequent and

larger extortion requests. Extortion has its origins in gangster culture in Cape Town,

evolving from a secondary income stream from organised crime to a mainstream crime

in its own right, rivalling drug trafficking in profitability. Gangs target businesses through

the “protection racket,” especially in townships like Khayelitsha and Nyanga, where

Siyabonga P. Hadebe, 2025

criminals act as alternative protectors and exploit weak policing (Bonello et al. 2021;

Gastrow 2021).

Tackling extortion requires enforcement and rebuilding a community of trust and state

legitimacy, as socio-economic factors continue to drive many people into the shadow

economy (Bonello et al. 2021; Gastrow 2021; Irish-Qhobosheane 2024a). In this regard,

the city government launched its ‘Enough is Enough’ anti-extortion campaign in 2023,

establishing a 24-hour tip-off line, a rewards system and a dedicated law enforcement unit

to combat these crimes (City of Cape Town 2023). While this represents a targeted

enforcement effort, its focus remains almost exclusively on the predatory end of the

spectrum. The campaign’s framing, while necessary, does little to address the governance

ambiguities that simultaneously criminalise survivalist informality in the same urban

spaces, revealing the continued challenge of implementing a truly differentiated

approach.

8. The Impact of the Illicit Market on Health, Fiscal Stability and

Regulatory Integrity

The illicit alcohol problem demonstrates state failure across three dimensions: public

health crises, massive fiscal losses and institutional corruption where police collude with

criminals (OECD 2022; Witt and Nagy 2021). Nearly a quarter of global alcohol

consumption remains unrecorded. WHO projections indicate that the global share of

unrecorded consumption would rise modestly from 25.5% in 2016 to 27.7% by 2025. The

WHO, however, cautions that this shift does not account for the projected increase in total

per-capita consumption (Parry 2025; WHO 2018a). In regions such as Latin America,

Africa and Eastern Europe, annual alcohol sales generate USD 19.4 billion in black

market revenue (Euromonitor International 2018). Criminal networks exploit these

conditions by utilising e-commerce and supply-chain disruptions to expand their

operations. Although the precise scale of illicit markets is difficult to quantify, the United

Nations Office on Drugs and Crime estimates suggest that money laundering alone may

amount to roughly 2–5% of global GDP, underscoring the scale of concealed cross-border

criminal value flows (UNODC, n.d.). Counterfeit alcohol products containing hazardous

substances cause poisoning and preventable deaths, mainly in low-income communities.

More broadly, hazardous alcohol consumption results in over 3.3 million deaths annually

and is linked to more than two hundred diseases and injuries (OECD 2022; WHO 2018a,

2018b). This public health crisis reflects the state’s failure to protect its most vulnerable

populations (Rawls 1971).

The illicit alcohol trade in South Africa, dominated by high-risk spirits (81%) due to

their high profit margins and ease of counterfeiting, presents a serious health and

governance threat (Allen 2020; Witt and Nagy 2021). Although beer constitutes only

5.5% of the global illicit alcohol volume, blanket regulatory tools like tax stamps

disproportionately target it, failing to curb the most dangerous segments of the market

(Allen 2020). Methanol poisoning represents a serious global health threat. A multi-

Siyabonga P. Hadebe, 2025

country review estimated over 750 deaths and 4,300 hospitalisations between 2015 and

2020 (Manning and Kowalska 2021). In South Africa, the actual scale of the crisis is

likely understated due to weak surveillance, which imposes long-term costs on healthcare

systems and household livelihoods. In addition, the overall impact of alcohol

consumption remains high in the country and is responsible for fatal road accidents

(Vellios et al. 2024).

Many countries implement targeted regulatory measures to address the challenge of

illicit trade. The Republic of Ireland’s Public Health (Alcohol) Act (2018), for example,

bans the advertising of alcohol, including online advertising and marketing, in line with

the WHO to reduce alcohol harm (Doyle 2022; WHO 2024). Despite such measures,

significant enforcement gaps remain and countries lose considerable tax revenue to

criminal organisations that exploit weaknesses in tax systems and law enforcement

(EUIPO 2016). However, these measures can blur the line between legal and illegal

ethanol supply chains and undermine the role and authority of government (OECD 2016,

2022).

Siyabonga P. Hadebe, 2025

Indicator

Illicit Alcohol

Illicit Tobacco

Extortion

Economies

Market Value

(ZAR)

ZAR 25.1 bn

(31%-60% at 2022)

industry-linked upper-

bound estimate

ZAR 20.5 – 23.5 billion

(23%-39% at 2022)

range reflecting

methodological dispute

No reliable national

valuation.

Source & Year

DFSA (2025); TRACIT

(2025a); Vellios et al.

(2024);

TRACIT (2021, 2025a); Van

der Zee et al. (2020)

Irish-Qhobosheane

(2024a; 2024b)

Methodology

Notes

Industry-funded study

combining tax-gap

analysis, consumption

data and field

research; treated as

upper-bound

Lower bound from peer-

reviewed academic survey

data; upper bound

from industry-funded seizure

and empty-pack surveys

Estimate based on field

interviews, reported

cases and extrapolation

from known extortion

rates in Cape Town's

construction and retail

sectors; no national

baseline available

Economy-wide

Contextual

Revenue-Loss

Magnitude

(Illicit Economy)

~ZAR 100 bn (SARS

2020) - indicative

economy-wide

magnitude cited in a

SARS presentation; not

a formal tax-gap series

~ZAR 100 bn (SARS 2020) -

indicative economy-wide

magnitude cited in a SARS

presentation; not a formal

tax-gap series

n/a

Sector-specific

Revenue Loss

(Annual,

Illustrative

Upper-Bound)

~ZAR 11.3 bn

(TRACIT 2025a)

~ZAR 18 bn

(TRACIT 2025a)

Not quantified

Sector-specific

Revenue Loss

(Cumulative,

Peer-Reviewed)

n/a

~ZAR 119 bn cumulative

(2002–2022) excise + VAT

revenue lost due to illicit

cigarettes (Vellios and van

Walbeek 2024)

n/a

Primary Driver

Affordability (high tax

rates & price

differentials); COVID-

19 sales bans.

Historical market share

growth, exacerbated by the

2020 sales ban

Territorial control and

exploitation of

governance voids

Source & Year

Parry (2025); Witt &

Nagy (2022)

Pitt & van Dyk (2023); Van

der Zee et al. (2020);

Irish-Qhobosheane

(2024b)

Table 2: Fiscal Impacts of Illicit Markets

The COVID-19 pandemic escalated the consumption of illicit alcohol in countries like

South Africa and India, where virus containment policies prohibited the sale of legal

alcohol, leading to a surge in black-market activity (Witt and Nagy 2021). Beyond the

health impacts, the fiscal haemorrhage caused by illicit trade is substantial. As shown in

Table 2, sector-specific fiscal losses are substantial but uncertain, with peer-reviewed

Siyabonga P. Hadebe, 2025

estimates confirming significant revenue erosion (Vellios and van Walbeek 2024).

Industry-linked assessments place upper-bound values at approximately ZAR 11.3 billion

for alcohol and ZAR 18 billion for tobacco, which are used illustratively rather than as

baseline magnitudes (TRACIT 2025a). These sector-specific losses must be

contextualised within a larger crisis.

As established in Section 4, SARS has cited an economy-wide revenue loss associated

with the illicit economy of approximately ZAR 100 billion. This paper does not treat that

figure as a formal ‘tax gap’ series. Separately, Vellios and van Walbeek (2024) estimate

that cumulative excise and VAT revenue lost due to illicit cigarettes amounted to

about ZAR 119 billion over 2002–2022, underscoring the material fiscal impact of illegal

tobacco within the broader context of revenue loss. The illicit alcohol and tobacco trades

are thus significant, measurable contributors to this broader fiscal crisis, which deprives

the state of capacity and hampers its ability to provide services and uphold the social

contract.

As Allen (2020) demonstrates, industry-supported proposals such as beer tax stamps

risk misallocating enforcement capacity, increasing compliance costs in a low-risk

segment while leaving high-risk ethanol diversion largely untouched. This assessment

is reinforced and strategically framed in submissions by industry-funded bodies such as

the DFSA, reflecting their positions within ongoing fiscal policy debates. This practice

also fuels extortion activities in Cape Town. Sudden or excessively high tax hikes, such

as during the pandemic, prompt consumers to seek unsafe alternatives (Witt and Nagy

2021). Taxation changes should promote a market aligned with public health and

economic goals, with duties adjusted for inflation. There is potential for tax reform to

narrow the price gap between illegal and legal products, eliminating incentives for black-

market entry. Evidence from South Africa’s immediate post-prohibition period

demonstrated that illicit sellers could suppress legal prices, underscoring the need for

price parity to curb illicit demand effectively. A similar dynamic was observed in the

tobacco sector during the 2020 lockdown, when illegal tobacco sales increased (Pitt and

Van Dyk 2023). Consequently, developing effective alcohol tax policies requires

vigorous law enforcement and awareness initiatives to balance public health, fiscal

objectives and market regulation (Witt and Nagy 2021).

9. Ethical Governance Pathways: From Repression to Integration

Reforming governance requires a shift from punitive systems to inclusive frameworks

centred on justice, equity and human dignity. Five interlinked pathways for ethical

reform, ranging from fiscal justice and enforcement realignment to institutional

accountability and social contract reconstruction, are recommended to reimagine the state

as a facilitator of integration rather than an agent of repression. The overarching

framework for this differentiated approach is presented in Figure 3. The model illustrates

the necessary policy responses to different types of economic activity, moving from

undifferentiated repression to targeted integration and enforcement.

Siyabonga P. Hadebe, 2025

Figure 3: A Framework for Differentiated Governance of the Informal-Illicit Nexus

9.1. Tax and Regulatory Justice: Decolonising Fiscal Governance

Post-colonial tax systems should introduce gradual excise reforms, adjusted for

inflation and wage growth, to prevent price shocks that disproportionately burden low-

income communities (Boswell 2016; Gwaindepi 2022). As outlined in the integrative

pathway of Figure 3, differentiated licensing should incorporate survivalist informality,

such as street vending, through simplified permits that protect traders from restrictive

corporate commercial bylaws. Furthermore, tax harmonisation in the Southern African

Development Community needs to mitigate colonial border arbitrage issues common to

many member states, particularly by imposing alcohol and tobacco duties to eliminate

smuggling linked to economic asymmetries (Irish-Qhobosheane 2024a; WHO 2024).

This proposal aligns with Allen’s (2020, 1) “sledgehammer to crack a nut” metaphor,

warning against uniform fiscal markers. Consequently, regional tax harmonisation should

exempt low-risk beer from stamp duty and impose digital tracing only on high-risk spirits,

pursuing risk-proportionate controls recommended by the WHO. These measures

confront the racialised inequities in fiscal policy, where apartheid-era spatial planning

continues to ‘other’ informal players.

A differentiated governance framework must also critically assess the regulatory

environment for survivalist informality. The City of Cape Town’s 2013 Informal Trading

Policy and 2009 By-law provide an institutional framework for integrating informal

economic actors into the city’s developmental vision (City of Cape Town 2013, 2009).

These instruments offer pathways for securing trading permits and specific licenses, such

as a “hawking in meals” licence for food vendors at a nominal cost (City of Cape Town,

Siyabonga P. Hadebe, 2025

n.d.). However, this supposed integration is immediately undermined by a key policy

inconsistency that requires a complex business licence to sell food on the street (City of

Cape Town, n.d.).

However, the requirement for a complex business licence to sell food on the street

exemplifies the bureaucratic formalisation that can be exclusionary. While promoting

food safety, this process can inadvertently criminalise those who cannot navigate its

complexity, sustaining the indeterminacy (Roy 2005) that keeps survivalist traders in a

precarious position, even as the city fights predatory extortion elsewhere. This contrast

between the fight against illicit predation and the persistence of bureaucratic barriers to

informal licit activity perfectly encapsulates the need for a more coherent and genuinely

facilitative regulatory approach.

9.2. Intelligence-Led Enforcement: Dismantling Predatory Networks

Resources must shift from policing survivalists to targeting the ethanol diversion

networks that supply criminal syndicates. Community policing models, capable of

distinguishing meth labs from homebrewers, can exploit local knowledge while

rebuilding trust damaged by militarised enforcement (Irish-Qhobosheane 2024a). Cross-

border coordination with neighbouring countries will disrupt trafficking routes stemming

from colonial border fragmentation. This shifts the enforcement landscape away from the

spaces marked as informal settlements to the more pressing target of dismantling Cape

Town’s multi-billion rand extortion economies established by gangs replicating

extractivist colonial practices through “protection” rackets (Irish-Qhobosheane 2024a, 3).

Furthermore, an intelligence-led enforcement strategy should prioritise state-controlled,

independent track-and-trace systems for high-risk sectors like tobacco and spirits,

avoiding the pitfalls of easily manipulated, industry-controlled solutions (WHO 2023;

Van der Zee et al. 2020).

Recent initiatives at the sub-national level demonstrate a growing recognition of the

need for this intelligence-led, collaborative model. The 2025 Western Cape Anti-

Extortion Summit culminated in a commitment to establish a multi-sectoral structure

focused on combating extortion, improving data sharing and enforcing a pre-existing

collaboration agreement between the Western Cape Government, the South African

Police Service (SAPS) and the City of Cape Town (Western Cape Government 2025).

This aligns directly with the recommended pathway of integrating law enforcement,

government and business intelligence to dismantle networks. Premier Winde himself tied

the success of such efforts to the need for better-resourced SAPS crime intelligence and

a capacitated National Prosecuting Authority, underscoring the critical link between local

action and national capacity that this framework envisions.

Siyabonga P. Hadebe, 2025

9.3. Livelihood-Centred Formalisation: Reparative Pathways

An amnesty for unregistered traders should, as a recognition of the state’s role in their

marginalisation, include a waiver of retroactive penalties. Analogous to Thailand’s

informal worker identity cards, such arrangements would grant immediate access to social

protection and healthcare, decoupling fundamental rights from formal employment status.

In the Thai model, individuals can access health, accident and pension benefits through

the Social Security Fund (SSF) without demonstrating formal employment status (Komin

et al. 2024). Bangkok street vendors and motorcycle taxi drivers reported that SSF

benefits, such as sick leave compensation, support their livelihoods when they are unable

to work due to injury. However, implementation of the programme encountered obstacles,

including very low benefit levels and bureaucratic complexity in claims processing after

injury (Komin et al. 2024). These interventions reject neoliberal conditionalities. Instead,

applying Fanon’s (1963) critique, they centre the “wretched of the earth” in policy design,

prioritising human survival and livelihood security over market-driven bureaucratic

compliance.

9.4. Institutional Reforms: Confronting State Capture

Implementing the recommendations of the Zondo Commission (2022) to prosecute

1,438 implicated entities is critical to disrupting the corrupt syndicates that allow illicit

trade to flourish. Extortion task forces cannot simply prosecute illegal traders, but they

must also dismantle local criminal economies. This is likely to involve asset forfeiture

and targeting the so-called “construction mafia,” which controls infrastructure projects

(Irish-Qhobosheane 2024a; WHO 2024). In public health governance, the parallel

reforms should include strict implementation of the WHO Global Alcohol Action Plan

2022–2030 and its call for countries to be free of conflicts of interest to protect health

policy from “commercial and other vested interests that can interfere with and undermine

public health objectives” (WHO 2024, 10). These steps directly confront what Mamdani

(1996, 24) terms “decentralised despotism,” remoulding institutions as sites of redress

rather than repression.

9.5. Ethical Integration: Toward a Post-Social Contract

Collectively, these reforms can reshape economic governance towards redistributive

justice. In particular, by protecting artisanal producers and actively dismantling criminal

syndicates, the state can begin to challenge the colonial paradigm that regards poverty as

a criminal offence (Gwaindepi 2022). The WHO’s “health in all policies” approach must

extend to informal economies, ensuring development frameworks embrace survivalist

activities and promote inclusion over marginalisation (Green et al. 2021). Only through

such differentiation can the state shift from an instrument of extraction to an architect of

inclusive legitimacy. In this transition, it aligns with Samans’ (2024, 241) ‘Roosevelt

Siyabonga P. Hadebe, 2025

Consensus,’ which advocates for an economic governance framework prioritising living

standards over the Washington Consensus. This includes support for tax justice, which

recognises livelihoods as equal to household welfare and fiscal stability.

10. Conclusion: Reimagining State Legitimacy in the Shadows

The analysis confirms that the crisis of state legitimacy in South Africa is deeply

connected to its uniform governance of the informal-illicit nexus. The journey from

ethical frameworks to colonial continuities and empirical case studies demonstrates that

state-engineered ambiguity is not a passive failure but an active mode of governance with

severe consequences. The cases of COVID-19 prohibitions and Cape Town's extortion

economies, though different in origin, are two sides of the same coin: a state that cannot

distinguish between survival and predation ultimately enables the latter and criminalises

the former. This conflation imposes a measurable cost. As the econometric evidence of

Ngarava et al. (2022) demonstrated, undifferentiated policies such as the sales bans create

structural breaks and volatility that predatory networks are uniquely able to exploit. The

outcome is a vicious cycle: fiscal haemorrhage, public health crises and the further

erosion of the very trust needed for effective governance.

The way out of this cycle is the ethically and operationally distinct framework proposed

in Section 9. This is not merely a policy checklist but a pathway to redefining state

sovereignty. The state gains the ability to integrate survivalists by decolonising fiscal

governance with simplified permits and risk-based taxation. Simultaneously, it reclaims

its monopoly on force by focusing enforcement on intelligence-led operations to

dismantle predatory networks. Success in either area is contingent on the other. The

ultimate goal is moving from a state that relies on repression and ambiguity to one that

builds legitimacy through recognition and integration. This transformation requires

recognising the statistical visibility of informal work not as a technical task, but as a

political commitment to economic citizenship. A reimagined social contract must be

founded on this sense of distributive justice, acknowledging the epistemic agency of

informal workers while systematically breaking the links between criminal capital and

state structures.

In summary, this analysis contends that the conflation of the informal and illicit

economies is not a market failure to be corrected but a symptom of a systemic governance

failure that demands fundamental change. The proposed differentiated governance

framework is more than policy; it is a mechanism for political accountability. This

governance would compel the state to clarify whether to protect or condemn, not only

regulating informality in the economy but also forcing the state to confront the colonial

and exclusionary roots of its authority. Consequently, the true measure of success will not

be merely reducing the informal economy but developing a state whose power relies on

radical inclusion rather than strategic ambiguity, and whose legitimacy affirms the

inherent dignity of all economic pursuits.

Siyabonga P. Hadebe, 2025

Funding

No funding was received for conducting this study.

Conflicts of interest/Competing interests

The author states that there is no conflict of interest. The funders had no role in the design of

the study; in the collection, analyses, or interpretation of data; in the writing of the manuscript, or

in the decision to publish the results.

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Appendix A: Data, Sources and Methodological Note

This appendix provides a comprehensive overview of the data and methodology

employed in this study to ensure complete transparency and replicability. It details the

variables used, the rationale for case selection, the criteria for evaluating sources and the

step-by-step protocol for harmonising data.

A1. Case Study Selection Rationale

The two primary case studies were selected through a purposive sampling strategy

based on their paradigmatic value in illustrating the core thesis of differentiated

governance. They represent two distinct nodes within the informal-illicit nexus and were

chosen to provide depth and analytical leverage. These cases are detailed as follows:

COVID-19 Prohibitions (2020): This case was selected as a critical juncture that

exposed the state’s failure to differentiate between survivalist and predatory actors. It

serves as a clear example of policy-driven conflation, where well-intentioned public

health measures inadvertently criminalised survivalist activities, including homebrewing,

while creating massive profit opportunities for predatory syndicates. The case enables a

before-and-after analysis of market shifts, tax revenue loss, and the erosion of state

legitimacy, providing measurable evidence of the consequences of undifferentiated

governance.

Cape Town Extortion Economies (2023-2024): This case was selected as an illustrative

example of a mature predatory illicit economy. It demonstrates the end-state of

institutional decay and the operationalisation of state-crafted terrain. Unlike the COVID-

19 case, which was triggered by a sudden policy shock, the extortion economies show

how illicit trade becomes entrenched through violence, corruption and the exploitation of

persistent governance voids. This case study illustrates the predator-prey dynamic and the

direct challenge predatory networks pose to the state’s monopoly on violence and

authority.

Siyabonga P. Hadebe, 2025

Together, these cases provide a complementary analysis where one demonstrates

the process of conflation and the other shows its long-term structural consequences.

A2. Data Harmonisation Protocol

A core principle of this study is to prioritise the integrity of source data while ensuring

comparability. The following multi-step protocol was applied to all quantitative data:

(a) Source Acquisition and Recording - All data points were recorded with their

original value, unit of measurement, primary source, and, critically, the year of

data collection (for example, ZAR 25.1 bn illicit alcohol for 2024 (DFSA 2025)).

(b) Temporal Contextualisation - No monetary values were adjusted for inflation.

Presenting figures as reported preserves the integrity of the original

methodologies and contextualises them within their specific economic moment.

This approach avoids imposing a single adjustment formula that may be

unsuitable for all data types.

(i) When sources presented conflicting figures for the same metric (for

example, illicit tobacco market share), the Source Hierarchy (A3) was

applied to determine precedence.

(ii) If conflicting sources were of similar standing (for example, two peer-

reviewed studies), the data were presented as a range (for example, 20.1 -

23.5 billion ZAR) to reflect methodological uncertainty and scholarly

debate transparently.

(d) Unit Standardisation - All monetary values were presented in South African

Rand (ZAR) for consistency, while those in other currencies (such as USD) are

reported as per the source. The figures are generally used to strengthen findings,

not generate a quantitative study.

Siyabonga P. Hadebe, 2025

A3. Source Hierarchy and Conflict Adjudication

To ensure the use of robust and reliable evidence, a clear hierarchy was established for

adjudicating between data sources. The following criteria were used to evaluate each

source: methodological transparency, independence from vested interests, peer-review

status and alignment with established statistical standards.

The resulting hierarchy, from most to least preferred, is as follows:

(1) Primary data from official national institutions, including Statistics South Africa

(StatsSA) and South African Revenue Service (SARS).

(2) Peer-reviewed academic studies, such as research published in journals

like Tobacco Control and World Development.

(3) Reports from international organisations, such as the OECD, World Bank and

WHO.

(4) Research from reputable, independent NGOs, such as the Global Initiative

Against Transnational Organised Crime (GI-TOC).

(5) Industry-funded or commissioned reports, including the Drinks Federation SA

(DFSA) and Transnational Alliance to Combat Illicit Trade (TRACIT). These are

used cautiously, always flagged as such, and typically to illustrate a perspective

rather than to establish a definitive fact.

(6) Quality Journalism was used only for specific examples or quotes, not for core

statistical claims. All such claims were traced to primary sources where possible.

A4. Codebook of Key Variables

This codebook provides precise definitions for the key quantitative variables used in

the analysis.

Siyabonga P. Hadebe, 2025

Variable Name

Definition

Unit of

Measurement

Primary

Source(s)

Official

Unemployment Rate

The percentage of the labour force

(persons aged 15-64) that is without

work, has taken active steps to find

work in the last four weeks, and is

available to work.

% of labour

force

Statistics South

Africa, QLFS

Informal Sector

Employment (Strict)

The number of persons employed in

businesses that are unregistered or

have fewer than five employees.

Number; % of

total

employment

Statistics South

Africa, QLFS

Informal Livelihoods

(Broad)

A broader estimate including

informal business owners, their

dependents, and those engaged in

informal work outside the strict

‘sector’ definition.

Number of

people sustained

FinMark Trust

Informal Sector

Contribution to GDP

The value added by informal sector

enterprises, measured via production

and income approaches.

ZAR (billions);

% of GDP

Statistics South

Africa

Illicit Market Value

The estimated total annual revenue

generated by the illegal trade of a

specific good (e.g., alcohol, tobacco).

ZAR (billions)

DFSA; TRACIT;

National Treasury

Annual Tax Loss

The estimated annual shortfall in

government revenue directly

attributable to the illicit market,

calculated by applying prevailing tax

rates to the estimated illicit market

value.

ZAR (billions)

National

Treasury; SARS

Shadow Economy

(% of GDP)

All unreported economic activity.

Not directly comparable to StatsSA’s

production-side estimate.

% of GDP

National

Treasury; SARS

Table A4.1: Key Variables