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Lockdown: The daily hustle of the booming black market

Marketed largely through WhatsApp.
The South African economy is going up in smoke. Image: Reuters/Rogan Ward

There’s almost no point calling it the black market because it’s pretty visible to just about anyone who cares to look.

On a Friday afternoon, two suburbans leave the leafy streets of Bryanston and make their way to Soweto to buy alcohol.

Ask why, and they openly tell you that that’s where their latest ‘plug’ (connection) is.

The journey to quench the ‘thirst’ for alcohol starts with a WhatsApp text that includes the latest pricelist of the types of alcohol available. The selection changes every week, as suppliers sell whatever they have been able to get their hands on.

If you take too long to decide whether you want to make a purchase, say a few hours, you might just find it out of stock — that’s how fast merchandise moves in the underground economy during the coronavirus lockdown.

Read: President rejects call to lift alcohol ban

You might think there would be a stock clearance sale, but there isn’t. Prices are inflated by 100% or more compared with the usual retail price, and consumers are willing to empty their pockets to get their ‘fix’.

And in truth, it’s really not that much of a hassle for the consumers.

“The experience was easier than we anticipated,” said one of the buyers I spoke to. “The supplier got alcohol from another supplier, and they do drop-offs to clients.

Read: Here’s how South Africans are dodging virus alcohol ban

The buyer believes the supplier is clearly making a lot of money from this trade and that there’s a demand, adding that it’s inundated with clients wanting drop-offs.

This ‘willing buyer’ did not mind travelling to Soweto to buy an unknown brand of gin for R300 and three litres of Fourth Street wine for R200 because in the suburbs “it costs R450”.

A typical black market pricelist in the time of Covid-19. Note, the above prices of ready-to-drink beverages are per bottle. Image: Supplied

In the black market, whether you are a supplier, the go-between or a consumer, it’s not that easy to get stock due to the lockdown regulations and the fact that police are roaming the streets looking for those who dare to defy the new law that prohibits the selling and buying of alcohol and tobacco. But where there is a will, there is a way.…

Word-of-mouth approach (not always successful) Image: Supplied

Black market liquor and tobacco entrepreneur Rakhir Patel [not his real name] is running a successful business from his apartment thanks to the lockdown regulations.

Aware that the regulations would prevent him from continuing with his usual job in sales, and anticipating that people would run of their ‘poison of choice’ prior to the lockdown being lifted, he stocked up on alcohol and cigarettes before lockdown came into effect on March 27. But his stock soon ran out, and he had to look for suppliers.

“Depending on the supplier, like when the ban first started, it was easy to find stock because most people had and were willing to sell their stock,” he told Moneyweb.

“As the lockdown continued and the supply ran low it started getting much harder, and now we try to find a new supplier every day because if you do find one, that supplier will only be able to supply you once-off due to no more stock availability.

Read: BAT drops plan to sue over cigarette-sales ban

“Sometimes we go for weeks without new suppliers who will give you a reasonable price,” he said.

“Most of the suppliers want to sell [cigarettes] to you for R1 200 per carton, which is madness.”

Willing buyer, willing seller …. Some black market customers don’t even try to negotiate. Image: Supplied

And when stock does become available, he said, it is gone within minutes.

“Once we do get stock for the right price and advertise it, the stock is sold out within the same day – and the search for a new supplier begins the next day,” said Patel.

“This is for your higher-priced brands of stock [cigarettes]. There is cheaper stock available on the lower brands, estimated to be around R600 a carton – which is still madness.”

If this prospective customer was trying to negotiate a better deal, their words fell on deaf ears. Image: Supplied

But Patel himself understands that demand has increased, and that equals more money for him.

“Most people are now smoking the cheaper brands just to survive,” he said.

Patel is not the only one trying to make some money from this lockdown.

Those with taverns, pubs and home cellars are trying to get rid of their stock in order to generate some income during this time when the economy is on halt.

Law enforcement

National police spokesman Brigadier Vishnu Naidoo said he is not in a position to say whether or not there has been an increase in the number of ordinary civilians committing crimes by buying and selling tobacco or alcohol. But the South African Police Service (Saps) knows where the hotspots are, and they have been working towards making arrests.

“We have made arrests on the sale of liquor or cigarettes, and at times both,” said Naidoo.

“These successes were achieved from routine checks, roadblocks, the information we received, and through intelligence.”

The economics of it all

Mike Schüssler, chief economist at economists.co.za, says the black market represents about 7% of the economy as recorded by Statistics SA, but he believes it is much bigger than that, “like double or even triple the estimates.”

He says Stats SA is doing research, which he believes was to be published this year, extensively looking at the illegal economy in terms of tobacco, alcohol, gold from illegal mines, and prostitution.

Right now the black market is evidently doing far better than it was previously, and the sad reality is that none of that money will contribute positively towards the economy.

“The growth in [the trade of black market] cigarettes is not part of the economy, even if it grows,” says Schüssler.

“I think the informal economy is very important and probably did not see the decline that much as formal businesses did as they are used to operating ‘under the radar’, but I still think this part also declined as some things are just in short supply.”

The ‘good’ informal economy affected

Schüssler highlights that other parts of the informal economy that are well known have been affected by the lockdown, as many have had to shut down their operations.

“The shebeens cannot operate and taxis have fewer passengers. [The] informal [sector] took many hits, while the formal, small and medium [businesses] took bigger hits, with some sectors closed for 57 days – like travel, hotels, B&Bs and the like, while the rest of the economy is on day 47-odd,” Schüssler says.

He adds that most businesses have, on average, two months of reserves to last them, leaving some with no income once those reserves run out.

Read: Loss of ‘economic capacity’ will have lasting impact on SA’s coffers

“I suspect many will close in these categories. Even if we open the economy, the money may not be there.’

The name of the black-market dealer has been changed, as he spoke to Moneyweb on condition of anonymity. 

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COMMENTS   25

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It’s way more than alcohol and cigarettes.

After all this is there a single small business that will report a profit to SARS?

Regardless of real results I reckon they will all show SARS a loss and with zero tax to boot.

Hope Kieswetter isn’t planning on any cash from small business and / or their business owners.

Time to revise targets downwards again.

Agreed. Show me the restaurant owner in this country who doesn’t claim his household groceries as a business expense and accordingly deducts it for tax purposes. (That is if his business is registered with SARS.)

@jnrb….Good !….hope all small businesses can survive enough to make a living without paying a SINGLE cent in extortion fees [ oops,…tax ] to the current thugs in power !!!!!

I have a legal sideline business that, up to now, led me to pay a large amount in provisional tax every February and August. For the first time ever, SARS will owe me money come August 2020, and given the shocking treatment meted out to white taxpayers, from now on my business will no longer be contributing what is theoretically expected of it in terms of taxes. I see no reason to fund a regime that is openly hostile towards me.

@Incitatus – agree with your statement and we have implemented a similar business process. As a small software development company and most of our developers are contractors they have all fallen through the cracks for assistance. I have helped as much as I can but also reached the end of my credit line due to corporate’s cancelling and postponing projects indefinitely. We have not been able to raise any financial assistance through any of the relief opportunities out there.

I agree. the exclusion of “white” businesses by the cANCer will only spur on their determination to avoid tax by every ” legal” means. I forecast tax collected to be 40% below what they were banking on.

Now u need to extend that to all big bussiness that treat u hostile aswell……
Spur, KFC – with that racist manager calling for the killing of a minority group…. Woolworths – with there racist share options…. We need to start thinking where and with who we spend our money…. I’m back to spending at the smaller mom and PA / family bussiness. It may cost slightly more…. But that’s fine, my money stays circulating in my community…. Added bonuses are when these same business hire the nieghbours son, daughter ect…… This is something each one of us can do in our own community… This builds strength…. Having a strong community is worth way more than getting a 10 % discount and never to see that money to come back to u. Or yr next door nieghbour

Fully concur — Running costs have skyrocketed and capital expenditure really eats up what is left ne !!!!

Tax revolt engineered by the anc

This is what happens when you ban things like alcohol or tobacco. The same thing happens when you tax things to death. The same thing happens when you institute price controls. Empty shelves and a black market. Mankind is a very stupid beast. History is a insightful teacher but out type will not learn from it. Hubris and ignorance all the way down.

Not sure what these stubborn cadres are trying to achieve and I don’t think they even remember themselves.

Maybe it is like a peace offering to the tokoloshe? I can not think of any other logical reason why they keep shooting themselves in the foot.

Main wholesale supplier to all this contraband…

Edward Zuma (Son to NDZ)

Haibo Leah, as much as I don’t particularly like that family, do you have proof?

@ Zuluboy. On his LinkedIn profile, he lists being a director of Amalgamated Tobacco since 2011. The dots should join themselves from there.

Readers here might find of interest a book called ‘Real Lives in North Korea’, by Barbara Demick (2009).

According to the supreme leader’s regulations no-one may engage in free-market activities, since that implies that the state cannot provide in the needs of the people. But outside of party members there are bustling [and illegal] neighbourhood markets integral to the survival of ordinary folk. In fact, the black market happens to be the real market, and obtaining almost any “non-essential” good along official channels happens to be impossible.

Interesting post Rinderpes. It only goes to prove that while Communism/Socialism sounds fine in theory (at least, at first), it cannot survive without Free Enterprise/Capitalism within its very midst.

Just wait till provinces have a different lockdown level. Buy in one province and sell in another. Black market will then start booming.

I am a 68 year old Law abiding citizen. I gave up alcohol last year to help loose weight. However I am a smoker and did stock up but down to my last 4 cartons. The networks and contacts that have been made is huge at a cost and taking on extra health risk beside no revenue for SARS. In the next 2 weeks I will sadly be breaking the law to get cigarettes. I am still hoping that sanity will prevail and allow us to purchase our fix and pay our taxes.

It makes no sense and something sinister is going on.

WJS

Give up smoking as well. Good for your health and now with the ban on cigarettes it will be easier to kick the habit. I know of two acquaintances who smoked a pack a day who have successfully done just that.

Well done to all the black market operators. Showing the government one fat middle finger. I just love it.

No tax for the ANC cabal. Drop all government salaries over R20000 per month by 30%…and so goodbye to the purchased votes….

would be very interesting to find out from where does the black market guys are buying /stealing / getting their stock from – by selling the stuff they must have some or other source which can continuously provide them with it – don’t tell me they were the 5 wise virgins in this scenario and stocked up for covert19.

If Govt cannot do its constitutional duty to protect the legitimate businesses in the country and that includes formal retail, as opposed to informal retail of whatever type, that do not pay taxes, then the Govt is a black market type government, unsustainable.

obviously black people and white people are generally the worst in flouting tax laws from taxi owners to cigarette mafia to lawyers in
corporates….

They should learn to use Telegram secret chats…silly bootleggers..

End of comments.

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