The Cost of the Black Market

We are not referring to race but evaluating the cost of trading in illicit goods. Mainly because of lockdown restrictions, bribery, and nepotism.

Family members will never hold you to task when you are employing them in business, corporate, or government. It is almost expected practice in Africa, where families run governments for decades.

It is only ever suitable for the family involved and their cronies. A lack of compliance and accountability is usually the start of the demise of a business, government, or country.

Ethical business

Running a business with a lack of ethics, fairness, and compliance is not the goal. Focusing on developing best practice, submitting tax returns, and even training up and coming employees should be.

The Covid-19 pandemic has highlighted how many South African businesses were not compliant. The volume of companies registered with CIPC, paying UIF, or even recorded to pay tax or VAT was enormous.

When it came time to claim some relief, the employers and employees were left out in the cold. But you cannot claim for something you have never paid for.

What happens then is individuals and companies resort to illegal trading. Restaurants and bottle store owners, in desperation, have been selling their stock of wine and beers under the table to friends and family. Maybe even a brave client. The stock is then resold a few times to some desperate consumers at inflated prices.

Bad for Business

The downfall to all of this is that the stock is not put through the business books for fear of being arrested while trying to pay the bills. The amount of tax and VAT that the South African Government is losing out on during all of this illicit trade is insane.

While many are quite keen to avoid paying as much tax as possible, this has a knock-on effect in government support of small businesses. Take into account UIF, Ters, maintenance, hospital supplies, etc.

In the short term, it may fund the bills and put food on the table, but the long term effects of this tax evasion, under the table business dealing and illicit trade, is not doing the country any good.

Once the channels have been opened, it is challenging to get consumers and businesses to become loyal taxpayers again with the temptation so big to carry on doing dodgy business.

The downfall of not ensuring sales are done correctly, comes when you want to:

  • Lend money for Expansion
  • Manage cashflow with Invoice discounting
  • Sell the business

It is not worth the heartache and missed opportunities in the long run.

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