Funding SARS a priority - Commissioner Johnstone Makhubu

South Africa's tax authority faces a critical infrastructure funding gap that threatens to undermine the country's battle against illicit trade. SARS Commissioner Johnstone Makhubu has publicly flagged that combating the shadow economy—which costs the fiscus billions annually—requires substantial capital investment that the agency currently lacks.

The scale of the challenge is staggering. Makhubu estimates that border scanning technology alone requires **R3.6 billion** in upfront infrastructure spending, with individual scanners costing R180 million each. This represents the largest single constraint on SARS's ability to detect and prevent smuggled goods, counterfeit fuel, and illicit commodities crossing South Africa's porous borders.

## What is driving SARS's infrastructure crisis?

The illicit economy operates on two fronts: domestic adulteration operations—such as plants mixing contaminated petrol that poses health risks—and cross-border smuggling networks. SARS has made incremental progress against localized operations, but lacks the technological backbone to scale enforcement at ports of entry. The agency's fragmented systems across multiple border checkpoints prevent real-time intelligence sharing and coordinated interdiction. Without integrated scanning infrastructure, customs officers operate blind, unable to identify high-risk shipments or flag suspicious patterns.

## Why is border funding a political priority now?

Commissioner Makhubu's candid admission reflects shifting political pressure. South Africa's revenue collection has underperformed for five consecutive quarters, partly due to VAT leakage from illicit trade. The IMF and international credit ratings agencies have flagged tax collection efficiency as a weakness in South Africa's fiscal framework. By framing scanner infrastructure as a "priority," Makhubu is signaling to Treasury and Parliament that this is not discretionary spending—it is essential to reverse revenue hemorrhaging.

Additionally, the illicit fuel trade has become a public health issue. Adulterated petrol damages vehicles and creates environmental hazards, shifting the debate beyond tax compliance into consumer protection and health security.

## How can SARS realistically close the capacity gap?

Makhubu has also revealed a second constraint: investigative staffing. SARS lacks sufficient personnel to pursue complex high-profile non-compliance cases, meaning even when contraband is detected, follow-up prosecution capacity is limited. This creates a bottleneck. The agency cannot scale enforcement through technology alone; it requires trained investigators, forensic accountants, and prosecutors capable of building cases against organized smuggling networks and tax evaders.

The solution requires multi-agency integration. Border scanning systems must connect SARS databases with South African Police Service (SAPS), the National Revenue Service, and regional customs bodies across SADC. This demands not just capital expenditure, but operational governance frameworks—currently absent.

**Market implications:** If SARS secures supplementary budget allocation in the 2026/27 fiscal year, expect procurement tenders for border technology vendors (likely Siemens, Smiths Detection, or Analogic). Conversely, underfunding signals continued VAT leakage, pushing the tax burden onto compliant enterprises and eroding South Africa's competitiveness.

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