South Africa’s shadow economy set to rise by 2025

South Africa is set to fail on reducing the size of its ‘shadow economy’—the production of and trade in legal goods and services that are deliberately and often illegally concealed from public authorities—by 2025, according to a new study from ACCA (the Association of Chartered Certified Accountants).

Emerging from the shadows: the shadow economy to 2025, estimates that the shadow economy represented 23.29% of GDP in 2016 – totalling an approximate ZAR 1,000bn. This is forecast to rise to 24.19% of GDP by 2025.

The global average is expected to fall from 22.5% to 21.39% of GDP over the same period.

‘The prevalence of shadow economy activity creates considerable practical and ethical issues for both business and government,’ said Pat Semenya, head of ACCA South Africa.

‘There was a decrease in the overall size of South Africa’s shadow economy’s share of GDP since 2011; a positive sign that efforts to curb its impact have been implemented in recent years. But that’s the end of the good news as the future trend is profoundly opposite,’ Semenya continues.

South Africa’s current shadow economy level is higher than the global average. Despite increasing access to education and training via private sector provision, global inequality (whilst not increasing) and unemployment are still very high, showcasing the need for more effective strategies to tackle it.’ Faye Chua, Head of Business Insights at ACCA says,

The shadow economy presents an enormous challenge for society and a huge potentiaopportunity for the profession to play an active role across the entire value chain from measurement and monitoring through to helping shadow firms and individuals manage their financial affairs and possibly make the transition from informal to formal.

 ‘Effective management of the shadow economy requires action at all levels – government, cities, local communities and individuals.

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