R8 billion blow to SARS

The number of illegally imported vehicles is growing as the demand for affordable vehicles climbs in South Africa, and it’s costing the country’s revenue service up to R8 billion every year.

These vehicles are commonly referred to as ‘grey vehicles or imports’.

Grey vehicles are those that have been imported illegally into South Africa, without following the proper legal procedures, often bypassing customs regulations and safety standards. 

The National Association of Automobile Manufacturers of South Africa (Naamsa) reported that in 2020, R3.8 billion per annum was lost in tax due to grey imports, and this figure has now increased significantly to R8 billion.

This represents a 110% increase over the last couple of years.

Speaking at the AutoTrader Dealer Convention in May, Kia South Africa CEO Gary Scott’s estimates aligned with those of Naamsa.

Scott noted that the majority of grey imports are brought across the country’s land borders from neighbouring landlocked regions like Botswana, Lesotho, and Eswatini, where it is a much more common practice to bring in used models.

This method is commonly used to circumvent official taxes and duties on new vehicles, leading to a substantial loss of revenue for the government estimated at between R5 billion and R8 billion per year.

Currently, it is estimated that around 30,000 used vehicles are illegally brought into South Africa annually, which leads to a loss of revenue and dilutes the market for legitimate dealerships.

Naamsa added that the influx of illegal used-car imports negatively impacts local car market sales, undermines local manufacturing, technological innovation, and job creation, and aids criminal activity.

It is also estimated that illegally imported second-hand vehicles make up 7.5% of South Africa’s 12.5 million car fleet, which is 938,000 vehicles being grey imports.

While price-conscious consumers looking for a new car on the second-hand market may be less inclined to care about the revenue loss, there are other dangers associated with grey imports.

Lizette Erasmus, Manager of Insurance Expertise at IntegriSure Brokers, noted that although they might appear to be a good deal due to lower prices, they can have hidden costs and risks.

She said, “It’s crucial for consumers to be aware of the dangers associated with these vehicles.”

Firstly, Erasmus said the possession of an illegal vehicle can result in fines, vehicle seizure, and even criminal charges.

“In the event of an accident, the driver could face liability issues, and in some cases, jail time if found guilty of knowingly purchasing and using an illegal vehicle.”

Additionally, grey vehicles often do not come with a manufacturer’s warranty or after-sales support, and buyers of these vehicles are likely to face challenges in obtaining spare parts.

Another consequence is that no insurance company in South Africa will knowingly cover grey vehicles, leading to financial loss to the owner as they bear the full cost of repairs or loss due to accidents or theft.

Considering this, Erasmus first highlighted ways to find out whether a vehicle is a grey import or not.

Consumers should be vigilant and take the following steps to identify potential grey vehicles, as outlined by Erasmus:

• Check Vehicle Identification Number (VIN): Ensure the VIN matches all documentation and is not tampered with. Any discrepancies could be a red flag.

• Inspect registration papers: Ensure the vehicle has a full service history and all necessary documentation, including import papers and registration certificates.

• Microdot Verification: Microdot verification is unique to South Africa, and consumers are urged to request a microdot certificate or take the vehicle to a microdot fitment centre for verification.

• Research the seller: Purchase only from reputable dealers and perform background checks on private sellers.

• Look for unusual modifications: Be wary of vehicles with unexpected or undocumented modifications, which might indicate attempts to pass off a grey vehicle as legitimate. Be cautious if the vehicle model is not commonly found in South Africa.

• Suspiciously low prices: Prices significantly lower than the market average for similar models are often an indication that a vehicle may be illegally imported. Avoid deals that seem too good to be true.

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