Assessing Potential Trade Misinvoicing and Data Quality Issues in South African Exports

Trade misinvoicing — the deliberate falsification of volumes, values or classifications of traded goods by at least one party in an international transaction — can undermine the accuracy of trade data, erode a country’s tax base, or facilitate illicit financial flows. South Africa has been flagged as one of the world’s largest sources of illicit financial flows from illicit trade, cross‐border laundering and mineral smuggling. Data availability however makes it difficult to assess this empirically. We compare South Africa’s reported ex‐ port and global counterpart import data to quantify the potential scale of export misinvoicing in South Africa. We show that the data suggest that there has been systematic under‐invoicing of South African commodity exports. However, we also highlight data limitations that constrain accurate assessment of trade misinvoicing. The scale of possible misinvoicing is significant. If taken literally, our findings suggests substantial foregone mineral royalties for the South African fiscus. Our back‐of‐the‐envelope estimates range between R30 to R50 billion for the period 2015‐2024. Our estimates of foregone fiscal revenue suggest that investing in capacity to monitor trade misinvoicing would therefore be self‐funding.