Following Money: South Africa’s Trade Gaps Point to Possible Illicit Flows

The researchers used the International Trade Centre’s TradeMap database to study trade figures every three months from 2011 to 2025, comparing what South Africa reported buying and selling with the records of its trading partners.

A shipment leaving South Africa should leave a matching trail in the importing country's records, making differences between the two accounts a useful starting point for investigating suspicious trade. Research published in Risks, titled 'Estimation and Analysis of Trade-Based Money Laundering Using Mirror Trade Data: The Case of South Africa,' examines these gaps across the country's trade with African partners and the European Union.

William Gaviyau and Jethro Godi of the University of South Africa find sharply different patterns between the two trading relationships, with discrepancies suggesting possible outward movements of capital through African trade and inward movements through EU exports. The findings identify areas needing investigation, rather than proving that the money involved was laundered.

How Trade Records Can Reveal Warning Signs

The researchers used the International Trade Centre's TradeMap database to study trade figures every three months from 2011 to 2025, comparing what South Africa reported buying and selling with the records of its trading partners. They measured all values in US dollars and applied a standard 10% adjustment because import prices include shipping and insurance costs, which export prices usually exclude. South Africa was chosen because of its important role in the regional economy, its major ports and its trade links with many countries.

The team checked differences in export and import records separately before combining them into one figure. A positive gap in one set of records can cancel out a negative gap in the other, making the overall difference look small even when large gaps need investigation. The study highlights how clear trade records, effective checks and cooperation between authorities and financial institutions can help identify possible financial crime.

African Trade Shows Signs of Capital Leaving

South Africa's exports to African partners showed an average quarterly mismatch of approximately minus $0.5 million, a pattern the authors associate with export under-invoicing and possible capital flight. Its imports showed an average positive mismatch of about $0.5 million, consistent with import over-invoicing, another potential route for moving money abroad. The combined quarterly average was close to zero, at minus $0.1 million, despite substantial fluctuations ranging from minus $6.1 million to positive $5.9 million.

The annual combined indicator reached a positive peak of roughly $20 million around 2011–2012, remained comparatively subdued during much of 2013–2020 and moved towards minus $20 million by 2025. Export discrepancies became increasingly negative from early 2020, reaching roughly minus $4 million to minus $5 million per quarter by 2025. The authors discuss economic instability, currency depreciation and political uncertainty as possible incentives for moving capital abroad, although their analysis does not test whether these factors caused the observed changes.

The paper contains a difference in emphasis that matters when interpreting the African findings. Its conclusion identifies import over-invoicing as the main mechanism, but its detailed analysis highlights export under-invoicing as the major driver of the decline after 2020. Both patterns appear in the results, supporting closer examination of imports and exports rather than treating one mechanism as definitively established.

EU Trade Follows a Different Pattern

Trade with the European Union produced a larger positive export mismatch, averaging approximately $2.6 million per quarter, which the researchers interpret as consistent with export over-invoicing and possible illicit funds entering South Africa. The average import mismatch was around positive $0.5 million, matching the African estimate. The combined quarterly indicator averaged $3.2 million and ranged from $0.4 million to $9.1 million, remaining positive throughout the period.

Annual combined discrepancies were approximately $5 million to $11 million during 2011–2015 and $8 million to $13 million during 2016–2022, with some dips within those periods. Estimates rose to roughly $18 million to $29 million annually during 2023–2025. Export mismatches, previously around $1 million to $3 million per quarter, exceeded $8 million in the first quarter of 2025, making exports the main source of the recent increase.

The African and EU indicators were separated by about $15 million in the first quarter of 2025, illustrating how different the two trading relationships had become. The paper notes that the widening gaps coincided with disruptions surrounding the pandemic, the Russia–Ukraine war and South Africa's period of increased international anti-money-laundering monitoring, without establishing causation. Opposing patterns could raise questions about money leaving through one route and returning through another, known as roundtripping, but the study explicitly says its evidence is insufficient to establish such a connection.

Better Checks Depend on Better Evidence

The authors recommend that customs officials, banks and law enforcement agencies share more information within and between countries to help spot suspicious trade. Staff who handle trade documents need training to recognise unusual invoices and shipping records, and automated systems could flag transactions that seem out of place for a customer's business. Checks should reflect the risks in each trading relationship, with closer attention to South Africa's exports to the EU and its imports and exports with African countries.

The researchers used the same 10% adjustment for shipping and insurance costs across all routes, even though actual costs differ, which could make the calculated gaps appear smaller. They used only TradeMap data without checking other databases and did not account for goods being exported again, passing through another country or being recorded under the wrong product category. These factors can create differences in trade records without any crime taking place, so the figures alone cannot prove money laundering.