Surge in illegal cigarette trade in SA, new study finds

07 July 2021 - 12:05 By nivashni nair
Research by Ipsos, commissioned by British American Tobacco, found illegal cigarettes on sale in two out of five shops. Stock photo.
Research by Ipsos, commissioned by British American Tobacco, found illegal cigarettes on sale in two out of five shops. Stock photo.
Image: 123rf.com/marcbruxelle

Undercover shoppers who asked for the cheapest cigarettes available found that illicit products have flooded SA.

Research by Ipsos, commissioned by British American Tobacco, found illegal cigarettes on sale in two out of five shops. The cheapest pack of 20 cost just R6, less than a third of the minimum tax rate on a legal pack.

The independent market research agency found that SA’s illicit tobacco trade has surged to unprecedented levels as manufacturers flood shops across the country with untaxed cigarettes.

British American Tobacco South Africa (Batsa) general manager Johnny Moloto said the research was “damning proof that authorities have failed to bring SA’s colossal criminal market in cigarettes under control”.

“Tax-evading manufacturers who exploited last year’s lockdown ban are now running rampant and costing South Africans huge sums of money at a time when every cent is a lifesaver. It is nothing short of a national emergency that demands a full-scale inquiry into the whole industry,” he said.

The survey, the third on this subject this year, found that the number of shops selling illegal cigarettes in the Eastern Cape more than doubled in just four months since the last time results were released.

In KwaZulu-Natal the rate shot up by a third, while two out of three shops in the hotspot provinces of the Free State, Gauteng and the Western Cape sold illegal cigarettes.

According to the research, illegal cigarettes were on sale in nearly half of all shops nationwide and five times as many outlets on petrol forecourts now sold illegal cigarettes since the last time results were released.

Brands owned by or licensed to Gold Leaf Tobacco Corporation (GLTC) continued to win the illegal price war, with the number of its SA brands purchased below the minimum collectible tax (MCT) rising by 25%.

SA must introduce a comprehensive track-and-trace system to stamp out this brazen criminality once and for all.
Johnny Moloto, Batsa GM

The incidence of brands owned by or licensed to Carnilinx, a member of the Fair-Trade Independent Tobacco Association (Fita), bought below the MCT, increased by a third.

There was a threefold increase in brands owned by or licensed to Fita-member Protobac being sold below the MCT.

“The bulk of the illicit tobacco problem in SA clearly has local origins, as the report demonstrates. It demands justice and that necessitates an immediate commission of inquiry into the tobacco market in SA,” Moloto said.

“Sars commissioner Edward Kieswetter has said withholding tax to punish government for poor service delivery or corruption will really punish South Africa’s poor and vulnerable.”

He urged the SA Revenue Service and the government to ensure compliance of all manufacturers with Sars production counter rules and immediately introduce a minimum retail sales price of R28 for a pack of 20.

“The government should finally ratify the WHO Illicit Trade Protocol to fight illicit trade. SA must introduce a comprehensive track-and-trace system to stamp out this brazen criminality once and for all.”

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