British American Tobacco South Africa (Batsa) says research indicates criminals have flooded South Africa’s retail market with illicit tobacco, citing a major new study conducted by independent market researcher Ipsos.
The government lifted the ban on the sale of tobacco products in August 2020, but according to Batsa this “has done little to curb the illegal trade’s rampant growth”.
The tobacco ban was imposed by the Minister of Co-operative Governance and Traditional Affairs (Cogta) on May 28, 2020, under Regulation 45 of the Covid-19 national state of disaster.
The government was warned that the Covid-19 tobacco ban would result in an increase in the illicit tobacco trade.
In May 2020 Batsa requested urgent clarity on the decision-making process that led to the tobacco ban. Batsa’s court action against the Cogta minister was delayed, and was only heard after the tobacco ban had been rescinded in August 2020.
The judgment was handed down in December 2020, and the tobacco ban was held to be unconstitutional.
Cogta was also not able to prove that the tobacco ban had any positive impact on health.
In commenting on the judgment, Batsa warned of the “explosion in illicit trade that occurred during the ban on tobacco and vapour products”.
The Human Sciences Research Council published research showing that illicit cigarettes had been widely available during the Level 5 lockdown.
Ipsos, a global leader in market research, has conducted two studies into the illegal tobacco trade in South Africa since the tobacco ban was lifted in 2020.
The first was conducted “soon after criminal manufacturers seized control of South Africa’s cigarette market as a result of the government’s lockdown ban on legal tobacco sales”, and the second was conducted between March 2 and 21, 2022, across 4 593 nationwide retail outlets.
The latest study, which incorporated “mystery shoppers” who were tasked with purchasing the cheapest cigarettes available at an outlet, indicates an explosion in sales of illicit cigarettes:
Batsa GM Johnny Moloto commented that: “The latest Ipsos study provides compelling evidence that criminals continue to dominate South Africa’s tobacco trade … These criminals are hiding in plain sight, robbing the fiscus of vital revenue when it is needed most. They are destroying legitimate businesses and jobs while national unemployment rates hit record highs.”
Moloto added that illicit tobacco sales “should be tackled as a matter of utmost urgency … They are depriving the fiscus of more than R19 billion a year”.
Is Sars doing enough to eradicate the illicit tobacco trade?
Since Edward Kieswetter was appointed commissioner of Sars, there has been an increase in successful interventions against the illicit tobacco trade.
In February, search and seizure operations were carried out on cigarette companies and manufacturers in KwaZulu-Natal, the Western Cape and Gauteng. Master cases to the value of R51 million were seized. A master case holds 50 cartons or 10 000 cigarettes.
In March, 2.31 million sticks of cigarettes and narcotics were confiscated at residences belonging to a well-known cigarette supplier in Phoenix, Durban.
Kieswetter said Sars is “building its capability to make it hard and costly for those traders who choose to be non-compliant”.
However, Sars cancelled the track and trace system tender in 2020 and there are no indications that it intends to change the current system that is currently in place to control the illicit tobacco trade.
Moneyweb asked Moloto for his views on how the illicit tobacco trade can be eradicated.
He replied that the illicit trade in SA is “multi-faceted” and that Batsa is “calling for Sars to take several steps to stamp this out”, listing these steps as follows:
NOW READ: Sars seizes cigarettes and drugs worth millions in Phoenix
Download our app and read this and other great stories on the move. Available for Android and iOS.