“One in three cigarettes smoked each day in this country are illegal,” Tobacco Institute of SA (Tisa) chief executive Francois van der Merwe told reporters in Cape Town on Thursday.
The loss to government in revenue last year was about R5 billion.
Van der Merwe was speaking at the end of a high-level meeting in Cape Town, called by government, on the illicit trade in tobacco products.
The meeting, which was closed to the media, included senior officials from the departments of trade and industry, and justice, the SA Revenue Service, the police, and representatives from the tobacco industry.
Deputy International Relations Minister Marius Fransman also attended. He told reporters discussions had revolved around co-operation to eliminate the illegal trade in cigarettes in South Africa.
According to Tisa, the number of illegally-manufactured cigarettes sold locally has “exploded” over the past six years.
“Although some 700 million illicit cigarettes were seized during 2013, this is the tip of the iceberg in relation to the scale of the problem,” it said in a background document released before the meeting.
Almost 60 percent of illegal cigarettes found in the South African market were manufactured locally, while about 38 percent were smuggled into the country from Zimbabwe.
In the document the problem is attributed to corruption and weak border control, and a lack of awareness among consumers.
“[Consumers] do not realise that by purchasing cheap illicit cigarettes they are effectively part of the crime trade.”
A recent Interpol report had linked illicit cigarette trade to criminal syndicates involved in the illegal drug, arms and human trafficking trade.
Van der Merwe said the tobacco industry was a significant contributor to the South African economy. The illicit trade had led to a “serious financial loss to government” in terms of lost taxes.
“According to independent research, 30 percent of the total cigarette market is illegal — that is about eight billion cigarettes in a year, or a million packs per day, that are smoked in this country are illegal.”
Since 2010, “our government has lost more than R18bn in taxes alone, due to illicit cigarettes”.
Responding to questions, he said illegal cigarettes were those that typically sold for about R10 a packet.
Fransman said more discussions on how to tackle the problem of illicit cigarettes would be held six months from now. Among solutions being considered were tightening up legislation and speeding up the justice process for those caught trading in illegal cigarettes.