New South Africa Urged to Tackle Illicit Trade
BAT has called on South Africa to crack down on the country’s rampant illicit tobacco trade. The multinational estimates that the government loses an estimated ZAR24 billion ($1.32 billion) in excise tax revenue to the illegal cigarette business every year.
In a recent Ipsos study cited by BAT, 59 percent of stores sampled sold illicit cigarettes for a little as ZAR5 per pack of 20.
The study also revealed that new manufacturers have entered the business, fueling intense competition at the bottom end of the market.
“The entrance of new players raises some serious concerns about government’s commitment to address illicit trade. Nothing justifies licensing new manufacturers in a sector already ravaged by high levels of noncompliance without conducting proper due diligence,” said Johnny Moloto, area head of corporate and regulatory affairs for BAT Sub-Saharan Africa, in a statement.
The Ipsos study highlights the challenge facing the new government in getting to grips with illicit trade and cross-border illicit financial flows, which are wreaking havoc with our economy and tax revenues.
“The Ipsos study highlights the challenge facing the new government in getting to grips with illicit trade and cross-border illicit financial flows, which are wreaking havoc with our economy and tax revenues. To right the ship, authorities urgently need to prioritize the fight against illicit tobacco and secure convictions against the ring leaders,” Moloto said.
In the past few years, the availability of cigarette packs selling below the minimum collectable tax has fluctuated in retail outlets: from 44 percent in March 2021, it dropped to 27 percent in October 2022, before surging to 59 percent in 2024. The recent Ipsos research showed a high level of cigarette packs available below ZAR25.05 in the wholesale and informal trade, at 83 percent and 72 percent respectively.
BAT urged the Ministry of Finance to introduce a minimum retail price, which would make it illegal to sell cigarettes for less than a stated amount.
