Tag: South Africa

Revenue Service Loses Camera Case Appeal

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The South African Revenue Service (SARS) has lost its appeal against a ruling that prohibited the agency from installing cameras in tobacco factories to monitor production and prevent tax evasion, reports The Herald.
Earlier this year, Bozza Tobacco and the Fair-Trade Independent Tobacco Association (FITA), representing several smaller tobacco producers, won an interim interdict preventing the SARS from attempting to install cameras in tobacco facilities.
The FITA argued that this constituted an “unjustified violation of the right to privacy and property.”
In addition, critics fear that if the SARS is given the right to permanently surveil tobacco producers, it might then impose the same rule on other sectors of the economy, such as clothing, gold and fuel.
In its appeal, the SARS argued that it needed 24-hour surveillance to counter the illicit trade in tobacco products that has resulted in rampant tax evasion.
The Pretoria High Court ruled that the SARS had failed to address whether its appeal was in the interests of justice. It had previously been found that the SARS had not followed the exact prescripts of the Customs and Excise Act when formulating the rule that would allow it to install surveillance cameras.
The main case against the SARS is still to be decided by the Pretoria High Court and may ultimately go to the Constitutional Court for a decision, given the constitutional issues raised regarding the rights to privacy, dignity and property.
October 1, 2024
New South Africa Urged to Tackle Illicit Trade

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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.
Johnny Moloto, area head of corporate and regulatory affairs, BAT Sub-Saharan Africa
“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.
July 18, 2024
South Africa Urged to Beef Up Tobacco Laws

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Nearly one third of South Africans smoke, according to the 2021 Global Adult Tobacco Survey (GATS) South Africa report, which was released by the Department of Health on June 13, 2024.
The study found that 21.2 percent of adults in South Africa smoke daily, while 4.6 percent smoke occasionally. Daily smokers light up an average of 8.5 cigarettes per day.
The data also revealed that a higher percentage of men (41.7 percent) are currently using tobacco compared to women (17.9 percent).
Meanwhile, 2.2 percent of survey respondents said they were currently using e-cigarettes, of which 3.8 percent are men and 0.7 percent are women.
Of those using e-cigarettes, 70.3 percent cited enjoyment, 67.5 percent cited flavor, 45.1 percent perceived it as less harmful than tobacco, while 43.5 percent said their use was influenced by friends or family members who use e-cigarettes.
The study also found that 3.1 percent of adults reported smoking hookah pipe.
Data also shows that 74.4 percent of adults who visited public places were exposed to second-hand smoke.
The Department of Health’s Deputy Director of General Primary Healthcare, Jeanette Hunter urged the government to adopt new measures to discourage tobacco use, including stronger tobacco taxes, smoke-free laws, graphic health warnings and bans on advertising.
“Effective strategies to reduce tobacco use, including putting in place more comprehensive laws that are compliant with the WHO Framework Convention on Tobacco Control, should be implemented to protect more people from exposure to SHS, and provide cessation services to help more people who smoke to quit,” Egbe was quoted as saying by the South African Government News Agency.
June 14, 2024
SATTA Urges Action Against Illicit Trade

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The South African Tobacco Transformation Alliance (SATTA) has called for stronger action against the smuggle, manufacture and sales illicit products.
Last year, South Africans smoked 37 billion cigarettes, but the South African Revenue Service (SARS) taxed only 13 billion. “Illicit tobacco is “the biggest fight we face now,” said Edward Kieswetter, SARS commissioner.
“Government should allocate more resources to Sars to pursue these complex crimes,” said SATTA spokesperson Zachariah Motsumi in a statement. “As the commissioner pointed out, illicit tobacco products account for 60 percent to 70 percent of cigarette sales and causes tremendous damage to the fiscus.”
The national fiscus is not the only area affected by the illicit trade. “Cigarette producers like BATSA has to retrench tobacco factory workers and about 500 jobs are currently at risk in third-party logistics companies that transport their products,” said Motsumi. BATSA has already cut 584 jobs due to a 40 percent decrease in [legal] cigarette sales from 2020.
“People are not smoking less—it is the sale of legal cigarettes that decreased,” said Motsumi. “The net effect of this is twofold: It has devastated tax collection and decimated the legal tobacco sector.”
April 12, 2024
Growers Worried About South African Tobacco Bill

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Small-scale tobacco growers in South Africa raised concerns about the impact of proposed legislation during public hearings in the Eastern Cape province.
To strengthen public health protection measures, lawmakers are considering a bill that would ban smoking in all indoor public places and certain outdoor areas; prohibit cigarettes sales in vending machines; require standardized tobacco packaging and ban the display of tobacco product at points of sale. The bill would also regulate electronic nicotine delivery systems and non-nicotine delivery systems.
During the Eastern Cape gathering, tobacco growers described the relative wealth that tobacco cultivation had afforded them in an area suffering from unemployment and poverty.
“When we were producing vegetables, me and my family were staying in a one-roomed mud house but immediately when we started producing tobacco leaf, I was able to build myself a beautiful six-roomed house, Nomfusi Kotsele, a member of the Katala cooperative in Butterworth, was quoted as saying in a report by South Africa’s Parliament. “I was also able to take my children to school so that they can have a better future than I had.”
Participants in the meeting also cautioned against the unintended consequences of overregulation. They pointed to South Africa’s thriving illicit cigarette trade, which exploded in the wake of a Covid-19 prohibition on tobacco sales and has remained above pre-pandemic levels long after the ban ended.
The hearings are part of a nationwide public participation process to garner citizens’ views on the bill. Similar consultations have already taken place in North West, Mpumalanga, Limpopo, Free State and Gauteng.
January 30, 2024
Court Approves Warehouse Monitoring

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The South African Revenue Service (SARS) will move forward with installing closed-circuit television cameras at tobacco warehouses, after defeating a legal challenge in the Guateng High Court, reports Daily Maverick.
The surveillance plan was drafted to help plug fiscal gaps due to illicit tobacco trade. The South African government misses out on an estimated ZAR8 billion ($431.06 million) in revenue annually due to tobacco tax evasion.
The Fair Trade Independent Tobacco Association (FITA), representing 80 percent of licensed cigarette manufacturers in Southern Africa took SARS to court in an attempt to stop the installation of the cameras. In two separate applications, 11 tobacco companies sought to prevent SARS from implementing the rule promulgated under the Customs and Excise Act.
The tobacco companies argued that the new rule is unconstitutional and that it was an unjustified violation of the right to privacy, dignity and property.
Acting judge Jacques Minnaar on Dec. 29 rejected their case, arguing, among other things, that companies applied for warehouse licenses in the knowledge that these are conditional on SARS officials having unrestricted access to install cameras.
The companies were all aware of the installation of CCTV cameras at British American Tobacco and Gold Leaf in February 2023, the court added.
January 2, 2024
New Deadline for South Africa Vape Comments

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The public consultation on South Africa’s new Tobacco Products and Electronic Delivery Systems Control Bill will end on July 28, the Portfolio Committee on Health announced.
In a media statement from Parliament, the government said that written submissions on the bill must be emailed to tobaccobill@parliament.gov.za or submitted online at https://forms.gle/FLrhnvThDk8ccLG97.
The submission period was originally between June 21, 2023, and Aug. 4, 2023.
The bill aims to regulate not only traditional tobacco smoking but also electronic cigarettes, such as vapes, which have become immensely popular not only as a means to stop smoking normal cigarettes but as a gateway into nicotine consumption.
In broad terms, the bill aims to regulate the sale and advertising of both tobacco products and electronic delivery devices, reports Business Tech.
According to Parliament “the bill will also focus on legislating electronic nicotine and electronic non-nicotine delivery systems; introduce plain packaging with graphic health warnings and pictorials; introduce a total ban on display at the point of sale; introduce 100 percent smoke-free areas—indoor public places and certain outdoor areas; and a total ban on vending machines for tobacco products.
At the start of the month, the Portfolio on Health briefed Parliament on the new bill with mixed reactions. Many stakeholders were concerned as to the severe knock-on effects the new bill could have on the tobacco/smoking industry, which is a key driver of economic growth in South Africa.
Members of Parliament said that the bill could lead to more people turning to the already budding illicit tobacco industry and lead to job losses.
Asanda Gcoyi, chief executive of the Vapour Products Association, said that combustible alternatives to traditional cigarettes should form the backbone of tobacco harm reduction in South Africa and be seen more as a solution to a problem rather than a new problem.
She said that the government has managed to demonize vaping, marking it as more damaging than traditional cigarettes.
Vapes are not only getting regulated by the new bill but are also being drawn into the ambit of excise taxes as provided in the updated Tobacco Product Excise.
Barry Buchman, managing director of Vaperite, said that the newly imposed excise duty on vaping products has taken its toll on retailers, with many arguing that the tax has had the adverse effects of driving consumers toward the illicit market.
Buchman added that the tax is pushing consumers to purchase the highest and most addictive nicotine content e-liquid as it is a cheaper option, negating the original aim of the National Treasury to tackle health-related issues.
June 29, 2023
South Africa: Illicit Products Destroyed

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The Customs Division of the South African Revenue Service (SARS) has begun destroying illicit and smuggled cigarettes at the Beitbridge border post, reports SA News.
According to SARS Deputy Commissioner Johnstone Makhubu, 2,000 master cases, or 20 million cigarettes, will be destroyed.
The illicit products were seized in multi-agency and intelligence-driven operations led by Customs’ National Rapid Response Team.
“SARS has a zero-tolerance for persons or organizations that are involved in tax crime or illicit trade, and SARS will pursue them relentlessly,” said Makhubu.
Customs has put into place measures to grant benefits to compliant traders through the Accredited Economic Operator Model, according to Beyers Theron, SARS director of customs and excise. SARS is also implementing SMART border technology to increase detection capability and response.
“Since the inception of its coordinated and focused investigations Customs has been conducting over the past three years in the tobacco and cigarette industry, there has been a noticeable shift to increased cross-border smuggling using ‘runners.’ These are not individuals smuggling these cigarettes as an entrepreneurial opportunity but organized criminal syndicates exploiting the unemployed and the poor by employing individuals as runners to carry goods, often for miles, across borders,” said Theron.
“These runners carry at least two master cases of illicit cigarettes on their backs per run, often repeating these trips multiple times. These cigarettes are then loaded into trucks, small goods vehicles, cars and taxis that wait at locations along the border for distribution to their intended destinations on the local market.”
June 14, 2023
South Africa: New Tobacco Tax

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Nicotine substitute solutions, including vaping products, are now subject to an excise duty of ZAR2.90 ($0.15) per mL in South Africa, effective June 1, reports Business Tech.
The forms that govern tobacco product excise have been amended to account for vaping products, according to the South African Revenue Service (SARS).
Manufacturers were required to apply for and obtain licenses from SARS for manufacturing premises before June 1, 2023, and must submit the first excise duty account by July 28, 2023.
“The tax will be detrimental to those using vaping to stop smoking as well as local small businesses—doing more harm than good,” said Kurt Yeo, co-founder of consumer group Vaping Saved My Life (VSML). “At face value, the tax will move the consumer to the intended purpose of vaping less. But with many of those who vape having switched from smoking to this safer alternative and now having to pay far more for the privilege, they might be forced to revert to smoking as a cheaper option.”
“Moreover,” said Yeo, “the excise overlooks that vaping is the most effective method for smoking cessation. So those who smoke and want to make the change will be dissuaded purely based on the price and will have to continue using the deadliest consumer product on the market, cigarettes.”
Many believe that the tax will lead to an increase in illicit products and growth of the black market, according to DFA.
“This tax is (also) going to wipe out a lot of small vaping businesses, and there is already evidence that it is promoting a black market for vaping products,” said Yeo.
June 5, 2023
BAT South Africa to Restructure Operations

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BAT is looking to restructure its South African business following a drop in legal cigarette sales. The process may affect 200 jobs.
The cigarette maker attributed its predicament in part to the five-month cigarette sales ban that South Africa implemented in 2020. Intended to help prevent the spread of Covid-19, the measure was later declared unconstitutional by country’s Supreme Court.
By then, however, the damage had been done, according to BAT.
“The 2020 tobacco sales ban resulted in an explosion of growth for the illicit market. This has continued even after the ban on tobacco sales was lifted,” the company said in a statement.
In 2019, BAT South Africa permanently employed around 1,800 staff across its South African operations. Since 2020, it has been forced to retrench more than 30 percent of its workforce, the company said.
Over the same period, the company’s cigarette sales dropped by around 40 percent as the illicit market accelerated, it said.
Based on independent studies, BAT South Africa estimates that the illicit cigarette trade accounts for up to 70 percent of South Africa’s total cigarette market. This illegal trade has severely impacted the sustainability of the legal tobacco industry and is a source of funds for criminal organizations in South Africa,” BAT wrote.
The company urged for stronger enforcement and new policies to combat the illicit trade.
“While BAT South Africa applauds recent efforts by the South African Revenue Service (SARS) and law enforcement agencies to clamp down on the illicit cigarette market, it also calls for even stronger action, given that the current approach has not stopped the growth of illicit cigarettes.
“SARS has issued important new policies, but now it is time to audit manufacturer policy compliance. To support law enforcement agencies and increase their effectiveness, as well as help consumers differentiate between illicit and legal market offers, a minimum retail price policy is required.
“The illicit trade robs South Africa of billions of rands in much-needed tax revenue, and the impact of this is now clearly being seen on legitimate businesses, their operations, and, unfortunately, the livelihoods of those in their value chains. Legitimate businesses cannot operate competitively if the country’s laws are not enforced.”
BAT did not give details of how it would restructure its business or which jobs might be cut.
January 16, 2023