Illegal cigarette shocker in South Africa

Illegal cigarettes are being sold in 41% of all shops in South Africa, a new study from independent market research agency Ipsos has found.

Using a mystery shopper approach, Ipsos researchers carried out fieldwork between 15 and 22 June 2021 and found the sale of illegal cigarettes had surged to unprecedented levels.

“The tide of illegal cigarettes has infiltrated every province as criminals wage a price war that is costing the state billions and destroying the legal market.”

The team found numerous stores across the country where cigarettes were being sold for less than the minimum collectable tax (MCT) of R21.60 on a packet of 20 cigarettes.

In fact, Ipsos found packs being sold for as little as R6.

According to the report, most illegal cigarette sales were found in the non-organised informal sector and certain wholesalers, but there was also an increase at branded petrol station retail stores.

The situation was at its worst in the hotspot provinces of the Free State, Gauteng, and the Western Cape, where two out of three shops were found to be selling illegal cigarettes.

In KwaZulu-Natal, the rate shot up by a third since the previous study, while the number of shops in the Eastern Cape selling illegal cigarettes more than doubled during the same period.

Notably, five times as many outlets on petrol forecourts now sell illegal cigarettes since the previous report.

The research also indicated the illegal trade was particularly prevalent among certain brands.

“Brands owned by or licensed to Gold Leaf Tobacco Corporation (GLTC) continue to win the illegal price war, with the number of its South African brands purchased below the MCT rising by 25%,” Ipsos said.

“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.”

In addition, there was a three-fold increase in brands owned by or licensed to FITA-member Protobac being sold below the MCT.

British American Tobacco South Africa (BATSA) general manager Johnny Moloto said the research provided “damning proof” that authorities have failed to bring South Africa’s 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 life-saver. It is nothing short of a national emergency that demands a full-scale inquiry into the whole industry.”

“The bulk of the illicit tobacco problem in South Africa clearly has local origins, as the report demonstrates,” said Moloto.

Moloto called for an immediate commission of inquiry into the tobacco market in South Africa.

He also urged SARS and the Government to enact four pressing initiatives to stem the tide of illegal cigarettes and to collect the taxes due from all manufacturers:

  1. Ensure compliance of all manufacturers with SARS production counter rules.
  2. Introduce a minimum retail sales price of R28 for a pack of 20 cigarettes.
  3. The Government should ratify the WHO Illicit Trade protocol to fight illicit trade.
  4. South Africa must introduce a comprehensive track-and-trace system.

Now read: Alcohol bans in South Africa extremely effective — research

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Illegal cigarette shocker in South Africa