Despite government lifting the blanket Covid-19 lockdown ban on tobacco sales roughly 18 months ago, criminals continue to dominate South Africa’s tobacco trade. Compelling evidence brought forward by Ipsos, a global leader in market research, shows that illegal cigarette trade continues to grow rampant, threatening the livelihoods of tobacco farmers across the country.
Ipsos conducted its fifth study of this kind between 2 and 21 March 2022. Looking at 4,593 retail outlets nationwide, the study asked “mystery shoppers” to buy the cheapest cigarettes available at an outlet.
The study revealed that four out of five stores in the Western Cape (80%) now sell cigarettes below the minimum collectible tax (MCT) rate of R22.79 per pack. While almost 70% of outlets in Gauteng do the same.
This is a significant increase compared to previous research and proves that the manufacturers could not have paid due taxes on these products.
MCT refers to the minimum amount of tax owed to SARS by a tobacco manufacturer per pack of 20 cigarettes. At present, MCT is calculated at R22.79, which does not include production costs, nor profit for the manufacturer.
Cigarette packs that sell for less than the MCT should be considered illegal, as this means the manufacturer has not paid the minimum amount of duties to SARS.
ALSO READ: Illicit cigarette trade already ‘killed 30 tobacco farmers’
Legitimate businesses suffer
Furthermore, despite the 2020 sales ban having been lifted the number of garage forecourts across the country selling illicit cigarettes have quadrupled in the last year.
Johnny Moloto, general manager of British American Tobacco South Africa, said criminals were hiding in plain sight.
“[They are] 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.”
Cigarette users can get their hands on a single pack of 20 cigarettes for as little as R7 in many retail outlets nationwide. This is less than a third of the MCT, and down even further from R8, which was the lowest price found in the October 2021 study.
Also, products bearing trademarks licensed to or owned by Zimbabwe-based Gold Leaf Tobacco Corporation (GLTC) and Carnilinx, a member of South Africa’s Fair-Trade Independent Tobacco Association (FITA), continue to win this illegal price war.
“If our country is to prosper and present itself as worthy of investment, the criminal manufacturers flooding our market with illicit tobacco should be tackled as a matter of utmost urgency,” says Moloto.
ALSO READ: Illicit cigarettes: Black tobacco farmers paying the price
R19 billion lost a year
The study further shows that brands owned by or licensed to GLTC Zimbabwe are the most widely available at illegal prices, with almost half (44%) of purchases made below MCT. Purchases below MCT of brands owned by or licensed to GLTC South Africa rose by 17% in the last year.
More than half (52%) of purchases of brands owned by Carnilinx were below MCT, according to the study..
Although Pall Mall, owned by BATSA, was the cheapest available brand in 642 stores (around 14% of total stores included in the sample), none sold the brand below the MCT.
“Tax-evading cigarettes have been allowed onto South Africa’s shop shelves for far too long.
“They are depriving the fiscus of more than R19 billion a year. For the sake of our economy, the people it is meant to serve and the rule of law, authorities should put an end to this brazen criminality once and for all,” Moloto cautioned.
ALSO READ: State of disaster: Mistakes we never want repeated
Sign up for Mzansi Today: Your daily take on the news and happenings from the agriculture value chain.
