The South African tobacco industry has joined this week’s calls for greater action against the illegal cigarette trade, particularly proposals to increase collaboration between the government and the private sector.
The industry said only decisive and integrated action will break the back of the R100-billion illicit economy that has led to farmers in the sector closing shop and ruining their livelihoods.
The spokesperson of the South Africa Tobacco Transformation Alliance (Satta), Zacharia Motsumi, said the scale of the problem has been clearly outlined with the release of the South Africa Illicit Economy 2.0 Report, published by the Transnational Alliance to Combat Illicit Trade (Tracit) in conjunction with Business Unity South Africa (Busa).
Urgent crackdown needed on illicit trade
“The Tracit’s statistics on the devastating impact of illicit trade on the tobacco sector represent our lived reality. Tobacco farmers, processors, manufacturers and importers of tobacco products in the legal value chain can bear witness to the profound drop in the sale of legal tobacco products as the illicit tobacco market has grown and now comprises around 70% of the total market.
“As a consequence, thousands of workers have lost their jobs and billions of rands have been lost in unpaid taxes. As the Tracit report points out that illicit trade continues to pose a serious threat to South Africa’s economic stability, governance, and international standing,” he said.
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Motsumi said urgent action is needed not just for the sake of the economy, but because of the ongoing damage resulting from South Africa’s greylisting by the Financial Action Task Force (FATF) in February 2023.
“Surely there is now sufficient evidence before the government of the benefits of acting against illegal traders in general and illegal cigarette traders in particular? Illicit trade in tobacco is estimated to cost government R28 billion a year in lost revenue.”
He added that the government’s focus should be on the industrial-scale tax-dodging in the tobacco industry. “It is important to allocate greater resources to dealing with illicit trade, and there would be no need to consider further taxation,” he said.
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Motsumi said the industry fully supports the suggestion from former trade and industry director-general Lionel October for greater collaboration between government and business to deal with the illicit economy.
“We also completely agree with his view that this should be a national priority. These are vital steps to stamping out the illicit economy once and for all.”
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