South Africa’s legal tobacco industry has called on the South African Revenue Service (SARS) and law enforcement agencies to step up their crackdown on the criminal networks involved in selling illicit cigarettes.
“We have seen some significant action in recent weeks, but it’s going to take a combined national effort to completely stamp out the illicit traders,” says Zacharia Motsumi, spokesperson for the South Africa Tobacco Transformation Alliance (SATTA), which represents the legal tobacco value chain.
“We are suffering huge losses because of the illicit cigarette networks, and more action is needed to arrest the perpetrators and destroy their illicit products. We need to put a stop to their nefarious activity – it is destroying jobs, and also robbing the country of tax revenue.”
Motsumi says the most recent arrests, during June 2021 – which were accompanied by the destruction of more than R17 million worth of illicit goods – comes on the back of the destruction of more than R30 million worth of illicit cigarettes confiscated at the Beit Bridge border post earlier this year.
Success of inter-agency working group
“These actions are a clear sign that the inter-agency Working group set up by government is working, and that an integrated approach is the best way to deal with illicit tobacco,” says Motsumi.
“The arrests, and the destruction of illicit cigarettes, send a good signal to members of SATTA, and a bad signal to the smugglers. But we need to see much, much more – particularly given the scale of the problem.”
According to figures released by SARS, a total of 1 150 seizures took place during the last financial year.
This resulted in the confiscation of 181 million cigarettes, with an estimated value of R219 million. If these cigarettes had been legally produced and sold, it would have resulted in an extra R160 million for the fiscus, according to SARS’ figures.
“The seizures and confiscations are significant, but they are just the tip of the iceberg,” says Motsumi. “The illicit trade continues to cause massive harm to the economy, and punishes farmers, processors and manufacturers who go about their business in a law-abiding way.
“No-one in the legal tobacco industry can ignore the harm caused to our entire value chain by the illicit traders. Dozens of farmers have gone out of business and many more are in financial jeopardy because of the increased market share of the illicit sector since the start of the Covid-19 lockdowns.
“In this regard, we strongly endorse the warning issued by SARS in terms of the damage caused by illicit goods, and tobacco products in particular.”
Bribery and corruption
As SARS said in a recent media statement, illicit goods:
- reduce the revenue the country collects, which is needed to provide basic services to all South Africans including the poor and vulnerable;
- destroy local industries, leading to factory closures, job losses and further erosion of the tax base; and
- contribute to higher levels of criminality, including bribery and corruption, as well as drawing the country into various syndicates of organised crime drug-smuggling, gun-running and human trafficking.
SATTA says it will continue to engage with SARS on other steps which can be taken to curb illicit cigarette products. Although smuggling is a problem, the main producers of illicit cigarettes are based in South Africa who commit crimes of tax evasion.
This is low hanging fruit which can be dealt with by SARS with relative ease and more than double its income from tobacco taxes.
“We are particularly keen to see the ring-leaders behind bars,” says Motsumi. “They are taking food from our mouths and killing our business.
“We also repeat our call for a commission of inquiry into the activities of these criminal networks, and pledge our full support for such an investigation. We will make our own research available to the commission and will do whatever we can to put a stop to this scourge.”