Entire South African Tobacco Industry in Jeopardy Because of Criminal Networks

This warning comes from the South African Tobacco Transformation Alliance (SATTA), following the release of new research by Ipsos indicating that illicit products are now available in a staggering 76% of tobacco retailers.

The expansion of the illicit sector is endangering the last remaining jobs in the industry and causing the government to lose out on potential tax revenue of approximately R28 billion annually.

The illicit tobacco market has surged to three times its size from just three years ago, as reported by Ipsos, reaching its highest level on record.

The vast majority of South African retailers are now selling cigarettes below the Minimum Collectible Tax (MCT) threshold of R26.22 per pack of 20. This is shocking, as the MCT serves as a key measure for assessing tax avoidance — clearly indicating that the overwhelming majority of retailers are dealing in non-compliant products.

This trend is unacceptable and demands immediate action.

While the South African Tobacco Transformation Alliance (SATTA) acknowledges the efforts of the South African Revenue Service (SARS) to combat illicit trading, the reality remains stark: R100 million is lost every working day due to tax avoidance. This situation underscores the urgent need for stronger measures—especially against local manufacturers as mentioned in the Ipsos report. Year after year Ipsos shows up the same suspects which are flooding the market with cheap illicit cigarettes. Cigarette taxes are paid at source of manufacturing, hence the actions taken should be primarily at the manufacturers not declaring their production correctly.

One prominent player in the illicit tobacco market, Gold Leaf Tobacco Company, was under the curatorship of SARS since 2022 due to tax non-compliance. Despite this, its products continue to flood the market unabated. Alarmingly, 9 out of 10 packs, (89%) identified by Ipsos during their research was being sold below the Minimum Collectible Tax threshold, indicating that the operators behind Gold Leaf are
evading tax obligations entirely.

This ongoing situation calls for decisive action to dismantle these illicit operations and hold those responsible accountable. It’s obvious now that firm, coordinated government action against illicit economic activity must become a top crime-fighting priority.

The solutions lie in greater cross-authority collaboration, a beefed-up SARS presence in all cigarette factories, revoking licenses of those avoiding taxes and introducing a Minimum Retail Price of R37 for a pack of 20 which will make enforcement much easier for all law enforcement agencies. These actions would make a huge and immediate difference.

But ultimately, we need effective prosecutions. The research has shown who the criminals are; they must be put on trial, found guilty, and be sent to jail. It’s time for law enforcement to kick in, and kick in hard.