Monday 19 August 2024 – SOUTH Africa’s rampant illicit cigarette trade is a “national disaster” that requires urgent action from our new Government, crime experts have warned.
eNCA’s Crime Watch on Sunday (18 August) laid out damning new evidence showing that almost 60% of stores nationwide now sell cigarettes at tax-evading prices – up from 27% in 2022.
The programme’s own investigators found cigarettes being sold at a fraction of the minimum collectible tax of R25.05 per pack of 20. This very transparent tax evasion is robbing the fiscus of R24 billion in excise tax revenue annually.
Willem Els, of the Institute for Security Studies (ISS), said cigarettes are now the most significant component in an illicit economy that is robbing South Africa of 10% of its GDP, and corruption is at the heart of this menace.
“It is organised crime,” he said. “These criminals are very well equipped, they make a lot of money and they are very influential. They compromise state actors for protection and that is why they are thriving.”
The problem needs to be tackled at the highest level, he said.
“In the first place we need political will,” Els said. “If we do not have political will, we will not get anywhere. The main challenge facing South Africa is corruption. We need a holistic strategy to curb corruption from the top. Without that we won’t be able to win this battle.”
Francois van der Merwe, of the SA Tobacco Transformation Alliance, told eNCA: “The illicit cigarette trade has reached the status of a national disaster. The South African government is about to lose its total tobacco tax base. The legal industry is shutting down, right down to the farmers. All cigarettes in this country will be illegal and the industry will be run by criminals.
“Government does not do enough to combat the illicit tobacco trade. It’s not difficult to solve. The problem is local manufacturers, who are licensed by SARS (South African Revenue Service) – they operate within a 50km radius of SARS.”
Several local cigarette manufacturers, led by the Fair Trade Independent Tobacco Association (FITA), have gone to the High Court to challenge SARS’ legal right to install surveillance cameras in their factories to monitor production volumes.
SARS Commissioner Edward Kieswetter told eNCA: “In regulated production, like alcohol and tobacco, the licensing conditions create the obligation for surveillance. Companies cannot duck the obligation for their production systems to be monitored.”
Johnny Moloto, area head of corporate and regulatory affairs for BAT Sub-Saharan Africa, said SARS surveillance is essential to defeating illicit manufacturers. “CCTV cameras would make a huge difference because they will monitor volumes produced and declared to SARS,” he said.
“BAT was among the first companies to say, ‘You can come and install in our factories because we have nothing to hide.’ What does FITA have to hide?”
Michael Varney, chief commercial officer of CCTV specialists Vumacam, said: “There should be no reason that footage is prevented from being collected out of these facilities. No personal information is collected and the footage is only to be used within a predetermined set of criteria.”
Crime Watch also looked at the wider problem of illicit trade in other sectors such as alcohol, clothing and jewellery, which is a growing threat to the national economy.
National Police Commissioner Fannie Masemola said: “We have established a unit that will operate on a full-time basis dealing with counterfeit goods. We must make sure we bring (the criminals) to book.”
Crime Watch presenter Yusuf Abramjee, who is founder of Tax Justice SA, said: “Illicit trade is costing South Africa billions of rand. We need a full-scale war against this illicit trade. We need action and the factories implicated to be shut down. We need the criminal justice system to move at speed to stop this mass-scale looting.”
Watch the full Crime Watch broadcast here.
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