Monday 12 April 2021 – GOVERNMENT policy has fuelled a massive explosion in South Africa’s illicit cigarette trade that is laid bare in a damning new report published today.
Three quarters of retail outlets in hotspot provinces are now selling cigarettes below the legal tax rate, according to the latest study by market research specialists IPSOS.
“That’s almost a 10% increase on the figures recorded only a month ago before the big hike in tobacco sin taxes,” says Yusuf Abramjee, founder of Tax Justice South Africa.
“It is shockingly clear that the excise increase, which was double the rate of inflation, has triggered a full-scale price war among tax-evading manufacturers, who’ve been gifted more customers and even bigger profit margins.
“The Government lit a fire under the illicit cigarette trade with the five-month lockdown tobacco sales ban last year that handed the market to criminal operators.
“The excise increase has added fuel to that fire, which is now raging out of control.
“It is a policy of economic sabotage that rewards criminals and impoverishes our nation.”
IPSOS’s study of almost 4,000 outlets in Free State, Gauteng and Western Cape found:
- Cigarettes are retailing for as little as R6 for a pack of 20 – a fraction of the legal Minimum Collectible Tax (MCT) of R21.61.
- The number of brands owned by the Zimbabwean-owned Gold Leaf Tobacco Corporation (GLTC) found being sold under MCT soared by 13 percentage points in a month; 85% of their brands purchased were illegal.
- The Remington Gold brand owned by GLTC is dominant and selling for as little as R10.
- Members of the Fair-Trade Independent Tobacco Association (FITA) are engaged in the price war with GLTC: 100% of Afroberg products purchased were below MCT, with 91% of Carnilinx brands also evading tax.
“The usual suspects are feeding at the trough of illicit trade and being rewarded for their criminality, while the country is robbed of billions in taxes at a time it can least afford it,” says Abramjee.
“The Government has unleashed this monster and has a duty to get it back in its cage.
“We urge lawmakers to institute a Commission of Inquiry immediately to investigate how this has been allowed to happen.
“In the meantime, SARS must ensure all manufacturers comply with production counter regulations, so illegal operators can be tracked down and held accountable, and South Africa must ratify the WHO Illicit Trade Protocol, a simple step that is years overdue.”