By Yusuf Abramjee, founder of Tax Justice South Africa (TJSA)
Thursday 17 August 2023
Our proposed new tobacco laws have ignited plenty of debate. But whatever side you’re on, no one can dispute that there is a glaring omission in the legislation being considered by MPs that renders it simply not fit for purpose.
The latest tobacco control bill offers no mention of – let alone a solution to – the rampant illicit trade that accounts for almost three-quarters of all cigarette sales in South Africa today.
Therefore, if enacted, the bill will have no impact on tobacco ‘control’ other than to push the market further under the control of kingpins in organised crime.
The grim reality is that South Africa hosts the world’s biggest black market in cigarettes.
After growing steadily from 2009 onwards, our illicit cigarette trade sky-rocketed as a direct result of the unconstitutional five-month ban on tobacco sales imposed under the COVID-19 State of Disaster.
As predicted then, the ban stopped virtually no one from smoking but enriched criminal networks who became so deeply entrenched they’ve become nearly impossible to remove.
They now account for around 70% of cigarette sales nationwide, depriving the fiscus of more than R20 billion a year in excise tax revenue alone.
If these illicit cigarette barons were to draft a business plan to expand their empires even further, the new bill is what it would look like.
The Tobacco Products and Electronic Delivery Systems (TPENDS) Control Bill will enforce plain packaging, which means all corporate branding will be removed.
But plain packaging is a counterfeiter’s dream. Consumers trying to purchase a legitimate product will find it impossible to distinguish between the authentic and the fake.
The Bill’s sales display restrictions will require retailers to keep tobacco products out of sight. Failure to comply with this ban will be a criminal offence, with penalties of up to 10 years in prison.
These prohibitions and their hefty jail sentences seem to have been drafted with no awareness of the realities of modern-day South Africa.
Let’s put aside our tragically high crime rate, our overstretched police force’s inability to stop 75 murders a day and the grim state of our overcrowded prisons.
Instead, just consider that 80% of cigarette sales today are conducted in the informal sector. Here, table-top hawkers, street-corner vendors and spaza shops often depend on sales of single ‘sticks’ of cigarettes. They will not be able to obey the new laws and will be made criminals overnight.
In reality, the Government’s inability to curb illicit trade has already corrupted these informal sellers, as they often have no choice but to deal with illicit products which are significantly cheaper than legally taxed products.
The minimum collectible tax on a pack of 20 cigarettes is R23.92. Yet TJSA’s own investigations[1] [2] and studies by market researchers IPSOS show it is very easy to buy cigarettes at a fraction of that price – often as cheaply as R6 per pack – at shops all over the country.
Despite these investigations and the submission of detailed video evidence to police and SARS, authorities have been unable or unwilling to stem this illicit trade.
‘Tobacco control’ is a complete misnomer if it is only applied to 30% of the market while being ignored or exploited by the majority of the sector that has been allowed to flout existing regulations for far too long.
In reality, the Bill will boost business for criminals by adversely affecting the compliant manufacturers and retailers who will lose yet more custom to illicit trade.
South Africans will lose billions of rand more in tax revenue and organised crime networks will grow even richer and better equipped to expand their other illegal activities.
The Bill will not save a single life and should be rejected by MPs for the huge harm it will inevitably cause.
Every citizen concerned for the rule of law and the future prosperity of our country should oppose this gift for gangsters through the public submission process*.
[1] https://taxjusticesa.co.za/investigation-2020/
[2] https://taxjusticesa.co.za/investigation-2021/