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Urgent action needed to defeat illicit cigarette trade, says UCT report

By February 19, 2021No Comments

Thursday 18 February 2021 – THE illicit cigarette trade is out of control in South Africa and tackling it should become a “national priority”, according to an important new study.

Independent experts from the University of Cape Town have found that the lockdown tobacco ban has backfired badly.

It has resulted in an increase in smoking levels and a price war being won by the criminal manufacturers of tax-evading cigarettes that rob the fiscus of billions in vital revenue.

“Reducing the illicit market should be a national priority,” says the report led by Professor Corne van Walbeek. “South Africa should ratify the Protocol to Eliminate the Illicit Trade in Tobacco Products and implement … an independent track-and-trace system.”

The report, based on data from the latest National Income Dynamics Coronavirus Rapid Mobile Survey (NIDS-CRAM), found:

  • Only 8% of South Africans quit smoking during the ban – and half of those who quit started smoking again when the ban was lifted.
  • The average number of cigarettes smoked has increased by 11.5%, from 7.9 per day pre-lockdown to 8.8 after the ban.
  • During the 20-week ban, the government lost about R5.8 billion in tobacco excise revenues.
  • Non-multinational manufacturers, who’ve previously been found selling illicit tax-evading cigarettes, “benefitted disproportionally from the ban”.
  • These firms, including Gold Leaf, Amalgamated and Fair-Trade Independent Association (FITA) members Carnilinx and Best Tobacco Company, now dominate the market and have doubled their turnover in the wake of the ban.

The NIDS-CRAM report concludes: “The sales ban entrenched and expanded an already well-established illicit market. To undo the damage will be difficult. Substantially reducing the illicit market should be a priority of the appropriate government agencies.”

Tax Justice SA (TJSA) founder Yusuf Abramjee says: “This important new study proves once again that the lockdown sales ban has proved a bonanza for criminals in illicit trade.

“They made a fortune by raising prices during the ban when no taxes were being paid. They’ve flooded the market with their illicit products and have no intention of paying their taxes now.

“The ban failed in its stated objectives and has created a monster that’s out of control. We urge government to heed the report recommendations, ratify the Illicit Trade Protocol and lock up these criminals who are looting our nation.”

–ends-