Illicit tobacco trade flourishes in South Africa

The South African government loses over 4 billion rand($277 million) in revenue annually to the illicit tobacco trade, whose proceeds might be funding organized crime, the Tobacco Institute of Southern Africa (TISA) said.  

“The illicit trade is a big threat to the sustainability of the legal industry and government revenue,” Francois van der Merwe, CEO of TISA, told Anadolu Agency in an interview on Monday.

Security experts have raise concerns that revenue from the illicit cigarette trade is funding organized crime.   

Certainly the amount of revenue is substantial. More than 24 billion rand ($1.6 billion) in tax revenue has been lost to the illicit trade since 2010, van der Merwe said.

“The money lost to illicit trade could have been used by government to fund education, health and other programs,” he added.

Van der Merwe said South Africa has the highest level of illicit tobacco trade in the region and is listed amongst the top five illicit markets in the world.

“As of September 2015, an estimated 23 percent of all cigarettes consumed in South Africa were illicit (equal to more than 4 billion sticks), according to TISA statistics.

The illicit cigarette trade is so large in South Africa that a month hardly passes by without officials of the South Africa Revenue Service (SARS) seizing cigarettes being smuggled into the country or confiscating lots of counterfeit cigarettes inside the country.

On Nov. 28, SARS officials made two busts at South Africa’s Beit Bridge boarder post, confiscating illicit cigarettes worthy 4 million rand ($277,872) in a truck attempting to smuggle the goods from neighboring Zambia into the country.

 According to TISA, previously most of the illicit cigarettes used to be smuggled into South Africa from China, Dubai, and neighboring countries, but the trend is changing with some of the illicit cigarettes being manufactured locally in the country.

Van der Merwe says it is important for the government to increase its fight on illicit trade because the practice erodes investor confidence.

The illicit trade makes cigarettes cheap and available to children and teenagers as well as to the poor. Illicit cigarettes are cheaper than the legal product, although they counterfeit the packaging of the authorized manufacturers.

Further, the increased level of smoking undermines Department of Health goals, van der Merwe said.

Van Der Merwe called for action by business and civil societies, who should work together to fight the trade in illegal cigarettes. He said government needed to protect business interests while the tobacco sector guaranteed it would do what it could to make government and law enforcement’s jobs easier.