ILLICIT TRADE FUELS DEBATE AS TOBACCO BILL LOOMS

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Fri 11 July 2025:

Advocacy group alleges formal manufacturers supply the illegal market to undermine new legislation, while industry reports point to massive tax losses.

The escalating crisis of South Africa’s illicit cigarette trade has ignited a fierce debate, with a leading public health advocate accusing formal tobacco manufacturers of deliberately supplying the illegal market to derail pending anti-smoking legislation. This claim comes amid industry-backed reports highlighting staggering national revenue losses, creating a complex battleground of public health, economic stability, and corporate accountability.

Peter Ucko, CEO of the Tobacco, Alcohol, and Gambling Advisory (TAG), asserts that the timing of recent reports on the illicit trade is a calculated move by the tobacco industry. “The process of the new legislation is going through parliament,” Ucko stated, arguing the industry’s goal is “to influence… particularly the parliamentarians, that this illicit trade… is harming South Africa. So they want to delay the legal process. They want to dilute the legal process.”

According to Ucko, the problem is not primarily one of smuggling or counterfeit goods, but rather a system where legally established companies are the main suppliers. He alleges that these companies engage in “round tripping,” a practice where cigarettes are declared for export to neighbouring countries like Namibia but never actually leave South Africa.

“The truth is that those cigarettes never left the country. They stayed in South Africa. They were supplied to the illicit trade,” he explained. This allows manufacturers to evade local VAT and excise duties while still profiting from sales.

This perspective challenges the narrative presented by major industry players. A recent study commissioned by British American Tobacco South Africa (Batsa) and conducted by Ipsos found that the illicit trade costs the nation approximately R28 billion in lost tax revenue annually, as reported by Moneyweb.

The report revealed an alarming increase in the availability of cheap cigarettes, with nearly 77% of retailers selling packs below the Minimum Collectible Tax (MCT) threshold of R26.22, a sharp rise from 27.4% in 2022, according to the SowetanLIVE.

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The Battle Over Legislation and Solutions

At the heart of the conflict is the Tobacco Products and Electronic Delivery Systems Control Bill. Ucko believes the industry’s focus on revenue loss is a strategy to weaken this bill. He argues that the availability of cheap, untaxed cigarettes has severe public health consequences.

“Smokers are likely to smoke more because the product costs less,” he said, adding that the low prices also entice non-smokers and, most critically, children to start. “The worst of all is that the youth are more likely to start smoking and then become addicted and prisoners to this enslavery by the tobacco company that sells an addictive killer product.”

The scale of the problem is significant. Research from the Tobacco Control Data Initiative indicates that the illicit market, which was below 10% in the early 2000s, surged to over 50% of the total market following the COVID-19 sales ban. This explosion created a vast distribution network for untaxed products that has persisted.

To combat the crisis, Ucko champions the implementation of a “tracking and tracing” system, as mandated by the World Health Organization’s Framework Convention on Tobacco Control.

“We need to introduce tracking and tracing,” he urged. “If you find illegal cigarettes… you can track where that product was manufactured and when by that system.” He cautioned against adopting the industry’s own tracking system, suggesting they “would know how to bypass it.”

Meanwhile, Batsa has called for different interventions, including the re-deployment of customs officials to factory sites and the introduction of a legal minimum retail price (MRP) of R37 per pack to make it easier for law enforcement to identify non-compliant products.

As parliamentarians deliberate on the new tobacco bill, they face a multifaceted problem where the lines between legal and illegal are blurred. While the government grapples with a R28 billion tax deficit from the illicit trade, public health advocates warn that the true cost is measured in the lives impacted by increased addiction and smoking-related diseases, fuelled by the very companies that claim to be victims.

This article originally published in Salaamedia click here

Salaamedia

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