By Kaya 959 News
A report has revealed how the illicit cigarette trade has flourished in South Africa.
A report by IPSOS shows that almost half of retail outlets nationwide sold cigarettes below the minimum collectable tax – that figure jumps to three-quarters in the Free State (76%) and Western Cape (73%) and to two thirds in Gauteng (62%).
“The lowest purchase price for a pack of 20 was R9, and for a 10-pack carton the unit price dropped to just R6.30 per pack. Mystery Shoppers bought packs of 20 below MCT in every retail sector, from informal to modern trade and 48% of outlets in the informal sector (spazas, cafes etc) sold below MCT. Furthermore, brands owned by Gold Leaf Tobacco Corporation were, by far, the most likely to be the cheapest available products selling below MCT, with its brand Remington Gold dominating.
ALSO READ Sin tax hikes hit tobacco and alcohol industry hard
South Africa Tobacco Transformation Alliance has expressed outrage at the flood of illicit cigarettes.
“It is growing every day. We see it, we feel it and we know all about it – which is why we are not at all surprised at the dramatic increase in illicit trading that Ipsos has reported. No, rather than be surprised: We are outraged,” SATTA spokesperson, Zachariah Motsumi, said.
He said in Gauteng alone, there has been a 13% increase in just one month in the number of retail outlets selling a pack of 20 for less than R20.
Motsumi said this is a national criminal network, not a group of hustlers standing on a street corner.
He said at the heart of the problem, as clearly shown by Ipsos’ independent research, are the Zimbabwean owned Gold Leaf Tobacco Corporation (GLTC), with its factory in South Africa, and the manufacturers affiliated to the so-called Fair-Trade Independent Tobacco Association (FITA).
Motsumi said Remington Gold, a Gold Leaf brand, is “dominant” in the illicit sector and can be bought for as little as R10 a packet, and “frequently” at R15.
He said the report has shown that illicit traders have flooded their outlets and found new ones following the announcement of the excise tax increase at the end of February.
In effect, they are building on the criminal networks that they set up and mobilised during the COVID-19 national lockdown, rather than being forced out of business.
“They are now selling cigarettes for as little as R6 for a pack of 20 cigarettes, even though the only way they can do this is not to pay taxes. As Ipsos points out, at least R18.79 in excise tax has to be paid on every packet sold. If you add VAT, the minimum collectable tax (MCT) on a pack of 20 is R21.61. And that excludes processing, manufacturing, distribution and all the other costs in bringing legitimate products to market. So if consumers are paying less than the MCT, they can be sure they’re buying illicit products – and that all their money is going to criminals in the illicit trade,” he said.
Motsumi said SATTA is calling on the government to address the issues and ratify the WHO Illicit Trade protocol to fight illicit trade, which has been gathering dust for almost a decade despite being one of the most useful weapons, worldwide, against the illicit cigarette trade.
“Without these interventions, we will be left in serious doubt as to the Government’s commitment to dealing with the illicit trade in cigarettes. And in even more doubt, unfortunately, about the future of our law-abiding, taxpaying members,” he said.
