South Africa has one of the highest incidences of illegal trade in cigarettes in the world.
Illegal tobacco products today account for approximately 24% of the South African market with an estimated 5.5 billion illicit cigarettes sold in South Africa last year. That means that more than 15 million illegal cigarettes are smoked every day in South Africa.
This trade in illegal cigarettes is not a victimless crime. Illicit trade networks in South Africa are well-established and linked to crime syndicates that are also involved in other illegal activities such as hijacking and people smuggling.
Illegal trade in cigarettes also defrauds the South African government of much-needed tax revenue. Last year the South African government was defrauded of an estimated R5bn in unpaid taxes on illegal cigarettes. Conservative estimates suggest that more than R25 billion rand has been lost to the fiscus over the past five years due to illegal trade.
Historically the main source of illegal tobacco in South Africa has been from Zimbabwe. However, recent developments have shown an increase in locally manufactured, non-excise paid products.
It is now estimated 80% of the total domestic trade in illicit tobacco is manufactured locally. These cigarettes are often manufactured in approved factories but not declared to authorities and no duty is paid to our government.
Growth in locally produced illegal cigarettes has eroded the value chain in the legal cigarette market. Over the last five years the volume of legal cigarettes sold by British American Tobacco has decreased from 22bn sticks to 15bn sticks and resulted in the loss of 600 jobs.