South Africa is now the world’s largest market for illicit cigarettes, said BATSA general manager Johnny Moloto.
Johnny Moloto, the general manager for British American Tobacco South Africa (BATSA), said about 70% of all cigarettes consumed in South Africa today are from illegal brands, making South Africa the largest market for illicit tobacco in the world.
Speaking to Fin24, Moloto said the South African Revenue Service (SARS) and the nation’s economy as a whole suffered the most from a smoking ban during the pandemic, with SAR19 billion (US$5.06 billion) lost in terms of excise tax, adding that for SARS, cigarette sales tax revenue still has not recovered to pre-pandemic levels.
After the departments of health, cooperative governance, and traditional affairs pushed tough anti-smoking regulations during the outset of the Covid-19 epidemic in 2020, the nation experienced a rise in the selling of contraband cigarettes.
The so-called "cigarette ban" stopped the sale of cigarettes, caused enormous losses for legal cigarette manufacturers and merchants, eliminated a sizeable portion of tax revenue, and drove many users to illicit brands. The ban also did not stop people from smoking.
Ipsos market researchers said that in November 2021, illegal cigarette sales reached all-time highs, with nearly half (43%) of stores nationwide selling them. The group also noted that packs of cigarettes could be purchased for as little as SAR8, or less than one-third of the minimum collectable tax (MCT).
SARS earlier this year made it more difficult and expensive to sell illegal tobacco. In KwaZulu-Natal, the Western Cape, and Gauteng, it conducted inspections, search operations, and seizures on cigarette producers and manufacturers through its Criminal and Illicit Economic Activities and Customs Divisions.
According to the revenue service, 10% of SARS' total revenue comes from high-volume everyday commodities including alcohol, tobacco, gasoline, and some luxury goods.