BUSINESS AGAINST CRIME
No smoke without fire:
South Africa’s illicit cigarette trade By Richard Chelin, Researcher and Rumbidzai Nyoni, Digital Communication Officer, ENAC
Cheap and readily available illicit cigarettes are a lucrative source of income for organised criminals.
T
he illicit trade in tobacco, especially cigarettes, costs South Africa’s economy billions of rand annually through lost tax revenue. According to the South African Revenue Service (SARS), the estimated loss through the illegal cigarette trade for the 2015/16 financial year was R6 billion. Aside from the local economic and health impact, illicit smuggling poses a threat across the Southern African region. Tackling the problem will improve regional economic outlooks and cripple an important source of funding for organised criminals in South Africa and beyond. The trade is part of a broader illicit economy involving counterfeit goods, motor vehicles, clothing and textiles, movies and music. Revenues gained contribute to high-level corruption, political party funding and other criminal endeavours. The illicit cigarette trade involves the ‘supply, distribution and sale of smuggled genuine, counterfeit or cheap white
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tobacco products.’ Counterfeit cigarettes are identical copies of branded products manufactured without the authorisation of the rightful owners. Cheap white cigarettes (or illicit whites) are produced with the approval of a licensing authority in one country, but are smuggled and sold in another without duties being paid.
Instead of arresting traders, law enforcement needs to target those higher up the chain Of the six ways to identify illicit cigarettes, five are related to markings on the pack: the lack of the excise marking (diamond stamp); the absence of or incorrect marking of the health warnings; tar and nicotine readings higher than 12 mg tar and 1.2 mg nicotine or readings that aren’t printed on a long side of the pack; the quit line number is incorrect or missing; and the absence of the words ‘reduced ignition propensity’ anywhere on the pack.
SECURITY FOCUS AFRICA JANUARY 2020
The last aspect refers to the pricing of the cigarettes. The excise tax on a 20-pack of cigarettes is R16.66 as at February 2019. With 15 per cent VAT added, the full tax amount is around R20. If a pack of cigarettes is sold below that price, it is probably illicit. In South Africa, the largest share of the illicit cigarette market is occupied by those manufactured locally, with other brands smuggled from neighbouring countries like Mozambique and Zimbabwe making up the rest. The Directorate for Priority Crime Investigation (Hawks) told Parliament that between April 2017 and March 2018, about 80 per cent of illegal tobacco products found in the country were produced domestically. Due to their low prices, illegal cigarettes make for an attractive bargain and all indications point to a growing market in the country. In his book Tobacco Wars, Johann van Loggerenberg estimates that illicit cigarettes make up around 40 per cent of the cigarette trade and show ‘no sign of slowing down.’
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