Illegal cigarettes seized by the police. (Photo: SAPS)
More than half of cigarettes sold in South Africa are sold on the black market. This after the illegal sales of these skyrocketed during the covid lockdown due to the ban imposed on the sale of tobacco products.
The University of Cape Town’s research unit for the economics of excise products warns in a report that the situation poses a serious threat not only to public health, but also to the South African government’s tax revenues.
The ban on cigarettes during the covid lockdown doubled the illegal market in South Africa from 30% to 60%.
Nationally representative data from the 2021 Global Adult Tobacco Survey published in the BMJ was used in the study. Researchers found nearly 60% of cigarettes sold in South Africa in 2021 were likely to be illegal.
The opinion poll, a nationally representative poll among people aged 15 and over, was conducted in South Africa in 2021.
Thami Nkwanyane, spokesperson for the university, says these findings, as well as other research carried out in the research unit, indicate a huge increase in illegal trade.
“Even before the 2020 tobacco ban due to the restriction, the illegal market formed almost 30% of the market. The ban on cigarette sales has increased the illegal market share to about 60% of the market.
“No significant decrease in the illegal market share was seen afterwards.”
A table indicates the prevalence of illegal cigarettes under the different brand names.
Nkwanyane says the research identifies a significant structural shift in the South African cigarette market.
“British American Tobacco (BAT) was the dominant player early in the 21st century with more than 90% of the market share, but in 2021 its market share has fallen to around 33%. In contrast, Polaris Manufacturing (formerly Gold Leaf Tobacco Corporation) has emerged as a major player with an estimated market share competing with that of BAT,” says Mxolisi Zondi, one of the researchers.
The study identifies specific brands and producers linked to illegal trade. It shows that more than 80% of the cigarettes were sold at prices that make it highly unlikely that the full tax was paid on them.
Illegal cigarettes seized by the police. (Photo: SAPS)
“These illegal products were mainly distributed by informal retailers, especially spaza shops.
The research also highlights important social patterns.
“Illicit cigarette use is highest among people with low incomes, people with lower levels of education and heavier smokers, suggesting that more vulnerable groups are smoking cheaper, untaxed cigarettes.”
The researchers urge the government to take urgent and decisive action to secure the national tobacco supply chain and counter the boom in the illegal trade market. The research also provides specific recommendations on where to direct these efforts.