Africa-Press – South-Africa. An estimated 70% of cigarettes sold in South Africa are illicit, leading to annual tax revenue losses of over R27 billion.
Finance Minister Enoch Godongwana revealed these figures in response to a recent Parliamentary question from EFF MP Thapelo Mogale.
Mogale asked the minister how much revenue South Africa has lost in the past five financial years due to the illicit trade and smuggling of cigarettes.
In his response, the minister explained that due to the market’s illicit nature, it is difficult to quantify the amount lost to cigarette smuggling reliably.
However, he said that over the past five years, South Africa’s illicit cigarette trade has escalated into a significant economic and enforcement challenge.
He referred to publicly available estimates that up to 70% of cigarettes sold in the country are illicit.
In April 2024, the SA Tobacco Transformation Alliance (SATTA) estimated that South Africans smoked 37 billion cigarettes in 2023, yet SARS only collected tax on 13 billion.
The organisation estimated that the lost tax revenue was at least R24 billion, as excise tax is around R1 per cigarette.
SARS’ data shows that revenue collection from tobacco and cigarette products declined from R13.4 billion in the 2015/16 fiscal year to R9.4 billion in 2024/25.
This reflects a decline of R4.0 billion (29.6%) and a 10-year compound annual growth rate of -3.8%.
Godongwana said a 44.9% year-over-year contraction in 2020/21 was primarily due to suppressed consumption during the Covid-19 pandemic lockdown.
During the lockdown, South Africa’s government banned the sale of cigarettes. Many experts believe these bans allowed the illicit market to flourish and cite these bans as a big reason for the market’s size today.
In 2024, SATTA spokesperson Francois Van der Merwe said the illicit cigarette market now represents between 65% to 70% of the total market, the highest in the world.
Van der Merwe explained that this is a casualty of the Zuma era, where former SARS commissioner Tom Moyane destroyed the revenue service. This illicit cigarette trade accounts for up to 40% of the market.
“Then, the mess that the government made with the sales ban during Covid-19 handed the total tobacco market on a golden plate to the illicit traders, and we’ve never recovered after that,” he said.
“The legal, taxpaying industry with a value chain right down to the farmers is a shadow of what it was, and that is an absolute disaster because the country is at a loss.”
SARS taking charge
In his response, Godongwana also outlined the various initiatives SARS has undertaken to address the country’s growing illicit cigarette problem.
The minister explained that these initiatives are multifaceted, attempting to combat illicit trade from every point on the value chain.
Therefore, SARS’ strategies include the following –
Frontline interventions and seizures at ports of entry
Dedicated tobacco audits of a company’s entire value chain
A Customs National Rapid Response Team that conducts high-risk operations
Technological advancements like CCTV monitoring at manufacturing facilities
SARS’ Syndicated Tax and Customs Crimes Investigations division, which investigates criminal and syndicated tax evasion schemes across all taxes
Regional and global cooperation to share information and combat illicit trade
Godongwana explained that these measures have had some success. Over the past five years, SARS’s Criminal Investigation unit has handed 129 Customs and Excise cases to the National Prosecution Authority (NPA).
There are currently 105 cases on the NPA roll, 33 of which are on trial, while 72 are pending the allocation of a trial date.
He added that eight of these cases relate to illicit Cigarettes and Tobacco, of which four are on trial and four are awaiting the allocation of a trial date.
In addition, 32 Customs and Excise cases resulted in successful convictions.
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