Tobacco major British American Tobacco (BAT) has called on SA authorities to place customs officials at cigarette factories as part of measures to clamp down on the proliferation of illegal cigarettes, which it says is costing the fiscus R100m a day in lost revenue.
A new study by Ipsos, commissioned and paid for by BAT, says the availability of illegal cigarettes in SA has become endemic, with nearly eight in 10 SA retailers selling illicit cigarettes — triple the number reported three years ago.
The study, which surveyed more than 4,000 outlets countrywide, found about 69% of retailers were selling cigarettes at less than R20 per pack, and nearly 80% were selling below the R26.22 minimum collectible tax (MCT).
In some instances, cigarettes were sold for as low as R5 a pack, with the study noting that, “Illicit manufacturers have escalated their price war, with over 89% of their portfolios now selling below MCT, compared to just 50% in 2022.
“Our analysis indicates that the illicit cigarette trade costs SA about R28bn annually — R100m every working day — representing more revenue than the SA Revenue Service’s (Sars’) entire additional collection target. Eliminating this leakage would protect law-abiding taxpayers from bearing additional tax burdens,” said Johnny Moloto, area head of corporate and regulatory affairs for BAT SA.
“With the clock ticking for Sars to collect at least an extra R20bn, these results from Ipsos show the need for immediate steps to plug the leaks in tobacco tax collection.”
The cigarette maker is also pushing for the introduction of a minimum retail price (MRP) of R37 per pack, saying it should be illegal to sell a box of 20 cigarettes below the threshold, which it says is “economically viable”.
With the clock ticking for Sars to collect at least an extra R20bn, these results from Ipsos show the need for immediate steps to plug the leaks in tobacco tax collection.”
“BAT SA also calls for the urgent introduction into the Customs & Excise Act of an MRP of R37 per pack of 20 cigarettes, which is an economically viable price when considering all taxes and the lowest costs and margins in the legitimate supply chain,” Moloto said.
“This would make it illegal to sell cigarettes below the MRP, providing law enforcement with a simple, effective tool to identify noncompliant products. Additionally, manufacturing licences should be revoked for companies found to be consistently under declaring their production volumes or engaging in tax evasion.”
BAT’s 2023 results were negatively affected by an impairment of goodwill regarding SA of £291m (R7bn) due to the continued “negative affect of illicit trade”.
Moloto said Gold Leaf Tobacco Company’s Chief brand was the most widely available cheapest brand, with 100% of products purchased at R26.22 and below.
“This is despite Gold Leaf Tobacco Company being placed under curatorship by Sars in 2022 due to its alleged involvement in illicit tobacco trade and tax noncompliance,” Moloto said.
“Deploying customs officials at factories, as was done successfully in 2019 before being discontinued, would ensure production volumes match quantities declared for tax purposes.”
Gold Leaf Tobacco, which stands accused by Sars of shortchanging the fiscus by R3bn, failed in its attempt to get Sasfin to hand in its bank statements, hinting that it suspects the lender fiddled with its bank records.
Gold Leaf, which owns brands such as RG cigarettes, approached the high court in Johannesburg, asking that Sasfin provide it with documents relating to the two accounts it held with the bank, one for US dollars and the other for rand.
Gold Leaf said it required the documents to co-operate with Sars’s probe into its tax affairs.
Sasfin’s employees allegedly helped Gold Leaf launder money in a complex web.
Update: July 8 2025
This story has been updated with additional information.
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