How SA plans to crack down on illicit tobacco trade

The National Consumer Commission (NCC) will implement South Africa’s first track-and-trace system as part of a co-ordinated crackdown on illicit goods, particularly counterfeit medication and pharmaceuticals, tobacco, alcohol, food and consumer appliances.

Authorities are scrambling to combat smuggling and rein in the illicit economy, which the National Treasury has said is worth as much as R700bn a year, or 10% of GDP.

NCC spokesperson Phetho Ntaba said the system is scheduled for launch in the 2027/28 financial year. Regulations to enable tracking and tracing will be issued under the Consumer Protection Act, particularly to enforce product labelling, trade descriptions and product recalls, she added.

“The focus of the tracking and tracing system will mainly be those products with the highest incidents of illicit trade, particularly tobacco, alcohol, pharmaceuticals, food and consumer appliances, which pose a serious risk to South African consumers and the economy,” Ntaba said.

“Other leading jurisdictions have adopted track-and-trace systems to monitor goods in the value chain to verify producer details, product authenticity, product composition and other important data.

“Track-and-trace systems also enhance consumer product safety by requiring products to carry a machine-readable unique identifier linked to a national track-and-trace repository for traceability.”

In its annual performance plan, the NCC said South Africa’s consumer-protection framework has for decades lacked a comprehensive track-and-trace system. Illicit trade in tobacco, alcohol, pharmaceuticals, food, and consumer appliances poses serious risks to consumers and the national economy, it added.

“To address the scourge of illicit goods in some of the highly affected sectors, the NCC will implement a tracking-and-tracing system which will require the promulgation of a regulation by the minister of trade, industry & competition,” the annual performance plan states.

“Once implemented, the tracking-and-tracing system will introduce measures to deter smugglers and counterfeiters, facilitate rapid recalls of dangerous goods, and ensure that only properly labelled products can enter and circulate in South Africa, thereby contributing to economic growth while protecting the health of consumers.

“The tracking and tracing of illicit goods will assist in ensuring that imported and locally manufactured illicit products are easily identified and followed up. There are limited systems of tracking and tracing illicit products in the market. The current instruments are limited and [are] prohibitive.”

Digital map

Track-and-trace systems typically function by creating a digital, real-time map of a product’s journey from the factory to the point of sale. That enables authorities to distinguish legal products from counterfeits and detect where goods diverge into the illegal market.

Earlier this year President Cyril Ramaphosa established a national illicit economy disruption programme, bringing together state agencies and the private sector to combat the scourge.

The National Regulator for Compulsory Specifications (NRCS), established to ensure that businesses produce, import and sell products or services that are not harmful to consumers and the environment, is also ramping up its efforts to “lock out” noncompliant products and encourage local manufacturing.

“The illicit/noncompliant products on average range between 10% and 15% of the fast-moving consumer goods market in South Africa. This signifies market failure and is linked to the reason for the existence of the NCRS,” the regulator said in its annual performance plan tabled in parliament.

“The NCRS estimates that R382bn worth of illicit/noncompliant products are traded annually within the NCRS regulatory space.”

The NCC has particularly taken issue with counterfeit medicines, which are endangering the health of consumers, and unregulated foodstuffs and appliances

“In Africa, counterfeit/substandard medicines are estimated to cause over 100,000 deaths annually, with the UN estimating that trafficked or fake medical products kill almost half a million Sub-Saharan Africans every year.”

In one of his last public engagements as commissioner of the South African Revenue Service (Sars), Edward Kieswetter last week told a webinar hosted by competition and commercial law firm Nortons that tighter co-ordination across state agencies was required to push back against syndicates operating in the illicit economy.

“The illicit economy may be illicit, but it is highly organised. It is well functioning. It acts and performs and behaves like a business.” The state, by contrast, he said, responded “in a transactional and functional way, not in a systemic way”.

Keiswetter added that Sars, the police, the Border Management Agency, the defence force, the Hawks, the National Prosecuting Authority and the Special Investigating Unit were each pursuing narrow mandates without shared intelligence or scoreboards.