Kieswetter proposes presidency-led clampdown on billion-rand illicit tobacco and alcohol industries

Sars commissioner Edward Kieswetter has recommended the creation of a presidency-led national illicit economic disruption programme to crack down on the illicit economy which he estimates could be valued at anything between R800bn and R1,2-trillion. This is one recommendation of a five-point plan that Kieswetter has proposed to deal with the illicit economy which has undermined the tobacco and alcohol industries in particular, and led directly to the announced closure by British American Tobacco (BAT) of its sole manufacturing plant in South Africa. Ilicit cigarettes are estimated to make up 75% of the local market.

The plan has been discussed with finance minister Enoch Godongwana and would hopefully begin to be implemented in the new financial year, Kieswetter said in reply to questions by MPs during an engagement on Friday between members of parliament’s two finance and two appropriations committees and Godongwana and Treasury officials on the 2026 budget. The commissioner noted that the advantage of a presidency-led programme was that the president could hold ministers accountable. Kieswetter estimated that in the past 15 to 20 years the illicit economy had grown faster than the formal economy, from about 5% of GDP to about 12%-15%.

This translated into R200bn-R300bn in taxes not collected. “So there is a strong business case to do better,” he said. Another element of the plan was the strengthening of inter-agency collaboration through the establishment of a command centre and collaboration platform with the initial target being high risk value chains in the tobacco, alcohol and fuel industries.

[paywall]

A further recommendation by Kieswetter was that dedicated prosecution teams and courts be set up as many of Sars’ seizures got caught up in a lengthy processes which created uncertainty and led to challenges. The commissioner also recommended that the experience of Sars be leveraged for a massive scaling up of investment in technology, data science and AI so that the government — and particularly the justice and security cluster — could move towards a far more data driven, evidence-based approach. A further recommendation concerned what Kieswetter said was a major problem, namely the lack of integration of efforts with each department pursuing their own narrow mandate, often with perverse incentives.

There was no national dashboard which could measure progress being made in combating crime, corruption and the illicit economy. The way capital budgets were allocated should also change. Instead of being allocated to different departments which did different things and did not address the problem systemically, they should be allocated to specific projects.

[/paywall]