The commissioner of the South African Revenue Service (Sars), Edward Kieswetter, has warned that South Africa is not winning the war against criminal syndicates operating in the illicit economy. Kieswetter was responding to theimminent closureof the only plant of British American Tobacco (BAT) in South Africa due to the proliferation of illicit cigarettes. The international tobacco major said illicit cigarettes now constitute 75% of the market.
He said the black market, which stretches from cigarettes, smuggled gold andfuel adulterationto counterfeiting, has become structural. “Take the tobacco sector as a cautionary tale. Once a robust industry supporting tens of thousands of jobs, it has been devastated by illicit trade.
Today, about three out of every four cigarettes sold in South Africa are illegal — untaxed and often produced or smuggled by organised crime syndicates,” Kieswetter said. “The result is stark: the state loses R18bn-R28bn a year in tobacco taxes; legitimate manufacturers cannot compete with dodgy 20-a-pack specials for R10, well below the minimum collectible tax of R26.22.” BAT, whose shares are traded on the JSE and in London, earlier this month said it would mothball its Heidelberg plant at year’s endand instead import tobacco to service the local market. The same networks that trade illicit cigarettes frequently diversify into illegal mining, gold smuggling, illicit alcohol, counterfeit goods and complex money‑laundering schemes.
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A study by Ipsos, commissioned and paid for by BAT, found the availability of illegal cigarettes in South Africa has become endemic, with nearly eight in 10 South African retailers selling such products, 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 a pack and nearly 80% were selling them below the R26.22 minimum price. More worryingly, Kieswetter said illicit tobacco is not an isolated failure but a gateway into a far wider criminal economy.
“The same networks that trade illicit cigarettes frequently diversify into illegal mining, gold smuggling, illicit alcohol, counterfeit goods and complex money‑laundering schemes,” Kieswetter said. “Tobacco profits are reinvested into other illicit sectors using shared logistics routes, compliant retailers, cross‑border channels and shell companies.
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