What is the Illicit Tobacco Trade?
The illicit tobacco trade refers to the production, distribution, and sale of tobacco products that evade taxation or regulation. This underground market thrives on smuggling, counterfeiting, and tax evasion, allowing cheap and illegal cigarettes to flood local markets. These illicit products are often sold for a fraction of the price of legal cigarettes, undermining public health policies and government revenue systems.
The Scale of the Problem in South Africa
In South Africa, illicit tobacco trade is a growing concern. Research by the University of Cape Town estimates that the illicit cigarette market has cost the government over R100 billion in lost revenue since 2010. This represents billions of rands annually that could have been directed toward public services like healthcare and education.
A 2022 Ipsos survey found that 58% of cigarettes sold in South Africa were illegal, with prices often falling below the legally mandated minimum of R32 per pack. These shockingly low prices make illicit cigarettes accessible to minors and economically disadvantaged communities.
How Does it Operate?
Illicit tobacco trade operates through:
- Smuggling: Moving tobacco products across borders to avoid customs duties.
- Counterfeiting: Producing fake tobacco products resembling legitimate brands.
- Tax Evasion: Selling products without paying the required excise duties.
Impact on Society
Beyond economic losses, the illicit trade fuels organized crime networks, encourages corruption, and undermines efforts to reduce smoking rates. The lack of regulation also means that these products do not adhere to health and safety standards, posing severe health risks to consumers.
