The illegal cigarette trade is nothing new but supply and demand has made it far more profitable during the country’s ban on the sale of tobacco products.
This view was shared by top investigative journalist Jacques Pauw on Tuesday during a webinar on the illegal tobacco trade facilitated by financial services group PSG.
Pauw said criminal syndicates had sold an estimated R3bn worth of illegal cigarettes since the prohibition on tobacco sales, which took effect on the first day of lockdown, March 27.
“The government could have already lost up to R4.5bn in revenue as a result of the tobacco ban,” Pauw, who wrote The President’s Keepers, an expose on key officials who helped keep Jacob Zuma in power, said.
Prominent tobacco and other companies placed a two-page advertisement in Sunday newspapers at the weekend, saying the prohibition had cost the national purse R3.5bn in excise taxes alone and enriched “billionaire criminals in the illegal trade”.
In the advertisement, published in the form of an open letter to President Cyril Ramaphosa, the companies, including British American Tobacco (BAT), retailer SPAR and the SA Spaza & Tuckshop Association, implored him to lift “the disastrous tobacco and vaping ban”.
Pauw said some peculiar — and potentially highly dangerous — brands had surfaced during the lockdown, with people smoking whatever they could get their hands on.
“The cigarettes are simply coming in from across borders because it has been difficult to manufacture cigarettes, meaning the losses are enormous because very few people have stopped smoking.
“In fact, people are smoking brands that have not been certified and we don’t know what they have been treated with and they do not carry any health warnings,” Pauw said.
He said cigarette smugglers were using the same routes for smuggling rhino horn, weapons and cocaine.
“It is a full-on criminal enterprise. The advantage for the cigarette smugglers is the light penalties, and the fact that we have not acted on these syndicates,” Pauw said.
Business news website Moneyweb published an article on Tuesday which noted a sharp fall in the prices of illicit cigarettes — from about R100 to R150 a pack to R50 now — suggesting that supplies were adequate and underground networks entrenched.
Pauw said these criminal networks had been empowered during the lockdown and that no decisive action had been taken against them by the authorities.
He gave a brief history on the illegal trade, tracing it as far back as 1997, when taxes on cigarette manufacturing were dramatically increased.
Overnight, there was a rise in the number of companies producing “cheapies”, leading to the creation of criminal networks.
Pauw believes that some legitimate cigarette manufacturers were also involved in the illegal trade.
“Someone explained to me that, though companies could not manufacture, they still had stock which they sent to the criminal markets when lockdown started but now they have run out of stock, and they need the ban to stop now so they can start manufacturing again,” he said.
He said that the last time Sars tried to systematically investigate and prosecute illegal tobacco sales was in 2012.
Driven by Johann van Loggerenberg, then head of the SA Revenue Service investigative unit, the operation raided tobacco companies, withdrew licences and closed down manufacturers.
However, the unit was dismantled in 2014 after Zuma appointed Tom Moyane as Sars commissioner.
SA’s tobacco ban — one of the only prohibitions still in place worldwide — has been a much-criticised feature of SA’s Covid-19 lockdown and is the subject of two separate court battles. — Additional reporting by BusinessLIVE