An illegal cigarette brand, RG, is now the biggest seller in the country, research released by the Tobacco Institute of Southern Africa shows.
RG is manufactured by Golden Leaf Tobacco Company, which produces illegal cigarettes, selling at an average of R10 for a pack of 20 cigarettes, below the minimum tax of R17.85 payable to Sars on every pack.
The research, by Ipsos showed an increase in sales of illicit cigarettes from 33.4% of total in June to 42% in October.
The Ipsos survey company looked conducted its investigations by looking at brands which sell at retail outlets below the minimum tax-inclusive price of R17.85.
Ipsos’s Zibusiso Ngulube says the survey recorded every single brand sold nationwide, concentrating on the selling price. They disregarded sales by hawkers, taverns and shebeens.
Ngulube says Ipsos found that illicit prices “are 73% cheaper than the reference price in the legal market used by treasury to determine excise duties, and 44% cheaper than minimum taxes owed on each pack”.
He said the Western Cape and the North West regions are outselling legal tobacco sales with at least 50% of illegal cigarette sold at each region.
The chairperson of the institute, Francois van der Merwe, says the tobacco industry cannot live on promises. “Sars has to fight illicit sales of tobacco products”.
“A project by Sars called Honey Badger was meant to probe the production of illegal tobacco sales, but has not been effective,” he said .
Van der Merwe said South Africa is the first country in the world to allow for informal trading of illicit tobacco to grow rapidly — and be readily available in mainstream retailers.
He says these illicit companies are defrauding the country of billions in taxes — with Sars losing at least R8-billion through tax collection. “This is not a problem of smuggling and its not about counterfeiting. It’s illegal local activity operating in close proximity of SARS,” he said.
Dumisani Sibeko of the Food and Allied Workers’ Union, who attended the press briefing in Rosebank, says “they plead with the government to hear their cries”.
Sibeko says they have experienced retrenchments in their factories and they fear that if nothing is done to clampdown illegal manufacturers, more employers will lose their jobs.
Van der Merwe says there should be audits from each company that is manufacturing tobacco in order to punish the culprits.