South Africa is bleeding billions every year, not through corruption or load shedding, but through the illicit cigarette trade.
Thank you for reading this post, don't forget to subscribe!Over the past decade, a once-strong regulatory regime has unravelled, with the illicit tobacco trade now dominating the market. The national fiscus has lost over R119 billion in tax revenue to illegal cigarette sales between 2002 and 2022.
This article sets out a Roadmap to 2030, detailing how South Africa can slash the illicit cigarette trade, restore public revenue, and protect legal businesses.
Read more in The Policy Fix: What South Africa Must Do to Curb Illicit Cigarettes for actionable strategies to strengthen enforcement and close loopholes in the cigarette trade.
Why the Illicit Cigarette Trade is Exploding
The rise of South Africa’s illicit cigarette market is no accident. It is the result of deliberate under-declaration, weak enforcement, and opportunistic actors in the supply chain.
According to Professor Corné van Walbeek and Samantha Filby of UCT’s Research Unit on the Economics of Excisable Products (REEP):
“The rise in illicit trade in South Africa is not the inevitable result of excessive taxation, but rather of inadequate enforcement and the complicity of some manufacturers who exploit regulatory weaknesses.”
COVID-19 Accelerated the Problem
The 2020 cigarette sales ban, introduced during COVID-19 lockdowns, had unintended long-term consequences. Smokers didn’t quit. Instead, they turned to informal markets, many of which sold untaxed, unregulated cigarettes.
“The sales ban entrenched the illicit market, creating distribution networks that had not previously existed,” REEP researchers noted.
SATTA’s Call to Action: Tax Losses and Economic Fallout
The South Africa Tobacco Transformation Alliance (SATTA) estimates that over R28 billion in revenue is lost every year due to illicit cigarettes.
In its August 2023 campaign briefing, SATTA warns:
“Legal tobacco farmers, manufacturers and retailers are under siege. The illicit sector now accounts for over 60% of cigarette sales in the country.”
This shift has also cost thousands of jobs, especially in rural farming areas and township retailers.
The Role of Minimum Collectible Tax and Pricing Floors
Under South African tax law, no pack of 20 cigarettes can be sold for less than R26.22, the Minimum Collectible Tax (MCT). However, SATTA’s research shows that over 70% of informal retailers routinely sell below this price.
Learn how to spot illegal packs in The R26.22 Rule: How to Tell if Your Cigarettes Are Legal or Not and protect yourself from illicit trade.
This pricing loophole is a clear marker of tax evasion. A consumer buying a R10 cigarette pack is not just saving money; they are buying a product that likely contributed nothing to SARS.
Regulatory Gaps: No Licensing, No Track-and-Trace
While some isolated enforcement actions have occurred, such as the curatorship of Gold Leaf Tobacco Corporation, South Africa has not implemented a national track-and-trace system.
South Africa has also failed to ratify the WHO’s Protocol to Eliminate Illicit Trade in Tobacco Products, which mandates licensing, record-keeping, and supply chain transparency.
What a Roadmap to 2030 Must Include
To slash the illicit cigarette trade by 2030, SATTA and public health experts propose five urgent pillars for reform.
Explore global solutions Could the WHO Protocol Be the Game-Changer in Fighting Illegal Cigarettes? and see how South Africa could benefit from adopting it.
1. Enforce Minimum Retail Pricing with Clarity
SATTA calls for the implementation of a clear Minimum Retail Price (MRP)—recommended at R37 per pack—to simplify enforcement.
This MRP would:
- Enable law enforcement to easily identify illegal packs.
- Protect legal manufacturers from predatory pricing.
- Reduce tax evasion and close informal market loopholes.
Read more on SATTA’s campaign page.
2. Fast-Track Track-and-Trace Technology
A secure national track-and-trace system, endorsed by both SATTA and international agencies, would allow authorities to:
- Monitor each pack from manufacture to point-of-sale.
- Identify factories producing non-taxed products.
- Crack down on both domestic and cross-border smuggling.
“If a product cannot be traced back to a tax-compliant factory, it should not be allowed on shelves,” SATTA states.
3. Strengthen SARS and SAPS Task Forces
The weakening of SARS during the state capture era still haunts its ability to act.
Professor Van Walbeek noted that enforcement units dismantled in that period have yet to be fully reconstituted, leading to unchecked manufacturing and distribution.
Restoring SARS’s enforcement capabilities is crucial. This includes:
- Real-time audits at manufacturing plants.
- Surprise raids and confiscation of non-compliant stock.
- Public reporting of enforcement statistics to deter future offenders.
4. Licence Every Link in the Supply Chain
South Africa needs to license all actors in the tobacco value chain—from farmers to wholesalers to informal traders.
Licensing would:
- Allow better oversight of who produces and sells cigarettes.
- Create accountability for non-compliance.
- Discourage fly-by-night operations.
The WHO protocol demands this, and South Africa must align with international best practice.
5. Educate Consumers and Empower Whistleblowers
SATTA’s campaign includes public-facing toolkits to help consumers:
- Spot fake or illicit packs.
- Understand pricing floors and tax stamps.
- Report illegal cigarettes via SATTA’s reporting portal.
Report illegal cigarette sales here: Report to SATTA
What Success by 2030 Looks Like
If South Africa follows this roadmap, by 2030 we could achieve:
| Target | 2025 Baseline | 2030 Goal |
|---|---|---|
| Illicit market share | 60% | ≤ 20% |
| Tax revenue loss | R28bn/year | < R10bn/year |
| Legal cigarette sales | 13bn sticks | ≥ 18bn sticks |
| Jobs in legal sector | Declining | Growing |
These are ambitious but necessary targets to secure both fiscal stability and public health gains.
Illicit Cigarettes: A Public Health Time Bomb
Beyond revenue loss, illicit cigarettes pose significant health risks. They often:
- Lack proper filtration
- Contain unregulated chemical additives
- Fail to meet South African health labelling laws
According to SATTA, many of these products are “manufactured in unhygienic, unlicensed environments, often near urban settlements or border zones.”
“This isn’t just a tax issue. It’s a health crisis,” warns SATTA Chairperson Francois van der Merwe.
Breaking the Informal Cycle in Townships
Informal retailers, such as spaza shops, are a key conduit for illegal cigarette distribution. In some townships, up to 90% of cigarette sales are illicit.
This hurts more than the government. It also squeezes out compliant businesses, discourages local entrepreneurship, and fosters dependency on criminal supply chains.
Expert Voices Call for Immediate Action
Leading voices in the tobacco space agree: delay means deeper losses.
“Unless decisive action is taken to strengthen enforcement and regulate the supply chain, the country will continue to suffer large revenue losses and diminished public health gains,” say REEP researchers.
“We have repeatedly shown who the culprits are. If SARS and the police wanted to act, they could today,” adds SATTA Chairperson Van der Merwe.
A Path Forward Is Within Reach
South Africa already has the data, tools, and policy frameworks to end the scourge of illicit cigarettes. What remains is political will, enforcement capacity, and cross-sector collaboration.
How South Africa can slash the illicit cigarette trade is no longer a mystery. It’s a matter of action, and that action must begin now, before the R28 billion black hole grows any deeper.
