South Africa has lost control of a massive criminal empire

The laws, which are currently going through a lengthy consultation process, want to make sweeping changes to South Africa’s tobacco regulations.

Some of the biggest proposals include:

• Introducing plain packaging with graphic health warnings and pictorials
• A total ban on the display of products at the point of sale
• A total ban on vending machines for these products and
• Introducing 100% smoke-free areas in indoor public places and certain outdoor areas

While many support the goals of the laws—to reduce smoking and exposure to tobacco products—the proposals have faced backlash from businesses and even the public for stepping too far.

Some of the biggest criticisms have been levelled at the economic impact of the laws, particularly on small traders.

However, big players, like BAT, have also come out swinging, mainly focusing on how the government has already failed to enforce current regulations, and now want to add more to the pile.

Delivering its latest presentation on the Tobacco Products and Electronic Systems Control Bill, BAT said that the proposed laws are fundamentally flawed, because only 25% of the market will actually follow them.

It said that 75% of the tobacco market in South Africa is now illicit and controlled by criminals that circumvent or outright defy regulations, and the new laws will only serve to drive more traders to that side.

Not only do criminals control the market, but BAT said that the government itself allowed the illicit market to thrive.

The 2020 sales ban on tobacco during the Covid-19 pandemic and lockdown was a “critical breaking point”, it said.

Its data showed that about R14 billion in total excise was collected from local manufacturers in 2019, before the ban. This dropped to R9 billion in 2021 after the ban.

At the same time, approximately 1.6 billion additional cigarettes were smoked in the country, pointing to a surge in illicit trade.

The handing over of the market to criminals is even more evident when looking at a 10-year period.

BAT noted that in 2014, the illicit market was approximately 35% of all sales. While this is still significant, the legal industry dominated with 65% of the market at the time.

Also at this time, close to R13 billion was collected in excise, and manufacturers declared 22 billion cigarettes to SARS.

In 2024, the illicit market had grown to 75%, completely dominating legal trade. R9 billion in excise was collected from manufacturers, despite an 88% increase in duties, and only 8.3 billion cigarettes were declared.

Over the 10-year period, the number of cigarettes has plummeted, but research shows that smoking increased, BAT said.

SARS set a minimum collectable tax value of R26.22 on a pack of cigarettes. According to Ipsos research, people are buying packs for as little as R5. This is another clear sign of illicit trade thriving.

Government needs a reality check

Given the situation, BAT said that the new laws proposed in the tobacco bill make little sense—mainly because the criminal-controlled market will ignore them while legitimate players suffer.

“The South African government seeks to implement additional control measures on a market it does not in fact control,” BAT said.

“The bill requires a level of enforcement our country has simply not seen in years. Public health policy cannot succeed when most of the market operates outside the law.”

Even if the government ignores the reality of the current market, BAT said that the laws themselves will simply aid criminals in entrenching themselves further.

Changes like forcing cigarette companies to sell products in plain packaging are ineffective, it said, but also, counterintuitively, aid criminals.

The group said that illicit manufacturers will simply continue to sell branded packs that consumers recognise. And if they want to appear legit, plain packaging is easier to counterfeit and get into the market.

With the retail display ban, BAT said this was a “high enforcement proposal for a low-enforcement market”, where informal traders will be worse off.

BAT said that it is not opposed to regulation, and that it supports public health objectives to reduce smoking rates.

However, it said there should be wider insistence that the government, including the National Department of Health, measurably take on illicit trade first, with dedicated legislative tools.

It said that in the current form, the bill is unlikely to reduce smoking rates and will help enrich criminals controlling the illicit market, and give them an even bigger share.

Issued on BusinessTech | https://businesstech.co.za/news/business/834779/south-africa-has-lost-control-of-a-massive-criminal-empire/