Over Half of South African Retailers Suspected of Selling Illicit Cigarettes
More than half of South Africa’s retail outlets are suspected of selling illicit cigarette goods, according to an Ipsos survey. Commissioned by British American Tobacco South Africa, the study exposes the circulation of illicit cigarettes at very low prices, severely damaging the economy and tax revenues. British American Tobacco South Africa is calling on the government to take steps to combat the illicit trade and ensure that the industry operates in a legal and compliant manner.
Ipsos Study Reveals Alarming Market Trends
According to South African Research News on July 15, a survey and analysis by Ipsos Enterprises (Ipsos: a market research firm established in Paris, France) recently revealed a worrying situation: more than half of the stores in South Africa’s retail market are suspected of selling illegal cigarette goods. The study, commissioned by British American Tobacco South Africa (BATSA), aimed to assess the legality and compliance of the tobacco market in South Africa.
Low-Priced Cigarettes Intensify Market Competition
The research team conducted a statistical survey of more than 4,500 stores across the retail sector in South Africa. The findings showed that new competitors have emerged in the market, selling cigarettes at extremely low prices — in some cases as low as R5 (about $0.27) per pack of 20 cigarettes. This has intensified competition at the lower end of the market and created an uneven playing field.
Widespread Sales Below Minimum Tax Threshold
The study also revealed that cigarette prices in many outlets fall below the Minimum Collectible Tax (MCT) level. Tobacco supply has been unstable over the past few years. Ipsos’ findings indicate that the wholesale and informal trade sectors have pricing below R25.05 (about $1.38), with high tobacco supply levels of 83% and 72% respectively — suggesting widespread noncompliance.
Growing Challenges for Law Enforcement
These findings suggest that punitive controls on the legal industry are ineffective, as illicit cigarettes continue to flood the market at rock-bottom prices. The products are especially prevalent among low-income consumers, and enforcement agencies struggle to contain the growing illicit economy, leading to further destabilization of the legal market.
Industry Leaders Call for Stronger Government Action
Johnny Moloto, head of British American Tobacco South Africa, expressed deep concern about the findings. He emphasized that the Ipsos study highlights the urgent challenges facing the government in combating illicit trade and cross-border financial crimes. These illegal activities have severely harmed South Africa’s economy and tax base.
Moloto urged the government to prioritize action against illicit cigarette operations and ensure that criminal networks are prosecuted. He also stressed the need for due diligence when issuing manufacturing licenses to prevent further growth of the illegal market.
Collaboration and Policy Reform Needed
Given the scale of the issue, BATSA has called for multi-agency cooperation and stronger enforcement. The company urged the Department of Finance to allocate more funding to the South African Revenue Service (SARS) to support tax investigations and strengthen its campaign against tax evasion within the tobacco sector.
Proposed Solutions: Minimum Retail Pricing and Tighter Oversight
Moloto proposed introducing a minimum retail price for cigarettes, making it illegal to sell below a set threshold. Such a policy would give law enforcement agencies a clearer basis for action and help curb the illicit trade. BATSA is calling for immediate nationwide implementation of this measure.
Economic Impact of Illicit Cigarette Trade
Moloto estimated that South Africa loses approximately 24 billion rand (about $1.3 billion) in excise revenue each year due to the illicit cigarette trade. He emphasized that the new government’s top priorities should include stabilizing public finances, managing rising debt, and enforcing decisive measures to counter the surge in illegal cigarette sales since the 2020 tobacco sales ban.
