Illicit Cigarettes Capture 60% of South Africa’s Market, Study Finds
A new University of Cape Town (UCT) study reveals that approximately 60% of cigarettes sold in South Africa are illicit, driven by weak regulatory enforcement and consumer habits formed during the COVID-19 pandemic.
- Market Shift: Local brands suspected of tax evasion have overtaken multinational tobacco companies in market dominance.
- The COVID Catalyst: Smokers who switched to cheaper, illicit brands during pandemic-era sales bans have largely refused to return to legal products.
- Enforcement Failures: A lack of track-and-trace systems and a controversial court ruling blocking factory surveillance cameras severely hamper regulatory efforts.
Researchers from the University of Cape Town have confirmed that illicit cigarettes now dominate South Africa’s tobacco market, accounting for roughly 60% of all sales in 2021. This dramatic shift, occurring against a backdrop of weak enforcement and pandemic-era buying habits, has directly led to massive tax revenue losses and rising smoking rates among low-income groups.
According to Corne van Walbeek, a researcher at the UCT Research Unit on the Economics of Excisable Products, the industry landscape has drastically changed over the past decade. Major multinational companies have lost their foothold to locally produced brands that are widely suspected of evading full tax payments.
These illicit products are primarily distributed through informal outlets, such as spaza shops, at prices significantly lower than legally taxed cigarettes. Van Walbeek notes that the COVID-19 pandemic acted as a major catalyst for this permanent market shift.
During the nationwide tobacco sales ban, desperate consumers switched to any available brand. Realizing the quality was acceptable, many simply stuck with these cheaper, illicit alternatives even after the ban was lifted.
The booming illegal market is heavily fueled by systemic regulatory failures. South Africa currently lacks a national track-and-trace system for cigarette production, leaving authorities entirely reliant on self-reporting by manufacturers. Efforts to tighten oversight have faced significant legal hurdles:
- Surveillance Pushback: The South African Revenue Service (SARS) attempted to mandate surveillance cameras inside production and storage facilities to monitor output.
- Legal Defeat: The Fair-trade Independent Tobacco Association (FITA) successfully sued to block the cameras, citing workers’ right to privacy.
- Regulatory Blindspot: Van Walbeek described the court’s decision as a “bizarre legal outcome” that effectively shields illicit production from government scrutiny.
The consequences of this illicit boom extend far beyond lost tax revenue. The UCT study highlights a severe human cost, as the artificially low prices of illegal cigarettes drive up smoking rates, particularly among vulnerable, low-income communities.
This trend threatens to inflict long-term health consequences and place an overwhelming strain on the public healthcare system. Researchers are urgently calling on the South African government to implement stronger controls, including a robust track-and-trace system, to curb the illicit trade, recover lost funds, and protect public health through proper taxation.
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