Illicit cigarette industry threatens jobs, economy

AUTHORITIES have come under pressure to clamp down on the allegedly tax-dodging manufacturers of illicit cigarettes.

New research has claimed that illegal cigarettes are now dominating the market share, deposing Peter Stuyvesant as a preferred brand.

The report by research group Ipsos, conducted on behalf of the Tobacco Institute of Southern Africa (Tisa), said RG – “an illicit brand” – was now the most bought cigarette in South Africa.

The report said RG and others had overtaken traditional brands by evading excise tax and thereby managing to keep their prices as low as R10 per pack.

The SA Revenue Service (Sars) has lost R8 billion due to untaxed cigarettes flooding largely the informal sector, the report claimed.

Francois van der Merwe, a tobacco farmer and Tisa’s chairperson, decried what he described as empty promises by the state to tackle manufacturers of illegal brands.

He said Tisa had given Sars solid information about the manufacturers and their modus operandi.

“I briefed Parliament in May. Parliament was shocked by the amount of money that’s lost through illicit tobacco,” said Van der Merwe.

“We’ve committed to work with Sars, assist them and show them factories. Sars made very good commitments.

“Unfortunately, nothing has happened yet because… the illicit trade has just gone up,” Van der Merwe said.

“We welcome the commitments and promises, but that will not save the legal industry and broaden the tax base again.

“Sars’ commitments need to translate into urgent action and decisive decisions. We can’t live off promises,” he said.

“We need Sars to act. We need the police to act. We need Parliament to get really involved.”

Facing a R50bn shortfall in the fiscus, the country could benefit from preventing illegal manufacturers evading tax, he said.

Van der Merwe said it should not be difficult for Sars to deal with illicit manufacturers because it already knew them.

“Illegal cigarettes are manufactured locally in factories licensed by Sars,” he said.

This also dispelled the belief that illicit cigarettes were counterfeits manufactured outside of South Africa.

Just last week, the Lesotho Revenue Authority confiscated 380 000 RG loose straws at the Maseru Bridge border post.

This was one of the biggest busts in Lesotho in the last five years.

“RG is smuggled from here to Lesotho,” Van der Merwe said.

The 12 000 jobs in the traditional tobacco sector were threatened, Van der Merwe added.

Members of the Food and Allied Workers Union marched to Sars’ offices earlier this year to ask it to act against the illicit tobacco industry.

Dumisani Sibeko, a shop steward at a Heidelberg factory, yesterday said workers were hard hit.

“There were retrenchments two months ago. Due to the decline of business, 50 workers lost their jobs. We used to produce 20 million sticks per annum, but we’re now sitting at 17 million sticks,” he said.

However, Gold Leaf Tobacco, manufacturer of RG, said Sars had never had to act against their brand because it was above board.

“Our RG brand is registered with Sars and there is nothing illicit about it,” said attorney Raees Saint.

“We have been constant contributors to the fiscus. We have, in the last 12 years, paid an amount of nearly R8.2bn in excise duties alone.”