<\/p>\n
The Fair-Trade Independent Tobacco Association (Fita) has questioned research funded by British American Tobacco SA (Batsa) implicating smaller manufacturers in the massive increase in illicit cigarettes being sold in SA.<\/p>\n
Fita was responding to a Batsa-funded Ipsos survey which, according to the association, found below-tax cigarettes in nearly 75% of outlets visited, compared with 27% in a 2022 survey.<\/p>\n
Read:\u00a0R7 cigarettes expose scale of illicit tobacco trade in SA<\/p>\n
Ipsos fieldworkers found cigarettes selling below the minimum collectable tax benchmark of R27.12 per pack in nearly 75% of outlets visited, with some packs priced as low as R7.<\/p>\n
\u201cFita has always acknowledged that illicit trade is a serious problem,\u201d says the tobacco manufacturers organisation in a statement.<\/p>\n
\u201cIt deprives the fiscus of revenue, prejudices compliant businesses and demands effective, even-handed enforcement across the whole value chain.<\/p>\n
\u201cWhat Fita does not accept is industry-funded research being presented as proof that three-quarters of the cigarettes smoked in South Africa are illicit, or independent manufacturers being named alongside statistics that do not show what the accompanying narrative suggests.\u201d<\/p>\n
Perspective<\/p>\n
Ipsos fieldworkers made 4\u00a0704 purchases, and in nearly 75% of outlets visited found cigarettes on sale at below the minimum collectable tax of R27.12.<\/p>\n
\u201cThat measures where below-tax packs can be found, not how many cigarettes are illicit,\u201d responds Fita.<\/p>\n
\u201cA shop that stocks one below-tax brand may sell far larger volumes of tax-paid cigarettes, and the survey did not measure what each outlet sells.\u201d<\/p>\n
In January, Batsa announced that it would close its Heidelberg factory which had been operating at just 35% capacity due largely to illicit tobacco sales.<\/p>\n
Read: BAT: \u2018We\u2019ve reached the limit\u2019 as SA factory closure confirmed<\/p>\n
It blamed weak law enforcement, the 2020 tobacco sales ban and above-inflation excise increases for worsening conditions.<\/p>\n
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\u201cFita\u2019s latest statement does little to advance a serious discussion about South Africa\u2019s illicit cigarette crisis,\u201d says Johnny Moloto, area head of corporate and regulatory affairs for BAT Sub-Saharan Africa.<\/p>\n
\u201cBatsa stands by the independent research it has published and remains focused on supporting efforts to address an illicit market that continues to undermine legitimate businesses, jobs and the fiscus.\u201d<\/p>\n
Market in turmoil<\/p>\n
The market shares of two of the country\u2019s largest cigarette manufacturers, Philip Morris and Batsa, were decimated in 2020 when then cooperative governance and traditional affairs minister Nkosazana Dlamini-Zuma implemented a five-month ban on tobacco sales during Covid, supposedly to reduce pressure on hospitals.<\/p>\n
The result was a dramatic shift to illicit brands, with cigarettes paying no excise duty pouring across the borders.<\/p>\n
Read:
Tobacco ban unconstitutional and invalid
Government to appeal ruling against tobacco ban
Dlamini-Zuma found to have infringed rights \u2018foundational to a democracy\u2019<\/p>\n
Local manufacturers were also accused of tax dodging, contributing to estimated tax losses of R30 billion a year.<\/p>\n
The tobacco market has not recovered to pre-Covid levels.<\/p>\n
Research vs proof<\/p>\n
Fita has\u00a0also criticised the naming of manufacturers whose brands were bought below the tax threshold.<\/p>\n
It says a retail price survey cannot establish whether a manufacturer failed to pay excise, where a pricing anomaly arose in the supply chain, or whether a pack was counterfeit.<\/p>\n
\u201cBrands are attributed from what is printed on the pack, so a counterfeit can be recorded against the genuine brand owner,\u201d says Fita.<\/p>\n
The association says these criticisms are not new.<\/p>\n
In 2022, UCT researcher Nicole Vellios traced Batsa\u2019s claim that \u201calmost 70% of all cigarettes consumed in South Africa belong to illicit brands\u201d to a survey finding below-tax packs in \u201calmost 70% of outlets in Gauteng\u201d.<\/p>\n
The national figure was 34% of stores. It was, she wrote, \u201cmisleading to say that 70% of the market in Gauteng is illicit\u201d.<\/p>\n
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Batsa\u2019s \u2018struggles\u2019 in context<\/p>\n
Fita has also challenged Batsa\u2019s explanation for closing its Heidelberg factory, which its own reports suggest is part of a factory network consolidation over the past 18 to 24 months.<\/p>\n
Fita says Batsa\u2019s own reports list Heidelberg as part of a wider group-wide manufacturing \u2018footprint optimisation and reorganisation\u2019.<\/p>\n
\u201cThe same programme involves about 5 500 role reductions outside the US, the transfer of about 3 500 roles to strategic partners and targeted annual savings of about \u00a3600 million [R13.3 billion] by the end of 2028,\u201d adds Fita.<\/p>\n
However, a June 2026 update from BAT says the closure is primarily due to the unsustainable level of illicit products in the South African market.<\/p>\n
Fita says Batsa needs to be held the same standard as everyone else, given its own history of sanctions violations, disputed tax assessments and allegations concerning illicit trade.<\/p>\n
The association acknowledges that this criticism does not establish present misconduct by Batsa in South Africa.<\/p>\n
Competing on equal terms<\/p>\n
Fita says legitimate local manufacturers struggle to access parts of the formal retail market, yet face criticism because their products are prevalent in informal and independent outlets.<\/p>\n
It calls for equal access to markets and argues that Batsa\u2019s loss of market share should not itself be treated as evidence of wrongdoing by competitors.<\/p>\n
Enforcement, it says, must follow evidence across the entire supply chain and apply equally to multinational and independent manufacturers, while protecting legitimate competition.<\/p>\n
BAT\u2019s Moloto previously suggested a halving in the excise on cigarettes (currently R23.58 a pack) to allow players to compete on equal footing.<\/p>\n
\u201cIllicit trade must be eradicated,\u201d says Fita. \u201cTax compliance must be enforced. Those who break the law must face the consequences.<\/p>\n
\u201cBut legitimate competition must be protected too. South Africa deserves an evidence-based tobacco policy, not one shaped by the commercial narrative of any single market participant. South Africans deserve the full picture.\u201d<\/p>\n
#Dont #blame #illegal #cigarettes #swamping #market #Fita<\/p>\n","protected":false},"excerpt":{"rendered":"
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