SOUTH AFRICA
Finance Minister Tito Mboweni announced in his 2020 budget that there would be a renewed focus on illicit and criminal activity.
The research, presented at a BLSA event in Johannesburg, showed that the most prevalent type of illicit tobacco were cigarette packs sold below master contract token (MCT) price (SAR20.01 (US$1.13) in 2020). Some packs were sold at SAR10, the research showed.
The size of the illicit cigarette trade was estimated at 30-35% of the total formal market and 42% of the informal market. Cigarettes priced at less than SAR20 were sold in all provinces ranging from 26.7% of the market in Limpopo to 37.3% in the Northern Cape Illicit products were sold in three out of four shops in the non-organized retail space.
The economic impact of illicit tobacco products was estimated to be a SAR7-8 billion loss in excise tax and job losses. It also contributed to increased spending on health. By volume, smuggling contributes 28%, tax leakage 24.8%, counterfeit 24.3%, and homebrew products 22.9% of the total illicit alcohol market.
The revenue loss by type was smuggling (38%), counterfeit (30.5%), tax leakage (31,1%), and homebrew products (0.4%). Excessive regulations and restrictions on licit alcoholic beverages, high excise tax, ineffective enforcement, and border controls, inadequate sanctions for offenders, and corruption were some of the problems that led to illicit alcohol flooding the local market.