Illicit cigarettes now biggest tobacco brand in SA

South Africa loses R8bn in tax revenue at the current growth of the illicit cigarette market, the report said.
South Africa loses R8bn in tax revenue at the current growth of the illicit cigarette market, the report said.
Image: Katarzyna Białasiewicz/ 123RF Stock Photo

South Africa has become the first country in the world in which the biggest brand in the tobacco industry is the illicit cigarette.

This is according to The Tobacco Institute of Southern Africa (Tisa) following a report conducted by Ipsos on the market share of illicit cigarettes in the country.

The report released on Tuesday showed that sales of illicit cigarettes have increased from 33.4% in June this year to 41.8% of the market in October 2018.

This means that one in every three cigarettes is sold below the minimum collectable tax.

RG brand, produced by Gold Leaf Tobacco Corporation, took number one spot in sales in the research, outselling all other brands and defeating even Peter Stuyvesant which has been the leading brand in South Africa for decades.

Researchers found that 89% of RG retails for less than R17.85 per pack and is now averaging R10 per pack.

The RG brand expanded its distribution in five of the country’s nine provinces. It tripled its distribution in the Northern Cape and doubled it in KwaZulu-Natal, while maintaining a strong distribution in other provinces.

In the South African market, of each packet of cigarettes sold, R17.85 goes to the SA Revenue Service. Of this, R15.52 is excise duty and R2.33 is Value Added Tax.

The report found that there were also cigarette packs selling as low as R5 in the market.

Loose sticks which sell for just 50 cents were on the rise as those selling at R1 become “less popular”.

Tisa chairperson Francois van der Merwe said illicit cigarettes needed urgent attention from the state as most of the illegal product is produced in South Africa.

“State capture began with illegal cigarette money. I am a tobacco farmer…if the legal industry goes down, we don’t have anywhere else to go. This must be fixed,” said Van der Merwe.

South Africa loses R8bn in tax revenue at the current growth of the illicit cigarette market.

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