Online Reporter
The illicit tobacco trade is a home-grown problem — more than 91 of the products sold without excise duty or value-added tax (Vat) come from 14 local manufacturers.
These cheap cigarettes, in some cases selling for around R5 per packet of 20 in the market, translate into an estimated R28 billion loss to the fiscus annually. Or put differently, around R100 million each working day.
These are some of the findings by research firm Ipsos, which has conducted a study commissioned by British American Tobacco (BAT) into the cheapest purchase prices in the cigarette market.
The minimum collectable tax (MCT) for a packet of 20 cigarettes is R26,22 (R22,80 for excise duties and R3,42 for Vat).
FTI Consulting noted that profitability is achieved at a purchase price of R33,83 per pack of 20.
The University of Cape Town is quoted as saying that the minimum retail selling price should be at least R35 per pack of 20 cigarettes when excise tax, manufacturing costs and profits, wholesaler and retailer margins, distribution costs and Vat are added.
Almost 70 percent of 4 812 retailers approached in the mystery shopper research sold cigarettes below R20 per pack. Ipsos found that cigarettes sold for less than MCT have reached record-high levels in 2025 at 76,6 percent up from 27 percent in 2022.
The hotspots for cheap cigarettes sold by retailers in South Africa are the Eastern, Northern and Western Cape as well as North West province.
Purchases at R26,22 and below occurred at more than 80 percent of the retail stores sampled in these provinces.
Johnny Moloto, head of corporate and regulatory affairs at BAT, says the strategies used to curb illicit trade in tobacco products are not working.
The same usual suspects keep popping up in the research and have gained significant market share over the past few years.
And that market share has not been gained from a level playing field – the same rules don’t apply to all the players in the game. — Moneyweb
