When the finance minister, Enoch Godongwana, tried to raise the value-added tax rate by 2%, much of the focus was on the unconscionable idea that a government riddled with waste and corruption could lean even harder on even the poorest people to finance itself.

Raising excise taxes on tobacco products, however, has never faced much, or indeed any, opposition. Yet it has consequences, and they are not limited to lower consumption of legal cigarettes.

In the 2024 financial year tax revenue on cigarettes fell by 8.4%

South Africa had long had a policy of taxing cigarettes at a rate of 50% of the price of the most popular brand in the market. For their part tobacco companies were free to raise cigarette prices to maintain profits despite declining consumption.

That began to change in the early 2010, when domestic manufacturers took the opportunity to enter the market with budget-priced products that undercut the established industry.

These companies began to eat into the market, primarily through informal sector sellers and independent retailers who, unlike the major chains, did not have established relationships with the incumbent tobacco companies.

The incumbents responded to the price competition as one would expect: by reducing the prices of their own products to keep them competitive.

This presented a dilemma for the South African Revenue Services (SARS), since the “sin tax” on tobacco products was tied to their price. The response was to begin raising the excise tax on tobacco products to at least keep up with inflation. As a result, the tax on cigarettes today is up to 65% of the pre-tax price of representative brands.

While SARS was keeping the price of cigarettes high, the domestic market – much of which was selling cigarettes at prices so low that they couldn’t possibly have paid the required excise tax – continued to grow, to a peak market share of about 35% in 2017.

By the time the pandemic happened in 2020, SARS had had some success in curbing the illegal, non-tax-paying trade, which now represented 22% of the total market.

The pandemic response, however, which included an ill-conceived and unscientific ban on all tobacco products, turned over the apple cart. Within weeks, while the legal market was shut down, the illicit market took over.

According to a survey taken at the time, 90% of tobacco smokers continued to have access to cigarettes, albeit not their usual, legal brands.

Once the ban was finally lifted, and legal cigarettes were again available, illicit tobacco accounted for about 75% of the market.

This demonstrated in dramatic fashion that prohibition rarely reduces demand by much and only serves to drive a business underground. Markets find a way to satisfy demand, no matter the hurdles placed in their way.

The harder it is to supply a market legally, the bigger the incentive becomes for both buyers and sellers to trade under the counter. And once consumers are introduced to the lower prices that can be achieved by evading excise tax, most never look back.

The legal market never recaptured its dominance. According to Johnny Moloto, head of corporate and regulatory affairs at South Africa’s largest tobacco company, BAT South Africa, illicit trade continues to account for about 70% of all cigarette sales in South Africa.

This, the company estimates, costs the country about R28 billion in lost tax revenue every year, or R100 million per day. Another estimate, published by Nicole Vellios and Corné van Walbeek in BMJ Open in 2024, said that the government lost R18 billion in excise and value-added tax to illicit cigarettes in 2022.

The government could employ 100,000 teachers, nurses or police officers for R28 billion. For that money it could build 30,000 small, pre-fab clinics, or 20 large hospitals.

It is almost equal to the Department of Human Settlement’s entire budget for building houses and could cover its expected budget cuts for the next three years twice over.

The market will always provide. If the government makes it difficult or expensive for producers to supply demand legally, informal sector actors will emerge that bypass the red tape and taxation. That is how free markets work.

The government faces a choice. Sustain its tobacco tax revenue and maintain its taxation-based anti-smoking policies, by investing heavily in on-site monitoring, tracking and tracing to suppress the illicit market.

The alternative is to give up, recognise that the illicit market has gone underground for good, and that it is unfair to burden the law-abiding companies now representing a minority share of the market with excise taxes that their commercial rivals do not pay.

Ivo Vegter writes in defence of free markets and individual liberty and is a Senior Associate of the Free Market Foundation.

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The perpetrators are not petty thieves. They are powerful crime bosses, crooked politicians and sophisticated syndicates with tentacles stretching across Southern Africa and beyond.

The construction mafia, illicit cigarette barons, criminal gold, coal and diesel cartels, and bent law enforcement officials are looting our country with impunity.

This is transnational organised crime on a scale we can no longer ignore.

At its core, illicit trade is the production, distribution and sale of goods outside legal and regulated channels.

That means products that evade taxes, dodge quality controls or are outright counterfeit.

Whether it’s a pack of untaxed cigarettes, smuggled alcohol, non-compliant electricals or fake medicine, every illegal transaction drains state revenue, undermines legitimate businesses and exposes consumers to unsafe products.

The numbers alone are staggering.

Illicit trade robs the fiscus of R100 billion every year. That’s R250 million a day stolen from honest, hard-working South Africans.

Illicit cigarettes alone strip almost R30 billion from the country annually, while illegal alcohol costs another R16.5 billion.

These are not victimless crimes. This is money that should be building schools, fixing hospitals and creating jobs. Instead, it vanishes into the pockets of criminals and their enablers.

The consequences are devastating.

While the syndicates grow fat on illicit profits, South African children are dying of hunger, unemployment is surging and millions of families are trapped in poverty.

Our national assets are being stolen before our eyes, and the state’s ability to provide services is being hollowed out.

Yet while the evidence mounts, our justice system moves at a glacial pace.

Criminals exploit every delay, every loophole, every weak point in enforcement to tighten their grip.

Billions of rand which should be securing our future are being siphoned out of the country through illicit financial flows.

This cannot go on. If we do not act, these hyenas will strip the country bare, leaving only a rotting husk behind.

South Africans deserve better. The fight against illicit trade is now a matter of survival and should be declared a national emergency.

Yusuf Abramjee is the founder of Tax Justice South Africa (TJSA) and a leading anti-crime activist.

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In the Vhembe District, coordinated operations by the MAJOC Roving Team, in collaboration with the Bloemfontein K9 Unit, targeted illicit trade in the Mphephu and Musina policing precincts. This operation led to the seizure of counterfeit goods and other illegal merchandise worth R6,694,227. In Musina, a high-speed car chase resulted in the interception of two BMW sedans suspected of transporting illicit cigarettes. After the occupants fled, police discovered several boxes of illegal cigarettes in the abandoned vehicles, valued at R729,891. Both vehicles were confiscated as part of the investigation.

On 17 January 2025, operations at shops in Mphephu led to the seizure of counterfeit cosmetics worth R154,030 and illicit cigarettes valued at approximately R1,726. The following day, in Musina town, operations at 10 shops uncovered counterfeit clothing valued at R6,222,435 and counterfeit cosmetics worth R119,675, bringing the total for the day to R6,342,110.

On 18 January 2025, the coordinated efforts of SAPS and SARS Customs led to the arrest of a 44-year-old foreign national for smuggling illicit cigarettes at the Beitbridge Port of Entry. The suspect, driving a white truck with a tanker trailer, was stopped by police, who discovered that the truck was fully loaded with illicit Remington Gold brand cigarettes. The cigarettes, valued at R14,449,363, were confiscated along with the truck and tanker, valued at R2.5 million. The suspect was arrested and is expected to face charges of smuggling illicit cigarettes in the Musina Magistrate’s Court.

These operations, which also included stop-and-search activities, route patrols, and foot patrols, are part of the broader efforts under Operation Vala Umgodi to combat illegal mining, curb the distribution of counterfeit and illicit goods, and protect local economies. Lieutenant General Thembi Hadebe, the Provincial Commissioner of Police in Limpopo, praised the police for their vigilance and effective collaboration in disrupting illegal trade at the borders, highlighting the significant impact of these operations on the fight against criminal activities in South Africa. Investigations are ongoing.

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The chase occurred along the R519 Bergenek road towards Zebediela on 23 August, when a black Jeep from Polokwane, fully loaded with illicit cigarettes, failed to stop when heeded by officers. The Jeep collided with a truck, overturned, and the driver, a foreign national, died on the scene. The truck driver and passenger sustained injuries and were taken to a local hospital, the South African Police Service (SAPS) said in a statement.

Two additional suspects, a South African and a foreign national, were arrested in a Toyota Rav 4, while a third foreign national was arrested in a white Ford Ranger, with both vehicles containing illicit cigarettes. A white Mercedes Benz van and charcoal Ford Ranger were recovered at Bergenek village in Westenburg policing area, still loaded with illicit cigarettes. It is believed an unknown number of suspects fled the scene before officers arrived.

All five vehicles, including the Jeep involved in the accident, were seized. Cases of culpable homicide, and possession and transportation of illicit cigarettes have been opened. The identity of the deceased suspect is still unknown.

Limpopo Provincial Police Commissioner, Lieutenant General Thembi Hadebe, applauded the persistence of officers, who pursued the suspects and recovered the illicit cigarettes. Hadebe further highlighted the ongoing fight against the smuggling of illicit goods, emphasizing the SAPS’ commitment to addressing cross-border crimes.

Last month, South Africa Police Service officers in the Free State, in conjunction with the South African Revenue Service (SARS), confiscated illicit cigarettes and arrested a suspect for corruption.

On the evening of 25 July 2024, Ficksburg SAPS members received intelligence-led information about the delivery of illicit cigarettes to take place in the border town. Members swiftly responded and when searching the premises, 119 boxes of illicit cigarettes worth an estimated R1.5 million were found at a house.

External stakeholders, such as SARS, were summoned for further investigation. The suspect has appeared in the Ficksburg magistrate court and was remanded in custody to 1 August 2024 for formal bail application.

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Captain A Tamela reported for the SANDF that soldiers from the Durban Light Infantry Regiment’s Charlie Company were operating along the border between KwaZulu-Natal and Lesotho on 18 July when they intercepted a suspicious white truck near Underberg. When searching the vehicle, they found 300 boxes of cigarettes, with an estimated street value of R6 000 000.

The driver of the truck and the passenger were taken to Evatt Police Station for questioning, and the truck was impounded.

“This significant interception not only serves to curb illicit activities in the region but also plays a crucial role in revenue collection for the government through the imposition of taxes. The commendable efforts of the Durban Light Infantry Regiment’s Company demonstrate their unwavering commitment to maintaining peace and order along the border,” Tamela concluded.

Police and soldiers regularly intercept illicit cigarettes on an almost weekly basis as illicit cigarettes account for nearly 60% of the market at present – up from just 5% in 2009. This is according to a University of Cape Town study released earlier this year.

The UCT’s Research Unit on the Economics of Excisable Products showed the total lost revenue to National Treasury (NT) from illicit cigarettes over the 2002-2022 period was a staggering R119 billion, reaching R18 billion in 2022. The majority of this accrued in 2010-2022 when R110 billion was lost. This, researchers Dr Nicole Vellios and Professor Corné van Walbeek sayid is due to the illegal cigarette market which started growing in 2010.

The illicit cigarette market comprised five percent in 2009, peaked at 60% in 2021 and decreased marginally to 58% in 2022, they said in a statement.

The main reasons for the massive growth of the illicit cigarette market were the five-month ban on tobacco sales in 2020 during Covid, which gifted the cigarette market to criminals as smokers switched to cheaper brands when their regular brands were unavailable; and the gutting of the SA Revenue Service under Tom Moyane, commencing around 2014, which resulted in a reduced capacity to collect excise on cigarettes.

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Police had received information from a farmer on Thursday evening about suspicious activities on his farm in Zeerust, leading to the arrest of the 55-year-old male and the recovery of illicit cigarettes worth R1.5 million.

The farmer had spotted an unknown truck parked on his farm. On arrival, the police approached the truck and found a male inside.

Upon searching the truck, illicit cigarettes were found and the man was arrested, while the truck and cigarettes were confiscated.

Investigations into the matter are underway by the Directorate for Priority Crime Investigation (DPCI).

The Provincial Commissioner of North West, Lieutenant General Sello Kwena, commended the farmer for his vigilance and cooperation, which led to the discovery and subsequent arrest of the suspect.

This was the second bust of illicit cigarettes within three days. In the first incident, police and the South African National Defence Force (SANDF) confiscated illicit cigarettes with an estimated street value of R8 million in Makgobistad last Tuesday.

The SAPS on Monday reported another huge cigarette bust, which occurred during a roadblock in the Rouxville area. One SAPS member received intelligence-led information about a truck that made a sudden turn and stopped near one of the petrol garages in the area.

“The truck was tactically approached and the driver, who explained himself as a 42-year-old male, said he was from Gauteng and on his way to the Eastern Cape for a delivery. Members continued to search the truck and under the sails, 400 boxes of illicit cigarettes worth an estimated street value of R12 million were discovered,” the SAPS stated.

The 42-year-old foreign national was arrested for possession of illicit cigarettes and the truck was also confiscated.

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