Latest news with #BATSA
IOL News
09-07-2025
- Business
- IOL News
Tensions rise in South Africa's tobacco industry amid allegations of illicit cigarette trade
The Ipsos research released on Tuesday and funded by BATSA named Polaris among companies whose products were being illicitly traded on the South African market. Image: Courtney Africa/Independent Newspapers Tawanda Karombo A trade war is brewing within South Africa's tobacco cigarette sector after Polaris Manufacturing on Wednesday dismissed findings of an Ipsos research into illicit trade in cigarettes through under-pricing. Polaris Manufacturing, a cigarette and tobacco products manufacturing firm formerly known as Gold Leaf Tobacco Company, also accused British American Tobacco South Africa (BATSA) of illegal imports. The Ipsos research released on Tuesday and funded by BATSA named Polaris among companies whose products were being illicitly traded on the South African market. 'The lpsos study determines whether a cigarette is illicit solely on the basis of price, assuming that any pack sold below the Minimum Collectable Tax (MCT) or an arbitrarily BAT-set Lowest Economically Viable Price is automatically illicit. This is not only legally unsound, it is dishonest,' said Raees Saint, a director with Polaris. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Saint added that the tobacco industry in South Africa was battling operational realities such as the existence of counterfeit products, cross-border smuggling and price-averaging. He explained that these issues affected retail pricing for cigarettes but were 'unrelated' to a manufacturer's tax compliance. Regarding the research, Saint said brands identified as being illicitly traded were only identified through on-pack indicators, with 'no verification undertaken to distinguish authentic product from counterfeit goods or smuggled' goods. Moreover, he added, the report by Ipsos had been compiled without engagement with Polaris. After the Ipsos report suggested closer surveillance by the South African Revenue Services (Sars) of tobacco companies, Saint said Polaris was among the 'first manufacturers in the industry to have continuous, daily on-site surveillance by Sars' officials. Polaris said that some products were being sold below the mandated threshold was also reflective of a price-sensitive market. This, said Polaris, had created a fertile ground for criminal syndicates, smuggling operations, and counterfeit producers to exploit the gap between legal prices and what the average consumer can afford. South African policy makers and industry players now had to consider this situation to come up with 'an effective and rational approach … to re-evaluate excise policy' and duties. 'The rest of the African continent, with far lower excise duties, has significantly less incentive for cross-border smuggling, precisely because there is little to gain in unlawful arbitrage,' said Saint. 'Aligning local excise structures with regional norms would neutralize the illicit trade, eliminate price differentials, and enhance compliance across the board, as products would become affordable enough to erode the market for illegal trade.' The trade wars and counter accusations by South African tobacco companies comes at a time when smoking and tobacco consumption is on the increase across Africa, sharply contrasting other developed regions where trends are pointing to a decline in smoking. South African tobacco consumers were, however, showing an inclination to adopt smokeless products that industry players tout as less harmless. Branislav Bibic, Philip Morris International vice president for Sub-Saharan Africa, recently said that tobacco consumers in South Africa 'are following global trends as they are embracing new' categories that are smokeless. 'Our experience in South Africa is that once these products are made widely available at an accessible price, and consumers are provided accurate information about their benefits, we see a significant switching from cigarettes to smokeless products,' Bibic said at the Technovation summit in Cape Town on Tuesday. 'Our estimates in South Africa show that already around 20% of the South African legal cigarette market has been replaced by non-smoking products.' Among the sharp differences between the government of South Africa and the value chain industry for tobacco are issues related to the proliferation and best practices in addressing illicit trade. BUSINESS REPORT
IOL News
08-07-2025
- Business
- IOL News
Local manufacturers fuel illicit cigarette trade in South Africa, warns BAT
As much as R28 billion in annual tax revenue was being lost to illicit trade, exceeding the South African Revenue Service's (Sars) entire additional collection target of R20bn. Image: Supplied Tawanda Karombo British American Tobacco South Africa (BATSA) has pointed the finger at local manufacturers for exacerbating the illicit trade in cigarettes. Their claims come on the back of a study released by the company, shedding light on the alarming prevalence of illegal cigarette sales in the country. This issue, which was once largely perceived as a cross-border problem, has now morphed into a serious domestic challenge that threatens the economy and public health. Speaking after the release of a BATSA-commissioned study into the pricing of tobacco cigarettes in South Africa on Tuesday, Johny Moloto, the company's head of corporate and regulatory affairs said illicit trade in cigarettes was now a domestic concern for the country. 'This is no longer just a cross-border issue. This is a homegrown crisis, fueled by local manufacturers who continue to operate with impunity while the state loses billions in revenue,' said Moloto. Illicit trade in tobacco cigarettes is worsening in South Africa, with over 70% of retail outlets selling the products below the mandated minimum tax price. Commissioned by British American Tobacco (BAT) and independently conducted by Ipsos, the 2025 report outlines alarming national trends in the illegal tobacco trade, identifying South African manufacturers as the primary culprits behind the growing black market. Conducted by Ipsos, the Cigarette Retail & Wholesale Price Research report reveals that 76.7%, up from 27.4% in 2022, of South African retailers were now 'selling cigarettes below the minimum' tax threshold. As much as R28 billion in annual tax revenue was being lost to illicit trade, exceeding the South African Revenue Service's (Sars) entire additional collection target of R20bn. 'Despite increased raids and product seizures over the past year, illicit cigarette availability has continued growing, indicating current strategies are ineffective. locally manufactured brands continue to dominate the market for products selling below Minimum Collectable Tax price,' noted the report. According to the Customs and Excise Act, the Minimum Collectable Tax price for a box cigarettes in South Africa should sell for above R26.22 a pack after accounting for levies. However, results from the survey show Gold Leaf Tobacco Company as having the highest prevalence of products purchased, accounting for 43% of total outlet sample universe. Within the portfolio of the Gold Leaf Tobacco Company, 78% of products purchased retailed for R20.00 a pack and below whilst 89% of products purchased. BATSA had the second-highest prevalence of products purchased accounting for 13% of the total outlet sample. 'Within the BATSA portfolio of products purchased, 1.0% of portfolio products purchased retailed for R20.00 and below whilst 1.5% of the products purchased retailed for under the Minimum Collectable Tax of R26.22 and below,' notes the Ipsos report. It added that Afroberg had the third highest prevalence of products purchased, accounting for 8% of the total outlet sample. Within the Afroberg portfolio of the product purchased, 92% of portfolio products purchased retailed for R20.00 and below, whilst 96% of products purchased retailed for under the Minimum Collectable Tax of R26.22 and below. The study disclosed that 'the most common retail price was R10, found in nearly 1 in 5' transactions. It further noted that of the 23 manufacturers identified in the illicit chain, 14 were based in South Africa, accounting for 91% of the illicit stock.
