Picture: GALLO IMAGES/AFP/NIU SHUPEI
Picture: GALLO IMAGES/AFP/NIU SHUPEI

The SA unit of cigarette group Philip Morris International has welcomed finance minister Tito Mboweni’s March 2020 deadline for a completed study by the SA Revenue Services (Sars) into the size of the country’s illicit economy.

Mboweni announced that the study will be finalised within the next few months. Conservative estimates suggest that SA loses R1-trillion a year or 20% of GDP to the illicit economy. This ranges from the underground economy, which operates outside the rules and regulations of the country, to organised crime.

The main culprits are tobacco smuggling, counterfeit textiles, drug manufacturing and smuggling, illicit mining of gold and diamonds, ivory smuggling and the poaching of endangered species such as abalone and rhino. These proceeds are generally used to fund drug smuggling, human trafficking and other serious crimes.

Philip Morris SA MD Marcelo Nico said on Thursday the findings of the Sars research will help to strengthen co-operation between the state, private sector and civil society. Nico said the company fully supports all efforts to combat illicit trade.

The illicit cigarette trade alone has cost SA more than R40bn in tax revenue since 2010, according to the Tobacco Institute of Southern Africa (Tisa).

“The next important step is for SA to ratify the Protocol to Eliminate Illicit Trade in Tobacco Products. Our country suffers from one of the highest rates of illicit tobacco trade globally. We look forward to government urgently submitting this international treaty to parliament to ratify. This will add further momentum to our joint efforts,” Nico said.

Beyond lost tax revenue, illicit cigarettes undermine SA’s public health agenda, as products may not comply with regulatory requirements, he said. Illicit cigarettes are also more affordable and accessible to minors.

Philip Morris International has launched a $100m global initiative to tackle illegal trade and related crimes, such as corruption, money laundering, and organised crime. A wide range of public, private and NGO projects are funded by the initiative.

To protect its operations from crime and to ensure compliance with the law, the company has employed advanced track and trace technology, security features and supply chain controls.

Earlier in October, Mboweni said an interim unit is in place at Sars and is tasked with tackling the illicit economy.

Sars’ previous unit — the so-called rogue unit — was controversial and provided disgraced former Sars commissioner Tom Moyane with ammunition to pursue his opponents, including current public enterprises minister Pravin Gordhan and other former top Sars executives.

phakathib@businesslive.co.za