Bully Kleynhans from Smokers Unite SA in Port Elizabeth showing his disapproval for the ongoing ban on cigarette sales during the lock down. Picture: Eugene Coetzee/The Herald
Bully Kleynhans from Smokers Unite SA in Port Elizabeth showing his disapproval for the ongoing ban on cigarette sales during the lock down. Picture: Eugene Coetzee/The Herald

It’s clear that the lockdown ban has resulted in the illicit trade in cigarettes spiking dramatically.

It marks a grim reversal of gains. Back in 2013, 26% of cigarettes on the SA market were illicit, but the SA Revenue Service (Sars) managed to bring this down to a respectable 17% in 2014. But as Sars’s capacity was weakened, illicit trade again surged to a massive 35% in 2018.

Now, thanks to the lockdown, 100% of cigarette sales are illicit.

Illicit packs of cigarettes can only come from one of two possible sources: either smuggled in from another country, or made locally (either by licensed, known manufacturers, or by unlicensed fly-by-night operators).

Historically, the majority of illicit cigarettes in SA came from Zimbabwe, but in recent years this has changed, with a large portion of the illicit market now coming from local manufacturers.

It’s easy enough to cheat: taxes are payable on every pack of cigarettes sold on the local market. All a manufacturer has to do is to underdeclare the volume of packs it has manufactured, allowing it to pay less tax.

But there is also a slightly more sophisticated way to cheat the system: by declaring that packs are intended for the export market, a manufacturer also doesn’t have to pay any of the local taxes and duties on those packs. Export papers are simply forged and the packs never actually leave the country, or the packs do leave but are immediately smuggled back into SA – tax-free.

Glaring contradictions

Globally, around one-third of cigarette exports go missing somewhere along the supply chain, not ending up where they were supposed to, in classic schemes to avoid taxes and duties. Data points to a similar trend in SA.

Now, the volume of cigarettes declared for export from SA should match the volume of cigarettes declared for import into the destination country. Only, it doesn’t match: in 2019, 66% of cigarettes declared as “exported” went missing before they could reach their destination.

Here’s one example: in 2019, records suggest that Namibia received 3,492t of cigarettes from SA, while SA manufacturers declared they had exported 3,702t of cigarettes to Namibia.

What happened to the other 210t, you ask.

But it gets more complicated. Assuming 3,702t were actually exported to Namibia, this would equate to about 3.7-billion cigarettes. But Namibians smoke, on average, 298 cigarettes per capita, equating to only around 729-million cigarettes a year.

So who is smoking the other 2.9-billion cigarettes which SA manufacturers are ostensibly shipping to Namibia? Or, are they being diverted back to the local SA market?

Or take Lesotho. In 2019, SA manufacturers declared they were exporting 2,276t of cigarettes (about 2.1-billion cigarettes) to Lesotho. However, Lesotho records reflect no imports.

And Lesotho records put the number of cigarettes smoked in that country at 940-million. So who is smoking the other 1.16-billion cigarettes we’re shipping to Lesotho?

There are other mystifying examples. We supposedly export 3.5t-3.7t of cigarettes to Mali every year, yet Mali’s records haven’t reflected any such imports from SA since 2017.

The lockdown export mystery

During SA’s lockdown, the story gets even more curious.

In May, SA manufacturers suddenly began exporting astronomical volumes. Indeed, that month saw the biggest volume of cigarette exports since November 2017.

Most of this was exported to Mali (27% of the volume exported), Namibia and Lesotho (some also bizarrely went to Syria). So, were we to believe these numbers, it suggests we shipped 61% of Lesotho’s annual consumption in one month. In one month, we shipped 733-million cigarettes to Namibia – more cigarettes than Namibians smoke in a year.

Why? Did the manufacturers know they’d need a ready supply for the local market once the ban went into force?

The fact is, there is no commensurate demand in the destination countries for the volumes being shipped there. There simply aren’t enough smokers in these countries to smoke those volumes.

Oversupplying a market means only one thing: the cigarettes are intended for the black market, and are almost certainly ending back on either the SA market or being on-shipped to another black market.

Bear in mind that British American Tobacco (BAT) has historically controlled around 75% of the local market, and is by far the biggest cigarette exporter in the country, sending its product to 22 countries. This should raise alarm bells about the extent to which manufacturers of all sizes appear to be fuelling contraband.

Of course, this isn’t an exact science. But even the most rudimentary exploration of Sars trade data suggests worrying trends. Are supposedly “exported” cigarettes fuelling the illicit market in SA? I’d be willing to bet on it.

*Snyckers is an independent illicit trade expert, and a former executive at Sars. Her exposé on the role of big tobacco in fuelling illicit trade – Dirty Tobacco — was released in May 2020.

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