logo
SA losing nearly R30bn to illicit cigarettes as Sars tools face delays, says Godongwana

SA losing nearly R30bn to illicit cigarettes as Sars tools face delays, says Godongwana

The Citizen5 days ago
Illicit cigarette trade has become a major economic and enforcement issue.
Efforts by the South African Revenue Service (Sars) to curb the illicit cigarette trade have been hampered by delays, with South Africa losing nearly R30 billion over the last five years.
This was revealed by Finance Minister Enoch Godongwana in a parliamentary reply.
EFF MP Thapelo Mogale asked the minister to disclose the total revenue lost as a result of cigarette smuggling and the illicit trade.
He also requested information on the measures introduced to tackle the issue and how effective these have been in recovering lost tax income and ensuring offenders are prosecuted.
Godongwana on illicit cigarette trade losses
In his written reply, Godongwana said illicit trade and smuggling are 'hard to reliably quantify' given their covert nature.
However, he pointed out that the illicit cigarette trade has become a major economic and enforcement issue, with estimates indicating that as much as 70% of cigarettes sold in the country are illegal.
This has resulted in annual tax revenue losses exceeding R27 billion.
ALSO READ: Illicit tobacco sales a drag on excise tax collections
The minister explained that according to Sars data, revenue from tobacco and cigarette products dropped from R13.4 billion in 2015-16 financial year to R9.4 billion in 2024-25, a 29.6% (R4 billion) decline over ten years.
The most notable drop, of 44.9%, occurred in 2020-21 due to the cigarette ban during the Covid-19 lockdown.
Sars measures against illicit cigarette trade
Sars, Godongwana highlighted, has implemented a multifaceted strategy to combat the scourge of illicit trade of tobacco and cigarettes.
He said the tax authority has adopted a long-term strategic approach that includes frontline interventions, targeted audits, and the use of advanced technology.
Regarding frontline operations, the minister explained that seizures of illicit cigarettes are being conducted at various ports of entry by customs border operations teams, in collaboration with other government agencies.
These efforts also extend to inland areas.
'This ensures that Sars does not only focus on revenue recoveries, but [also on] removing illicit goods from circulation.'
READ MORE: SA loses R30 billion in revenue due to illicit trade in cigarettes and liquor
He emphasised that compliance audits are prioritised, covering the entire value chain, to ensure adherence to relevant laws.
'This methodology enables an end-to-end audit of the entire value chain and ensures that a company is scrutinised from the point of raw material supply, its entry into the manufacturing warehouse, to calculating how many cigarettes could be produced at any given time, considering the appropriate yield and capacity analysis.'
Godongwana pointed out that Sars has integrated data and advanced technologies to monitor the tobacco supply chain and detect illicit activities.
This involves the use of CCTV surveillance at manufacturing facilities to monitor production and prevent tax evasion.
However, this initiative has faced delays due to legal challenges from certain industry stakeholders.
'As a stop-gap measure, Sars intends placing inspectors at these factories, on a full-time basis, depending on the availability of funding and budget.
'In addition, cigarette counters were made mandatory for all licensed manufacturers to assist Sars with production statistics.'
Investigations and arrests
Another tool in the fight against illicit trade is Sars' criminal investigation unit, which was established to probe complex tax evasion schemes.
Godongwana said the unit continues to investigate cases involving tax non-compliance, smuggling, diversion, ghost exports, and misdeclarations, especially in high-risk industries such as tobacco and cigarettes.
The minister revealed that international trade agreements and tools are being used to improve intelligence sharing and strengthen enforcement against illicit trade.
He highlighted specific enforcement successes, including arrests and prosecutions.
READ MORE: JMPD cracks down on illicit cigarette smuggling in Brixton
The Sars criminal investigation unit has handed 129 customs and excise-related cases to the National Prosecuting Authority (NPA) over the past five years.
Currently, 105 of these are on the NPA roll, with 33 currently on trial and 72 awaiting trial dates.
Eight of these cases specifically involve illicit cigarettes and tobacco.
Four are currently on trial, while the remaining four are pending trial dates.
Godongwana added that 32 customs and excise cases have resulted in successful convictions.
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

G20 Finance Track meetings highlight global economic challenges
G20 Finance Track meetings highlight global economic challenges

IOL News

time3 hours ago

  • IOL News

G20 Finance Track meetings highlight global economic challenges

Key note addresses from Minister of Finance, Enoch Godongwana, Dr Duncan Pieterse, Director-General of the National Treasury, and Lesetja Kganyago, the governor of the South African Reserve Bank highlighted the global uncertainty and challenges faced by developing and African countries. Image: Yogashen Pillay The G20 Finance Track meetings that took place in Zimbali North of Durban entered its final day on Friday. Key note addresses from Minister of Finance, Enoch Godongwana, Dr Duncan Pieterse, Director-General of the National Treasury, and Lesetja Kganyago, the governor of the South African Reserve Bank highlighted the global uncertainty and challenges faced by developing and African countries. Pieterse on the opening day of the G20 Finance Track meetings said that we are meeting at a moment of ongoing uncertainty in the global economy. 'While there are signs of resilience in some areas, various challenges remain: uneven growth trajectories, elevated debt levels, persistent inflationary pressures, and the complex implications of tightening financial conditions.' Pieterse added that at the same time, various long-term transitions including digitalisation, climate finance and demographic shifts are reshaping the foundations of our economies. 'The multilateral system is being tested, and our collective ability to respond, will shape the pace of our recovery, but also the prospects for inclusive and sustainable development." 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 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. Next Stay Close ✕ ''As the G20, we have the responsibility to demonstrate leadership, and our Presidency places a very strong emphasis on strengthening the role of the G20 in delivering concrete solutions, fostering a more stable and effective and resilient international financial architecture, enhancing debt sustainability, addressing liquidity challenges, as well as strengthening multilateral development banks, and ensuring financing for development,' added Pieterse. Godongwana in his opening remarks at the Finance Ministers & Central Bank Governors (FMCBG) Meeting said that we meet at a time of fragile global economic growth. 'While inflation is gradually moderating and financial conditions have started to stabilise in some regions, uncertainty continues to weigh heavily on global growth prospects. Rising trade barriers, persistent global imbalances and new geopolitical risks are significant concerns.' Godongwana added that many developing countries, especially in Africa, remain burdened by high and rising debt vulnerabilities, constrained fiscal space, and a high cost of capital that limits their ability to invest in their people and their futures. 'Technological shifts—especially in artificial intelligence and digital finance—offer tremendous potential but also demand robust governance and coordinated action to harness the opportunities, mitigate risks such as job displacement, and bridge the digital divide towards inclusive growth. At the same time, climate-related shocks and extreme weather events are increasing in frequency and severity worldwide, impacting lives, livelihoods, and macroeconomic stability,' said Godongwana. Godongwana added that in the face of these complex challenges, the G20 must remain a source of strategic global leadership, cooperation, and action. 'We must extend our efforts, if we are to reach our true potential as a collective, to enable us to deal decisively with the economic, environmental, developmental and social challenges that plague especially Africa, low-income countries in other regions and small developing states.' Kganyago warned of the headwinds for the global economy as forecasts have been revised lower. 'Risks to the outlook have been tilted to the downside, while inflation has eased across countries, it remains higher than desired. Central banks have to skillfully navigate what uncertainty means for their financial stability mandates,' Kganyago said. 'These developments are unfolding under the backdrop of elevated debt and emerging risks on financial sustainability. According to the Organisation for Economic Co-operation and Development (OECD), the world has shifted to a new debt paradigm. Governments and companies are borrowing more than $10 trillion (R179 trillion) compared to the pre-COVID-19 period.' Meanwhile, Greenpeace Africa has called on G20 host and South African President Ramaphosa to push ahead on accelerating efforts to impose a wealth tax on the world's billionaires and to support the UN Tax Convention for new and fair global tax rules. Cynthia Moyo, Lead Campaigner, Greenpeace Africa, said that it's outrageous that billionaires keep getting richer from a broken global tax system while millions across Africa and the world are driven deeper into poverty and climate chaos. BUSINESS REPORT

South Africa's illicit trade crisis: Tobacco, alcohol, and fashion industries under siege
South Africa's illicit trade crisis: Tobacco, alcohol, and fashion industries under siege

IOL News

time11 hours ago

  • IOL News

South Africa's illicit trade crisis: Tobacco, alcohol, and fashion industries under siege

Illicit trading has emerged as a staggering threat to various industries in South Africa, with the black market for both cigarettes and alcohol reaching unprecedented levels. Illicit trading has emerged as a staggering threat to various industries in South Africa, with the black market for both cigarettes and alcohol reaching unprecedented levels. Illicit trading has emerged as one of the most pressing issues facing South Africa, pervading various sectors of the economy and costing the nation billions in lost tax revenue. At the forefront of this crisis are illicit cigarettes, now reaching record high levels in terms of market presence. Research conducted by Ipsos reveals a shocking statistic: more than 76.7% of shops across the country now sell cigarettes below the minimum tax threshold applicable on a standard pack of 20. This trend coincides with Finance Minister Enoch Godongwana's aim for the South African Revenue Service (SARS) to collect an additional R20 billion in tax revenue for the financial year, an effort aimed at circumventing new tax measures in the upcoming 2026 budget. Johnny Moloto, Area Head of Corporate & Regulatory Affairs for BAT South Africa, stressed the urgency of the situation. 'With the clock ticking for SARS to collect at least an extra R20bn, these results from Ipsos show the need for immediate steps to plug the leaks in tobacco tax collection,' he emphasised. Moloto further revealed that the illicit cigarette trade costs the country an estimated R28bn annually, equating to R100m lost every working day, surpassing SARS's entire additional collection target. 'Despite increased enforcement activity over the past year, including more raids and product seizures, illicit products remain as available as ever, suggesting that current tactics are failing to address the root causes of tax evasion. Our analysis indicates that the illicit cigarette trade costs South Africa approximately R28bn annually – R100m every working day – representing more revenue than SARS's entire additional collection target. Eliminating this leakage would protect law-abiding taxpayers from bearing additional tax burdens,' said Moloto. While illicit cigarettes have been noted as a growing concern, the Drinks Federation of South Africa (DF-SA) released new research revealing a sharp increase in the illicit alcohol market, which has grown by 55% in volume since 2017. Conducted by Euromonitor International, the research highlights the growing threats illegal alcohol poses to public health and safety, as well as the significant loss of national tax revenue. 'This study is a wake-up call. Communities are being exposed to harmful, unregulated alcohol, and the country is losing billions in revenue. It is urgent that government, industry, and civil society work together to tackle this issue head-on,' warned Dr Shamal Ramesar, Head of Research at DF-SA. Ramesar urged collaboration among government, industry, and civil society to tackle this pressing issue effectively and further called for coordinated action to promote responsible consumption, shut down illegal producers, and raise public awareness regarding the inherent dangers of illicit alcohol. Eustace Mashimbye, CEO of Proudly South African, also highlighted how the prevalence of these illegal practices is crippling the already-stressed local fashion industry. 'For the local fashion industry, illicit trade has domino effects: It leads to job losses in the value chain of the fashion industry, distorts the market by forcing local producers to compete unfairly with illicit traders who incur lower production costs, encourages widespread copyright infringements, deprives the creatives of their hard-earned revenue, compels legitimate entrepreneurs to compete with illegal traders who sell similar but substandard products without complying with safety, health or environment-related requirements, breeds precarious employment where labour regulations are disregarded, deprives the fiscus of much-needed tax revenue, and puts downward pressure on wages and salaries in the fashion industry labour market,' Mashimbye stated. In light of these challenges, industry leaders rallied to march on behalf of the fashion sector, submitting memorandums to the Department of Trade, Industry and Competition (DTIC) and the National Clothing Retail Federation (NCRF). These memorandums were a clarion call for authorities to intensify efforts against counterfeit goods to safeguard jobs and local production. At the Buy Local Summit and Expo, Mashimbye expressed the importance of protecting South Africa's invaluable fashion industry, estimated to be worth over $11bn (R197bn). 'We not only have a moral obligation to protect the sector; it makes economic sense to do so,' he said. In its commitment to combat the increasing threats posed by illicit trade, SARS has reiterated its dedication to revenue collection and facilitating legitimate trade. According to the agency, the illicit economy undermines the rule of law, erodes public trust, and enacts a substantial toll on national security. 'The illicit economy is a global phenomenon that threatens South Africa's society, economy, and national security. Tax evasion, smuggling, illegal transactions, illicit manufacturing, and fraud undermine the rule of law, erode public trust, distort markets, deprive governments of revenue, and enable corruption and organised crime. The pervasiveness of these illicit activities in our country demands that all enforcement agencies work jointly to curb their harmful practices. The illicit economy is complex and requires a whole-of-government response among public entities, the private sector, civil society, and international partners.' SARS revealed it is working with other law enforcement agencies to combat the scourge of the illicit economy. Saturday Star

Mitchells Plain community rallies against gang violence and police inaction
Mitchells Plain community rallies against gang violence and police inaction

IOL News

time18 hours ago

  • IOL News

Mitchells Plain community rallies against gang violence and police inaction

The Economic Freedom Fighters (EFF) marched with PAGAD G-FORCE against gangsterism in Eastridge, Mitchells Plain. Image: Supplied/ EFF Community members, political activists, and anti-crime groups gathered in Eastridge, Mitchells Plain on Friday in a demonstration aimed at confronting drug and gang activity in the area. The protest, led by the Economic Freedom Fighters (EFF) and People Against Gangsterism and Drugs (Pagad G-Force), lasted several hours and was marked by tense confrontations between demonstrators, gang members, and law enforcement. According to EFF Western Cape representatives, the protest was organised in response to calls from the Eastridge community concerned about the persistent presence of drug dens and gang violence. The party extended invitations to various faith-based and political organisations, but only Pagad G-Force joined the demonstration. Protesters moved through several locations identified by residents as suspected drug hotspots. During the operation, gang members allegedly confronted the demonstrators. In one instance, a South African Police Service (SAPS) certificate was reportedly found inside a raided property and was confiscated by police officers. 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 ✕ Ad Loading The EFF expressed disappointment with the conduct of SAPS officers who were present during the demonstration, alleging that police officials refused to arrest self-identified gang members despite on-site confrontations. The EFF claimed that some officers insisted it was not illegal to be a gang member, despite the provisions of the Prevention of Organised Crime Act (POCA). The Act, under Section 11, criminalises participation in or benefiting from the activities of a criminal gang and provides criteria for identifying gang membership. Protesters say these provisions were ignored, even after some gang-affiliated individuals openly identified themselves to police officers and demonstrators. Western Cape police spokesperson Warrant Officer Joseph Swartbooi confirmed that Public Order Policing officers were present at the scene to monitor the situation. 'This office can confirm that police members of Public Order Policing were present on Friday 18 July in Eastridge, Mitchells Plain. Confrontation erupted when gang members clashed with protesters. The police members intervened and took action to disperse the crowds,' he said. Swartbooi further said no cases were registered and no suspects were arrested. The protestors also raised concerns about the safety of residents who fear retaliation from gangs if seen participating in anti-gang activity. The EFF said they would continue to conduct similar community-led initiatives across the province, calling for more direct action from police and government. They criticised both national and provincial authorities for not taking meaningful steps to address the root causes of gang violence on the Cape Flats. 'The prevalence of crime and gangsterism in Mitchells Plain is well documented, with parts of the Cape Flats consistently ranking among the country's highest in terms of murder rates. Despite this, residents say they have not seen any tangible improvement in law enforcement or safety on the ground,' said the EFF. The groups maintain that further demonstrations will be organised as part of an ongoing campaign to create safer environments, especially for children and vulnerable residents affected by gang-related crime.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store