South Africa is losing billions of rand every year to the illicit cigarette trade. Finance Minister Enoch Godongwana revealed that delays in enforcement by the South African Revenue Service (SARS) are preventing authorities from stopping the illegal sale of tobacco, which now dominates the local market.
Speaking in Parliament on 15 July 2025, Godongwana confirmed that illicit cigarettes now make up a significant portion of the market, costing the government more than R27 billion annually in lost tax revenue. He warned that unless SARS accelerates its enforcement, the country will continue bleeding billions.
What Are Illicit Cigarettes?
Illicit cigarettes are tobacco products sold outside of legal channels. These include:
- Smuggled cigarettes
- Counterfeit products
- Locally produced cigarettes that evade tax
Many of these are sold at prices well below the Minimum Collectible Tax (MCT), which is currently R26.22 per pack. Some brands are being sold for as little as R5, particularly in informal and township markets.
How Much Is South Africa Losing?
SARS data shows that legal tobacco tax revenue dropped from R13.4 billion in 2015/16 to R9.4 billion in 2024/25. That’s a 29.6% decline in less than a decade. The steepest drop occurred during the 2020–21 lockdown, when tobacco sales were banned and illicit trading flourished.
Today, the combined loss from both illicit cigarette and illegal alcohol trades is estimated at R30 billion per year, according to the Transnational Alliance to Combat Illicit Trade (TRACIT).
While Godongwana cited that 70% of the market is now illicit, academic research offers slightly lower figures. A University of Cape Town study shows that 58% of cigarettes sold in 2022 were illicit, indicating the scale is massive, even if varying by source.
What Is SARS Doing?
SARS has launched several initiatives to fight the illicit cigarette trade:
- Auditing manufacturers and distributors
- Installing CCTV cameras in tobacco factories (court-approved)
- Conducting inspections and seizures
- Using rapid-response teams to act on tip-offs
- Working with border and customs officers to stop smuggling
In June 2021, SARS destroyed R17.4 million worth of illicit cigarettes in Pretoria. While this shows their capacity for action, more recent figures for 2024/25 have not yet been publicly disclosed.
Prosecutions Are Rare
Since 2020, SARS has referred 129 cases to the National Prosecuting Authority (NPA), with eight involving illicit tobacco. Of those, four are currently in court, four are awaiting trial, and only one has resulted in a successful conviction in the 2024/25 financial year.
These delays and low conviction rates continue to fuel the illegal market, as traders operate with little fear of legal consequences.
Why Illicit Cigarettes Thrive
The widespread sale of illicit cigarettes is driven by:
- Affordability: Packs sold for under R10 attract low-income smokers.
- Local manufacturing: Some illicit brands are produced within South Africa, evading customs.
- Weak enforcement: Delays in SARS operations give criminals time to adjust.
- Organised crime: Networks involved are often linked to broader illegal activities.
One example is Gold Leaf Tobacco Corporation, which was recently placed under curatorship for suspected links to illicit trade.
The Bigger Picture
The impact of illicit cigarettes goes beyond tax losses. It weakens the legal tobacco industry, funds criminal networks, and diverts money from healthcare, education, and infrastructure.
Tax Justice South Africa estimates that recovering revenue lost to illegal cigarette sales could raise as much money as a 1% VAT increase but without putting extra pressure on citizens.
(Source)
Researchers from UCT also calculated that South Africa lost R15 billion in excise tax and R3 billion in VAT from illicit tobacco in 2022 alone.
What Must Be Done?
To stop the growth of the illicit cigarette market, experts recommend:
- Speeding up SARS enforcement tools, especially factory surveillance
- Strengthening prosecution teams at the NPA
- Tightening border security to stop smuggling
- Raising public awareness about buying illegal products
- Encouraging industry cooperation with enforcement
The illicit cigarette trade is costing South Africa more than just money. It’s eroding trust in the law, hurting public services, and supporting criminal networks. Minister Godongwana’s warning is clear: if SARS doesn’t act swiftly, this problem will spiral even further.
Stopping it now could restore billions to the economy and give honest taxpayers a break.
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