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Tobacco farmers threatened by illicit cigarette trade

Agri SA calls on government to urgently respond to the shocking findings of the study into illicit tobacco trade that was released today. The Ipsos study finds that a significant percentage of cigarettes are sold illicitly – with no excise duty being paid – with a clear correlation to foreign-sourced tobacco. South African tobacco farmers risk being cut out of the value chain if this trend continues.

“The implication of the findings extends beyond tobacco, said Pietman Roos, Head of Corporate Affairs at Agri SA. “If criminal organisations can earn billions each year through bypassing simple excise taxes, the next step is to infiltrate the value chains of other commodities. Illicit trade already hurts local tobacco farmers and the South African towns that are dependent on this labour-intensive crop. Imagine this happening across the country.

According to the Ipsos study commissioned by the Tobacco Institute of South Africa (TISA), 26.8% of cigarettes in South Africa are sold below the R17.85 minimum in tax payable. The responsibility is on the cigarette manufacturers – the company who owns the brands – to pay the excise and VAT on each packet of cigarettes. By drastically under-declaring their volumes and not paying the full tax, they are able to flood the market with illegal goods.

“The Ipsos research shows that almost 8bn cigarettes this year will be sold illegally, which translates to more than R7bn loss to the fiscus, said Francois van der Merwe, the chairman of TISA. “This is an outrage considering the country’s public finances and the fragile economic recovery.

The tobacco industry supports more than 108 000 jobs, including 8 000 – 10 000 farm workers. Tobacco is farmed in North West, Limpopo and Mpumalanga and has proven to be an excellent crop to drive transformation in agriculture. TISA is an Agri SA member.
Agri SA calls on the relevant government departments to intervene and ensure consistent law enforcement.

Omri van Zyl
Agri SA: Executive Director
C: 082 417 5724
T: 012 643 3400

Pietman Roos
Agri SA: Head of Corporate Affairs
C: 066 201 8326
T: 012 643 3400