Johannesburg – The planned closure of British American Tobacco’s (BAT) only cigarette factory in South Africa illustrates the growing damage of illegal trade on jobs and tax revenue, according to a report by The Citizen. Business Leadership South Africa (BLSA) notes the factory, operating at just 35 percent capacity, will cut about 230 direct jobs. Ripple effects could threaten as many as 35 000 positions across the value chain, including roughly 100 tobacco farmers in Limpopo, North West, and Mpumalanga, who produced over seven million kilograms of tobacco last year, as well as distributors and retailers.
BLSA CEO Busisiwe Mavuso says illicit cigarettes, which made up around a third of the market in 2019, now account for 75 percent. Policy missteps during Covid‑19, including temporary bans on legal cigarette and alcohol sales, allowed illegal networks to establish distribution chains that persist. Subsequent sharp increases in excise duties widened price gaps that illicit operators exploit. Illegal cigarette boxes now sell for less than the R26.22 in combined excise and VAT that should be collected, costing the fiscus about R30 billion annually and bypassing age restrictions and health warnings.
The illicit economy extends beyond cigarettes. Mavuso reports illegal alcohol sales have risen 55 percent by volume since 2017, with one in five drinks from illegal sources. Counterfeit pharmaceuticals, fake branded clothing, electronics, cosmetics, and food products are also increasing. The Consumer Goods Council of South Africa estimates the illicit economy now accounts for roughly 10 percent of GDP, funding organised criminal networks involved in illegal mining, construction mafias, and cash-in-transit heists.
The tobacco industry has proposed solutions, including minimum retail pricing and tamper-proof product markings that would allow consumers to verify authenticity via smartphone apps and crowdsourced reporting. However, these measures have remained unimplemented for years.
BLSA has joined the Illicit Economy Task Force under the Consumer Goods Council to coordinate intelligence sharing, public awareness campaigns, and enforcement support across sectors. The task force works directly with SARS, the police, and the National Prosecuting Authority (NPA) to identify enforcement bottlenecks and propose solutions.
Mavuso says government action is critical. SARS must dedicate specialised resources to the illicit trade task team, police need trained investigators to tackle sophisticated criminal networks, and the NPA must prioritise prosecutions targeting organising networks. The Department of Trade, Industry and Competition should tighten import controls, enforce intellectual property rights, and implement product authentication systems.
She warns that other sectors are also at risk. South Africa’s automotive industry, which employs tens of thousands directly and supports extensive supply chains, faces threats from low-cost Chinese imports. Similar vulnerabilities exist across alcohol, textile, and pharmaceutical industries.
Mavuso says repeated warnings to government have gone largely unheeded. “Protecting domestic manufacturing must be a strategic priority. Countries that successfully tackled illicit trade combined technology, enforcement, and public awareness. South Africa can do the same, but the window for action is closing,” she says.
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