Tax Justice SA calls for transparency as tobacco companies face illicit trade allegations

Tax Justice SA (TJSA) has issued a bold demand for the Fair-Trade Independent Tobacco Association (FITA) to disclose the identities of criminal manufacturers purportedly undermining South Africa’s economy.

The allegations, which have surfaced amidst a burgeoning black market for cigarettes, raise serious questions about job security and tax revenue within the country.

In statements made to eNCA on Friday, FITA chairperson Sinenhlanhla Mnguni claimed that his organisation had expelled members who were non-compliant with local laws. However, he failed to identify any specific companies or detail the actions taken against those alleged offenders. The silence has provoked a fierce response from TJSA leader Yusuf Abramjee, who argues that off-record assertions equate to a major deception.

“FITA’s public posture rings hollow,” Abramjee stated, emphasising the overwhelming evidence revealing that its members are deeply involved in tax evasion linked to the illicit cigarette trade. “If FITA has truly expelled members involved in illicit trade, it is Mr. Mnguni’s public duty to name them. Anything less amounts to a cover-up,” he asserted.

The pressure on FITA intensified after British American Tobacco South Africa's shocking announcement regarding the closure of its Heidelberg factory in Gauteng. The company cited years of declining sales due to the rampant growth of the illicit market, which now represents three out of every four cigarettes sold nationwide. This shift has severe implications for the South African economy, with estimates suggesting that the state loses over R30 billion annually in uncollected taxes.

Recent data from an Ipsos study highlights the extent of the problem, revealing that illicit cigarettes are available in 76.6% of stores across the country—significantly up from three years ago. Alarmingly, over a third of these illicit purchases were linked to brands from manufacturers resisting the South African Revenue Service’s (SARS) legal enforcement efforts. Among these is Carnilinx, a prominent FITA member, with a staggering 94% of its brands sold at illicit prices according to the same survey.

As Professor Corné van Walbeek of the University of Cape Town’s Research Unit on the Economics of Excisable Products (REEP) points out, some local manufacturers may intentionally underreport production to maximise profits before any potential government intervention. He explains, “Local groups work on the principle of ‘let’s make as much money as we can, as quickly as we can, because at some point the government is going to crack down.” Such assertions reaffirm TJSA's claim that immediate action is essential.

Abramjee articulates a vehement call for results: “FITA cannot claim to represent ‘fair trade’ while shielding companies that cheat the fiscus, undermine law-abiding businesses and push thousands of workers into unemployment. We call on FITA to come clean, on SARS to enforce the law without fear or favour, and on the government to stop appeasing an industry that is bleeding the country dry.”

For South Africans, the demands for accountability and emissions of transparency are imperative. “We deserve transparency, accountability and action—not excuses,” Abramjee concluded firmly. The unresolved issues surrounding illicit trade could have lasting ramifications for legitimate businesses and the nation’s economy unless decisive action is taken soon against those perpetuating these illegal practices.