SA loses R30bn to illegal cigarettes as tax tools stall

PRETORIA – South Africa has lost close to R30 billion over five years due to rampant cigarette smuggling and illicit trade, Finance Minister Enoch Godongwana has revealed.

The disclosure was made through a written parliamentary reply after Economic Freedom Fighters (EFF) Member of Parliament Thapelo Mogale demanded answers on the revenue loss and efforts to clamp down on illegal cigarette trade.

Godongwana said it was difficult to pinpoint the exact value lost through the illicit trade due to its hidden nature. However, industry estimates suggest that up to 70% of cigarettes sold in the country are illegal, costing the country billions in lost tax revenue.

According to SARS data, annual revenue from tobacco products has plunged from R13.4 billion in the 2015/16 financial year to R9.4 billion in 2024/25. The worst drop was recorded in 2020/21 when cigarette sales were banned under Covid-19 lockdown regulations, resulting in a 44.9% slump.

To fight the growing trade in illicit cigarettes, Godongwana said the South African Revenue Service (SARS) is using frontline enforcement, targeted audits and advanced technologies. Customs and excise teams are seizing contraband at ports of entry and within the country, while full-scale audits are conducted across the supply chain, from raw materials to finished products.

CCTV monitoring has been introduced at cigarette factories and manufacturers are now required to install cigarette counters to help SARS monitor production. However, legal challenges from some players in the industry have delayed the rollout of surveillance technology, forcing SARS to deploy inspectors to factories as a temporary measure.

Godongwana said SARS also operates a criminal investigations unit that probes large-scale tax evasion and smuggling schemes. Over the past five years, SARS has handed 129 excise and customs cases to the National Prosecuting Authority, with 105 cases still in court. Of these, eight cases involve illicit tobacco products, with four currently on trial.

He said international partnerships are also being used to track smuggling operations and strengthen enforcement.