Illegal tobacco trade costs country billions

FILE PHOTO - Cigarettes are seen during the manufacturing process in the British American Tobacco Cigarette Factory (BAT) in Bayreuth, southern Germany, April 30, 2014. Photo: Reuters

HEIDELBERG - Illicit trading in the tobacco industry is costing the country billions.

It’s also leading to job losses.

Now the industry wants the government to intervene.

Today Gauteng MEC for Economic Development, Lebogang Maile, visited British American Tobacco’s Heidelberg plant, in a bid to understand the challenges.

About R6 billion is lost to the country due to the illicit trade in tobacco.

“Illicit is a significant problem, it’s a big problem. It’s sitting at about 34%, so when you look at numbers, in terms of loose sticks that get sold, we’re looking at about ten billion sticks that are being sold in our country without paying excise or without paying tax,” said British American Tobacco's, Bongumusa Makhathini.

The illegal transactions have grown from R2 billion in 2008, to a massive R10 billion worth of stocks currently being sold illegally or below market price.

While a pack of twenty low-grade cigarettes may cost on average R17, these traders sell them for R6.50.

“In the past 5 years, we had to cut about over 600 jobs because of the illicit problem. We are losing about a billion stocks every year as a result of illicit, and you know our footprint in the farming space, we create about 10 000 jobs, with the continued problem of illicit, those problems are at risk,” said Makhathini.

The plant in Heidelberg in the south of Gauteng is BAT’s eighth largest plant.

It contributes over R18-billion to the province’s GDP.

But 29% of the country’s illegal dealings take place here.

“Illicit trading is bad for the economy, it doesn’t help us to create jobs, it doesn’t help us to increase the revenue that we so much need in the public service so that we are able to invest in job creating initiatives in education, in health, so we will be looking at that issue amongst others,” said Gauteng Economic Development MEC, Lebogang Maile.

Maile is promising to engage with police and the Department of Community Safety to stop the practice in its tracks.

But Makhathini said it’s an uphill battle.

“In my view, I can’t say they’re winning the fight because the legal market, which is BAT business and other legal businesses are in decline and the illicit guys are growing double digits every year,” said Makhathini.

BAT is currently running an anti-illicit trade campaign aimed at educating consumers about the impact of the black market. 

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