Don’t blame us for illegal cigarettes swamping the market, says Fita

The Fair-Trade Independent Tobacco Association (Fita) has questioned research funded by British American Tobacco SA (Batsa) implicating smaller manufacturers in the massive increase in illicit cigarettes being sold in SA.

Fita was responding to a Batsa-funded Ipsos survey which, according to the association, found below-tax cigarettes in nearly 75% of outlets visited, compared with 27% in a 2022 survey.

Read: R7 cigarettes expose scale of illicit tobacco trade in SA

Ipsos fieldworkers found cigarettes selling below the minimum collectable tax benchmark of R27.12 per pack in nearly 75% of outlets visited, with some packs priced as low as R7.

“Fita has always acknowledged that illicit trade is a serious problem,” says the tobacco manufacturers organisation in a statement.

“It deprives the fiscus of revenue, prejudices compliant businesses and demands effective, even-handed enforcement across the whole value chain.

“What Fita does not accept is industry-funded research being presented as proof that three-quarters of the cigarettes smoked in South Africa are illicit, or independent manufacturers being named alongside statistics that do not show what the accompanying narrative suggests.”

Perspective

Ipsos fieldworkers made 4 704 purchases, and in nearly 75% of outlets visited found cigarettes on sale at below the minimum collectable tax of R27.12.

“That measures where below-tax packs can be found, not how many cigarettes are illicit,” responds Fita.

“A shop that stocks one below-tax brand may sell far larger volumes of tax-paid cigarettes, and the survey did not measure what each outlet sells.”

In January, Batsa announced that it would close its Heidelberg factory which had been operating at just 35% capacity due largely to illicit tobacco sales.

Read: BAT: ‘We’ve reached the limit’ as SA factory closure confirmed

It blamed weak law enforcement, the 2020 tobacco sales ban and above-inflation excise increases for worsening conditions.

“Fita’s latest statement does little to advance a serious discussion about South Africa’s illicit cigarette crisis,” says Johnny Moloto, area head of corporate and regulatory affairs for BAT Sub-Saharan Africa.

“Batsa stands by the independent research it has published and remains focused on supporting efforts to address an illicit market that continues to undermine legitimate businesses, jobs and the fiscus.”

Market in turmoil

The market shares of two of the country’s largest cigarette manufacturers, Philip Morris and Batsa, were decimated in 2020 when then cooperative governance and traditional affairs minister Nkosazana Dlamini-Zuma implemented a five-month ban on tobacco sales during Covid, supposedly to reduce pressure on hospitals.

The result was a dramatic shift to illicit brands, with cigarettes paying no excise duty pouring across the borders.

Read:
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Local manufacturers were also accused of tax dodging, contributing to estimated tax losses of R30 billion a year.

The tobacco market has not recovered to pre-Covid levels.

Research vs proof

Fita has also criticised the naming of manufacturers whose brands were bought below the tax threshold.

It says a retail price survey cannot establish whether a manufacturer failed to pay excise, where a pricing anomaly arose in the supply chain, or whether a pack was counterfeit.

“Brands are attributed from what is printed on the pack, so a counterfeit can be recorded against the genuine brand owner,” says Fita.

The association says these criticisms are not new.

In 2022, UCT researcher Nicole Vellios traced Batsa’s claim that “almost 70% of all cigarettes consumed in South Africa belong to illicit brands” to a survey finding below-tax packs in “almost 70% of outlets in Gauteng”.

The national figure was 34% of stores. It was, she wrote, “misleading to say that 70% of the market in Gauteng is illicit”.

Batsa’s ‘struggles’ in context

Fita has also challenged Batsa’s explanation for closing its Heidelberg factory, which its own reports suggest is part of a factory network consolidation over the past 18 to 24 months.

Fita says Batsa’s own reports list Heidelberg as part of a wider group-wide manufacturing ‘footprint optimisation and reorganisation’.

“The same programme involves about 5 500 role reductions outside the US, the transfer of about 3 500 roles to strategic partners and targeted annual savings of about £600 million [R13.3 billion] by the end of 2028,” adds Fita.

However, a June 2026 update from BAT says the closure is primarily due to the unsustainable level of illicit products in the South African market.

Fita says Batsa needs to be held the same standard as everyone else, given its own history of sanctions violations, disputed tax assessments and allegations concerning illicit trade.

The association acknowledges that this criticism does not establish present misconduct by Batsa in South Africa.

Competing on equal terms

Fita says legitimate local manufacturers struggle to access parts of the formal retail market, yet face criticism because their products are prevalent in informal and independent outlets.

It calls for equal access to markets and argues that Batsa’s loss of market share should not itself be treated as evidence of wrongdoing by competitors.

Enforcement, it says, must follow evidence across the entire supply chain and apply equally to multinational and independent manufacturers, while protecting legitimate competition.

BAT’s Moloto previously suggested a halving in the excise on cigarettes (currently R23.58 a pack) to allow players to compete on equal footing.

“Illicit trade must be eradicated,” says Fita. “Tax compliance must be enforced. Those who break the law must face the consequences.

“But legitimate competition must be protected too. South Africa deserves an evidence-based tobacco policy, not one shaped by the commercial narrative of any single market participant. South Africans deserve the full picture.”