MIDDELBURG – The arrest of an Indian national found in possession of illicit cigarettes is a stark reminder of a major problem the country is facing.
The illicit cigarette market appears to be on an upward spiral, costing the government billions in value-added tax (VAT) revenue.
The 40-year-old man appeared in the Middelburg Magistrate’s Court on Tuesday, February 18, 2025, after being arrested by Middelburg Crime Prevention following information that he was in possession of illicit cigarettes in his shop.
According to police, illicit cigarettes estimated to be worth R3.4 million were recovered from the shop.
Mpumalanga Hawks head, Major General Nico Gerber, issued a strong warning to community members, urging them to avoid using illicit cigarettes, as they pose a health hazard. “These cigarettes contain harmful substances, including high levels of tar, nicotine, and other toxic chemicals. If such cigarettes are smuggled into the country, they negatively impact the economy as smugglers evade taxes and regulations,” he warned.
According to research by the University of the Western Cape, the illicit cigarette market comprised 5% of the market in 2009, peaked at 60% in 2021, and decreased to 58% in 2022.
In 2022, the government lost R15 billion in excise revenue and R3 billion in VAT revenue.
From 2002 to 2022, the government lost R119 billion (in 2022 prices) in excise and VAT revenue.
The research further indicates that the majority of the lost revenue occurred between 2010 and 2022, with R110 billion (in 2022 prices) in excise and VAT revenue lost.
A comprehensive sensitivity analysis indicates that the estimated lost revenue of R119 billion from 2002 to 2022 falls within the range of R65 billion to R130 billion (all in 2022 prices).
