SA losing nearly R30bn to illicit cigarettes as Sars tools face delays, says Godongwana

Efforts by the South African Revenue Service (Sars) to curb the illicit cigarette trade have been hampered by delays, with South Africa losing nearly R30 billion over the last five years.

This was revealed by Finance Minister Enoch Godongwana in a parliamentary reply.

EFF MP Thapelo Mogale asked the minister to disclose the total revenue lost as a result of cigarette smuggling and the illicit trade.

He also requested information on the measures introduced to tackle the issue and how effective these have been in recovering lost tax income and ensuring offenders are prosecuted.

Godongwana on illicit cigarette trade losses

In his written reply, Godongwana said illicit trade and smuggling are “hard to reliably quantify” given their covert nature.

However, he pointed out that the illicit cigarette trade has become a major economic and enforcement issue, with estimates indicating that as much as 70% of cigarettes sold in the country are illegal.

This has resulted in annual tax revenue losses exceeding R27 billion.

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The minister explained that according to Sars data, revenue from tobacco and cigarette products dropped from R13.4 billion in 2015-16 financial year to R9.4 billion in 2024-25, a 29.6% (R4 billion) decline over ten years.

The most notable drop, of 44.9%, occurred in 2020-21 due to the cigarette ban during the Covid-19 lockdown.

Sars measures against illicit cigarette trade

Sars, Godongwana highlighted, has implemented a multifaceted strategy to combat the scourge of illicit trade of tobacco and cigarettes.

He said the tax authority has adopted a long-term strategic approach that includes frontline interventions, targeted audits, and the use of advanced technology.

Regarding frontline operations, the minister explained that seizures of illicit cigarettes are being conducted at various ports of entry by customs border operations teams, in collaboration with other government agencies.

These efforts also extend to inland areas.

“This ensures that Sars does not only focus on revenue recoveries, but [also on] removing illicit goods from circulation.”

READ MORE: SA loses R30 billion in revenue due to illicit trade in cigarettes and liquor

He emphasised that compliance audits are prioritised, covering the entire value chain, to ensure adherence to relevant laws.

“This methodology enables an end-to-end audit of the entire value chain and ensures that a company is scrutinised from the point of raw material supply, its entry into the manufacturing warehouse, to calculating how many cigarettes could be produced at any given time, considering the appropriate yield and capacity analysis.”

Godongwana pointed out that Sars has integrated data and advanced technologies to monitor the tobacco supply chain and detect illicit activities.

This involves the use of CCTV surveillance at manufacturing facilities to monitor production and prevent tax evasion.

However, this initiative has faced delays due to legal challenges from certain industry stakeholders.

“As a stop-gap measure, Sars intends placing inspectors at these factories, on a full-time basis, depending on the availability of funding and budget.

“In addition, cigarette counters were made mandatory for all licensed manufacturers to assist Sars with production statistics.”

Investigations and arrests

Another tool in the fight against illicit trade is Sars’ criminal investigation unit, which was established to probe complex tax evasion schemes.

Godongwana said the unit continues to investigate cases involving tax non-compliance, smuggling, diversion, ghost exports, and misdeclarations, especially in high-risk industries such as tobacco and cigarettes.

The minister revealed that international trade agreements and tools are being used to improve intelligence sharing and strengthen enforcement against illicit trade.

He highlighted specific enforcement successes, including arrests and prosecutions.

READ MORE: JMPD cracks down on illicit cigarette smuggling in Brixton

The Sars criminal investigation unit has handed 129 customs and excise-related cases to the National Prosecuting Authority (NPA) over the past five years.

Currently, 105 of these are on the NPA roll, with 33 currently on trial and 72 awaiting trial dates.

Eight of these cases specifically involve illicit cigarettes and tobacco.

Four are currently on trial, while the remaining four are pending trial dates.

Godongwana added that 32 customs and excise cases have resulted in successful convictions.