Illicit Tobacco Market Claims Seventy Five Percent of South African Sales as Prices Drop to Five Rand

South Africa's illicit cigarette trade costs the fiscus R28 billion annually as illegal packs sell for just R5 following pandemic-era market shifts.

By: AXL Media

Published: Mar 28, 2026, 9:44 AM EDT

Source: Information for this report was sourced from Daily Investor

The Exponential Growth of a Parallel Economy

South Africa's tobacco landscape has undergone a radical and damaging shift, with illicit products now dominating the vast majority of the market. According to the Transnational Alliance to Combat Illicit Trade, or TRACIT, illegal cigarettes may now account for between 50 percent and 75 percent of all sales nationwide. This surge in underground activity has created a massive fiscal black hole, as illicit sellers bypass the heavy excise duties required of legitimate businesses. The result is a pricing environment where a single pack of cigarettes can be found for as little as R5, a fraction of the cost of legal alternatives which typically carry at least R25 in taxes alone.

The Pandemic Catalyst and Persistent Infrastructure

The current crisis traces its origins back to the controversial lockdown regulations implemented during the Covid-19 pandemic, which banned the legal sale of tobacco and alcohol. While framed as a public health measure, the policy effectively served as a multi-billion rand gift to organized crime networks. According to TRACIT's deputy director general, Stefano Betti, the ban allowed illicit supply chains to establish deep roots that have remained intact long after the restrictions were lifted. These networks now operate with sophisticated distribution channels that continue to funnel untaxed goods into the hands of consumers, making the illegal trade remarkably difficult to dismantle.

Tax Evasion and the Burden on National Revenue

The impact on the South African Revenue Service, or SARS, has been catastrophic, with billions of rands in potential tax income vanishing every year. A study by Ipsos suggests that the illicit trade drains approximately R28 billion from the country's economy annually, money that would otherwise fund essential public services. According to data from the SA Tobacco Transformation Alliance, South Africans consumed an estimated 37 billion cigarettes in 2023, yet the government was only able to collect taxes on 13 billion of those units. This massive discrepancy underscores a systemic failure to capture revenue from a high-volume industry that is increasingly operating in the shadows.