british american tobacco p.l.c. sustainability report 2010 - Tackling illicit trade in South Africa

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Sustainability Report 2010
South Africa

Illicit trade in South Africa has increased significantly in recent years. According to the Tobacco Institute of Southern Africa, the illicit trade in cigarettes currently comprises more than 20 per cent of the total cigarette market. It is estimated that 15 million cigarettes are sold illegally in South Africa every day. British American Tobacco South Africa now regards illicit trade as its biggest competitor. The South African Government loses nearly R2.5 billion (£221 million) per year in unpaid taxes. This is money that could provide a much-needed boost to public services and infrastructure.

Most illicit cigarettes in South Africa are smuggled across the borders without tax duties being paid. These are considerably cheaper than legitimate cigarettes and, with South Africa now facing its first recession in 17 years, consumer demand is high.

Trading in illegal cigarettes is punishable by law in South Africa. A retailer or reseller caught with illicit products and prosecuted under the Customs and Excise Act (for evasion of taxes), can face a fine of R20,000 (£1,770) or three times the value of the goods, whichever is greater; or up to five years in prison. However, if prosecuted under the Tobacco Control Act (for non-compliant product) the penalties are higher, with a fine of up to R1 million (£88,493).

Despite these strict penalties, the economic benefit of illicit trade is perceived to outweigh the risks. A single container of 8.5 million cigarettes smuggled into South Africa and sold at half the recommended retail price could net the criminals millions of Rand in profit.

British American Tobacco South Africa works closely with the various authorities, such as the South African Police Services and South African Revenue Services, to help combat the illicit trade in cigarettes by alerting them to the sale of any known contraband products.

In late 2010, the company launched an awareness campaign against the sale and consumption of illegal cigarettes. Supported by the Tobacco Institute of Southern Africa (TISA), the campaign aims to educate wholesalers, retailers, consumers and the general public about the issue. It includes advertising through billboards, newspapers, magazines and radio, as well as media interviews.

British American Tobacco also fully supports TISA’s campaign to raise retailers’ awareness of the growth in illicit trade and the penalties for selling illicit cigarettes. As part of this, TISA has sent out letters to wholesalers and retailers, reminding them of the penalties of buying, stocking and selling illicit cigarettes.