Illicit tobacco trade on the rise in South Africa underscores global requirement for effective product tracking and tracing systems
In an alarming development, South Africa's illicit tobacco trade accounts for over 70% of the market, causing an annual loss of over R30 billion ($1.69 billion) to public coffers. This flourishing black market for tobacco fuels organised crime and cripples legitimate businesses, a situation that has prompted tobacco control advocates to call for action.
The European Union (EU) has faced similar challenges, with its current track-and-trace system, launched in 2019, giving the tobacco industry undue influence. This violation of the World Health Organization's (WHO) ITP Protocol has been a cause for concern, as the system was meant to tackle illicit trade. Operators of the EU's track-and-trace system have even promoted Codentify, a traceability system developed by Philip Morris International, which the public health community has universally rejected.
Big Tobacco has been aggressively lobbying worldwide to block solutions that threaten its illicit profits. The industry has pushed for digital-only systems to maintain control over a technology that could potentially curb its profits. In 2014, Big Tobacco successfully pressured the EU to exclude an independent track-and-trace solution from the last Tobacco Products Directive (TPD) review.
However, not all is lost. Countries such as Turkey and Brazil have implemented WHO-compliant track-and-trace systems in recent years, which have shown effective results in strengthening control over the illicit market and increasing tax revenues by improving supply chain transparency and reducing counterfeit tobacco sales. For instance, Kenya's traceability system raised tobacco excise collections by more than 30% in its first year. Similarly, Brazil and Turkey have also reported strong gains in tobacco excise collections after implementing similar solutions.
South Africa's tobacco policy experts are urging the government to follow suit and implement a tobacco traceability system capable of monitoring cigarettes from factory floor to retail shelf. Such a system, aligned with the ITP Protocol, could help South Africa combat its illicit tobacco trade and reap the benefits enjoyed by countries like Turkey and Brazil.
The WHO's ITP Protocol calls for member-states to adopt track-and-trace systems independent of the tobacco industry. However, it's important to note that Big Tobacco has been known to interfere with traceability systems to protect its profits from the illicit trade it facilitates. The UK's digital-only system, involving Dentsu Tracking, is a case in point, showing increased illicit consumption and decreased legal sales, despite steady smoking rates.
Cheap illegal cigarettes continue to entice young South Africans, compromising public health goals. The country's losses from illicit tobacco have nearly doubled from R17.6 billion ($1 billion) in 2022 to more than R30 billion today. In 2024, only R9 billion ($510 million) in excise was collected despite an 88% hike in duties over the past decade.
Implementing a WHO-compliant traceability system could help South Africa reverse this trend. By improving transparency and control over the tobacco supply chain, such a system could reduce the illicit trade, increase tax revenues, and protect public health. It's a step that South Africa's government should seriously consider to safeguard the nation's health and economy.
