Research house Ipsos said this week that South Africa has become the first country in the world to allow an illegal cigarette brand to become a top seller.
This after Gold Leaf Tobacco’s RG brand became the top-selling brand in the country, overtaking all legal brands.
Ipsos’ latest tobacco market study shows the trade in illegal entjies has increased dramatically despite promises of a crackdown from Sars.
Cigarettes selling for less than the tax of R17.85 per pack owed to Sars have grown market share from 33 percent to 42 percent in the informal market in just three months.
RG cigarettes sell for an average price of just R10 and are therefore evading the R17.85 owed to Sars.
A 2015 judgement found that cigarettes that are sold below the minimum tax can be deemed as illicit.
Ipsos said in a remarkable show of defiance, manufacturers of cigarettes selling below the minimum tax have expanded their distribution at the very same time as Sars has been promising to crack down.
Gold Leaf Tobacco Corporation (GLTC) now represents 73 percent of the market for illegal cigarettes and is on track to become the biggest tobacco company by sales volume in the country, especially if there is another tax increase on legal cigarettes in February 2019.
Ipsos said GLTC’s biggest challenger is Best Tobacco Company whose brand, Caesar, also retails for R10 on average and is now the second fastest growing cigarette brand in the country, after RG.
ANA