Illicit cigarettes a problem 'bigger' than SARS - Kieswetter

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SARS Commissioner Edward Kieswetter says that there are significant challenges when it comes to illicit tobacco and cigarette trade. (Getty)
SARS Commissioner Edward Kieswetter says that there are significant challenges when it comes to illicit tobacco and cigarette trade. (Getty)
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  • The track and trace project meant to clamp down on the illicit tobacco trade was stopped by SARS, as it did not address risks across the entire supply chain, says commissioner Edward Kieswetter.
  • Kieswetter described the project as locking the front door with a modern safe, but then leaving the backdoor open.
  • The battle against illicit tobacco trade was a problem that required collaboration with all of government, said Kieswetter.

The track and trace project meant to clamp down on illicit tobacco trade was discontinued by SARS, as it did not address risks across the entire supply chain, according to Commissioner Edward Kieswetter.

The commissioner was speaking during a briefing to Parliament's Standing Committee on Finance on Tuesday, where members of Parliament were updated on the revenue service's 2020/21 annual report.

Committee chairperson, Joe Maswanganyi, asked for an update on the track and trace project.

In 2019, SARS had issued a tender, seeking a service provider of the "track-and-trace marker technology" which would track the movement of cigarettes from manufacturing plants to points of sale, Fin24 previously reported. 

Earlier this year, cigarette manufacturer British American Tobacco South Africa called for the introduction of a track and trace system to fight illicit trade.

But Kieswetter said the project was stopped.

"It did not respond to managing risk across the entire supply chain," he said. Kieswetter added that it was like locking the front door with the most "modern safe" and then leaving the back door open.

During a briefing in September 2020, Kieswetter similarly said that the revenue service had started a new process to develop a system that would be embedded throughout the value chain of multiple industries.

There was currently a review of the management of all supply chains, to be part of SARS' customs modernisation programme, he told members of Parliament.

However, SARS was still in a "reactive and defensive mode" when it comes to illicit tobacco trade, said Kieswetter.

"We have seen significant improvement in management of value chain."

Beyers Theron, director of customs and ports of entry at SARS, gave a brief update on the work done to address illicit flows.

For the 2019/2020 financial year, SARS conducted 445 seizures, valued at R103.5 million. During 2020/21, amid the Covid-19 pandemic and its restrictions of movements, there were 1 150 seizures, valued at R221 million.

SARS had been focusing on manufacturing compliance, Theron explained. "The biggest problem is not what is smuggled across the border... It is illicit manufacturing within the country."

He added that SARS also started work on illicit distribution - whereby teams go to shops. In the past six months, SARS teams had been to 40 shops, whereby R11 million worth of illicit stock was recovered. This was stock marked for export, but end up in the local economy, Theron said.

SARS also conducted blitz operations jointly with the South African Police Services and the South African National Defence Force at border areas, where they conducted roadblocks. SARS was working on increasing screening at borders, while still allowing for trade facilitation, he explained.

Scratching the surface

Kieswetter said that despite the efforts, SARS wass still "scratching the surface" on illicit flows and the cigarette and tobacco industry were riddled with significant challenges.

"We have seen particularly during lockdown, a significant proliferation of the sale of illicit cigarettes that now has embedded itself as an alternative to the regular brands. People have become spoilt and used to buying cigarettes at significantly lower prices and they have become brand aware. We are fighting a losing battle in this regard. This problem is significantly bigger than SARS, it is a whole of government response to deal with this."

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