The Real Tobacco Lords of South Africa

Politicians will continue suppressing the legal tobacco industry while they line their pockets from tax revenue in legal sales and direct profits from illicit ones.

Photo by Mathew MacQuarrie on Unsplash

Some research I conducted recently on the illicit tobacco trade in South Africa reminded me why I detest politicians and why the world would be better off without them. In our case, the ones we have aren’t mere buffoons who refuse to learn from history. They are thugs and self-serving parasites who have no issue with sacrificing the security of an entire country for their own narrow interests.

The problem really began at the height of Covid-19 in 2020, when they imposed a five-month ban on the sale of tobacco (and alcohol) during lockdown. One of the lies used to justify this harmful decision - aside from containing the virus - was the claim that it would reduce tobacco consumption and encourage people to quit.

The real agenda, of course, was to suppress the legal tobacco industry in the country and grow the illicit trade that many of them are involved in. With no legal cigarettes in retail stores or fuel stations, millions of South Africans had no choice but to buy illicit cigarettes under brands that hadn’t existed before. By the time lockdown ended, the illicit market’s share had jumped to 60% - a 30 increase from before the ban.

Those who think this was well-intentioned should consider the following figures. Only 7.8% of smokers quit during the ban, meaning over 92% did not. Of those who quit, around 55% relapsed as soon as the ban was lifted. These figures show that the ban was never meant to help people and the politicians behind it knew this. Smoking is a stubborn habit, and the real goal was to push the 92% towards the illicit market.

As I’ve already noted, the plan worked, and it has since permanently distorted the tobacco trade in South Africa. The illicit market still holds a 60% share, with most South Africans - whether knowingly or not - smoking illegal cigarettes that carry their own dangers. Even more alarming is the fact that 90% of these cigarettes are manufactured locally, with about 75% of them being sold through spaza shops.

Whichever way you look at it, the real kingpins of tobacco in this country are no longer the legal companies that are weighed down by regulation and taxes. The real kingpins are the same politicians who have distorted the market and forced millions of people into buying their products.

In a hypothetical scenario where we had ethical leadership, the solution to such a crisis would be straightforward. We would slash the price of legal tobacco by abolishing the heavy taxes, regulations, and compliance costs that weigh it down. Over time, this would bring prices closer to those of illicit cigarettes and shift consumer behaviour back towards the legal market.

But alas, the country remains in the grip of the same scoundrels who want the illicit industry to thrive at the expense of the legal one. Nothing is likely to change anytime soon.

For now, a legal pack of cigarettes will continue to cost anywhere between R25 and R60, with roughly half of that price feeding the state through sin tax and VAT. By contrast, an untaxed, illicit pack will continue to sell for as little as R5 to R20.

In other words, the same politicians will continue suppressing the legal industry while they line their pockets from tax revenue in legal sales and direct profits from illicit ones. The irony here is rich: the very people who preach about tax compliance in the private sector are themselves dodging taxes in real time.

It is essentially a rigged game where they enjoy freedom from red tape while no one else is allowed the same.

In such a context, it is crucial to remind ordinary people who fall for the illiberal propaganda of these forked-tongue politicians that there is nothing wrong with freedom. Freedom is indispensable, and it is tied directly to prosperity and better outcomes for humanity. The only reason why politicians deny it to others while quietly practicing it themselves is because they know that they could never personally benefit in a truly free society.

If there were no sin taxes on legal tobacco, how would they enrich themselves? If there was no VAT, how would they skim? By extension, if there was no crushing tax burden on productive South Africans who create value and jobs, how would they afford their sports cars and luxurious getaways to Western Europe or North America?

Politicians are a problem precisely because they survive by attacking our freedoms while operating in a parallel world of their own, which is free from the very constraints they impose. They are parasites who produce no real value and extract wealth from those who do.

This piece should leave readers with a greater appreciation for freedom and its importance.

If true freedom underpinned this country, illicit trading would not be an issue, and I would not be writing this.

Ayanda Sakhile Zulu holds a BSocSci in Political Studies from the University of Pretoria and is an intern at the Free Market Foundation.