South Africa has become the first country in the world to allow an illegal cigarette brand to become a top seller.
Research house Ipsos said on Tuesday that Gold Leaf Tobacco’s RG brand overtook all legal brands.
Their latest study shows the trade in illegal smokes has increased dramatically despite promises of a crackdown from the South African Revenue Service (Sars).
Cigarettes selling for less than the tax of R17.85 per pack owed to Sars have grown market share by over 25%, from 33%- 42% 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 on each pack.
A 2015 judgment 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 now represents 73% 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 smokes 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 brand in the country.
Its growth has been driven by its expansion into the Eastern Cape.
African News Agency (ANA)
