Tensions rise in SA's tobacco industry amid allegations of illicit cigarette trade

A TRADE war is brewing within South Africa’s tobacco cigarette sector after Polaris Manufacturing on Wednesday dismissed findings of an Ipsos research into illicit trade in cigarettes through under-pricing.

- TAWANDA KAROMBO

Polaris Manufacturing, a cigarette and tobacco products manufacturing firm formerly known as Gold Leaf Tobacco Company, also accused British American Tobacco South Africa (BATSA) of illegal imports.

The Ipsos research released on Tuesday and funded by BATSA named Polaris among companies whose products were being illicitly traded on the South African market.

“The Ipsos study determines whether a cigarette is illicit solely on the basis of price, assuming that any pack sold below the Minimum Collectable Tax (MCT) or an arbitrarily BAT-set Lowest Economically Viable Price is automatically illicit. This is not only legally unsound, it is dishonest,” said Raees Saint, a director with Polaris.

Saint added that the tobacco industry in South Africa was battling operational realities such as the existence of counterfeit products, cross-border smuggling and price-averaging.

He explained that these issues affected retail pricing for cigarettes but were “unrelated” to a manufacturer's tax compliance.