South Africa’s rising illicit tobacco trade highlights global need for robust track and trace

South Africa's soaring illicit tobacco trade has received strong media and political scrutiny in late August, with the widespread impact of this scourge no longer possible to ignore. According to the tobacco industry's own estimates, the country's illicit tobacco now accounts for over 70% of the market, draining over R30 billion (approximately $1.69 billion) annually from public coffers. 

Recognising the gravity of the situation, the Congress of South African Trade Unions (COSATU) recently pressed the parliament to strengthen the country’s draft tobacco control bill by adding anti-illicit trade provisions – particularly, the introduction of a track-and-trace system. While the bill contains important measures to protect non-smokers and young people, the omission of illicit trade constitutes a major blind spot that compromises the country’s public and fiscal health revenue at a time when the Government faces a considerable budgetary gap.

In pursuing a track-and-trace solution to rein in its illicit tobacco trade, South Africa should draw on international experience and establish a dual system combining both digital and physical safeguards. Crucially, its government will need to resist Big Tobacco’s efforts to undermine such reliable mechanisms – part of the industry’s wider strategy to dilute ambitious, WHO-aligned tobacco control policies that threaten its profits.

South Africa’s deteriorating tobacco picture  

Illicit cigarettes have become a fiscal disaster for South Africa, with losses nearly doubling from R17.6 billion (roughly $1 billion) in 2022 to more than R30 billion today. The Treasury’s collapse in revenue is stark: in 2024, only R9 billion (approximately $510 million) in excise was collected despite an 88% hike in duties over the past decade, and just 8.3 billion cigarettes were declared – compared with nearly R13 billion ($730 million) in tax revenue generated and 22 billion sticks declared in 2014. 

This flourishing black market not only robs the state of vital social funds for healthcare, policing and education, but also fuels organised crime and cripples legitimate businesses. Furthermore, cheap illegal cigarettes continue to entice young South Africans, compromising public health goals of the government’s draft tobacco bill, while legal tobacco shop owners are further collateral damage in an environment where law-abiding business is punished and crime rewarded.

With ineffective monitoring and enforcement enabling the deluge of illicit tobacco, leading tobacco policy experts from the University of Cape Town and the South Africa Tobacco Transformation Alliance (SATTA) are calling for South Africa's government to implement a tobacco traceability system capable of monitoring cigarettes from factory floor to retail shelf. As SATTA has long argued, the rapid, comprehensive implementation of track-and-trace is the country’s only real chance to regain control of its tobacco supply chain. 

Pioneering countries showing traceability’s vital role

South Africa's tobacco control advocates are rightly pushing for a tobacco traceability system aligned with the World Health Organisation’s (WHO) Protocol to Eliminate Illicit Trade in Tobacco Products (ITP Protocol) – which the South African government has signed but has yet to ratify it. Crucially, the Protocol calls for all member-states to adopt track-and-trace systems independent of the tobacco industry – a safeguard necessitated by Big Tobacco’s global interference with traceability systems to protect its profits from the very illicit trade it facilitates.

As South African journalist Karabo Makodi recently highlighted, countries that have adopted such WHO-compliant track-and-trace systems have achieved both stronger enforcement and improved tax revenue collection. For instance, Kenya’s traceability system raised tobacco excise collections by more than 30% in its first year, while Brazil and Turkey have similarly reported strong gains after implementing the same solution. These global case studies demonstrate that when designed and operated properly, track-and-trace delivers meaningful results.

Beyond its independence from Big Tobacco, the traceability systems rolled out in Kenya, Turkey and Brazil bear another key distinguishing feature: dual physical-digital capabilities. Hardly a niche point, the incorporation of both tamper-proof physical tax stamps and advanced digital coding components in track-and-trace has proven vital in effectively tackling the illicit trade and boosting tax revenue. The question of dual systems is actually inseparable from that of industry independence. Indeed, Big Tobacco has lobbied aggressively worldwide to block such solutions, pushing instead for digital-only systems to facilitate its control over a technology that threatens its illicit profits.

Big Tobacco’s undermining European track-and-trace systems

As South African policymakers weigh track-and-trace solutions to curb the illicit trade, they would do well to look to Europe, where Big Tobacco has successfully hindered the adoption of an independent, dual system. After successfully pressuring the EU in 2014 to exclude an independent track-and-trace solution from the last Tobacco Products Directive (TPD) review, Big Tobacco subsequently lobbied for a digital-only system operated by allied firms with deep industry ties – namely, Inexto, Dentsu Tracking, PSQR, Atos, and four of the latter’s subsidiaries. 

Launched by the European Commission in 2019, the EU’s flawed, heavily-criticised system has effectively given the tobacco industry influence over a system meant to tackle a major source of its profits – constituting a severe violation of the WHO’s ITP Protocol and particularly Article 8. The operators of EU track-and-trace have, through their respective acquisitions, either inherited components of or actively promoted Codentify – a traceability system developed by Philip Morris International which the public health community has universally rejected. Former WHO FCTC head Dr. Vera Luiza da Costa e Silva has notably described Codentify as “essentially a black box” that is ultimately “managed and controlled by the tobacco industry.”

Under the EU’s flawed, digital-only system, illicit trade has continued to climb – draining as much as €20 billion in tax revenue every year – with even the Commission’s DG TAXUD recognising the scheme’s ineffectiveness in curbing illicit tobacco and excise tax losses. Meanwhile, the UK, which runs a highly-similar system also involving Dentsu Tracking, offers a similar warning: a recent Philip Morris International-commissioned study reveals illicit consumption surged by more than 20% between 2022 and 2023, while HMRC data shows legal sales have almost halved since 2021 even as smoking rates remain steady. Moreover, HMRC has recently launched a tender for vape traceability under an independent model promoted by the International Tax Stamp Association, with its refusal to extend the existing UK system amounting to an implicit admission of its failure.

The key takeaway

With the EU beginning to pursue the long-overdue, tobacco industry-delayed reform of its tobacco control framework, it should look to the best practice examples of countries like Kenya and Brazil and implement an independent, dual system in line with its WHO Protocol obligations. Failure to deliver in this window of opportunity will leave the continent defenseless in the face of its growing illicit tobacco trade.

As the European experience illustrates, illicit tobacco is far from a uniquely South African problem – it is a global epidemic that erodes public revenues, sustains criminal networks and weakens health systems wherever it thrives. South Africa’s current debate marks only the latest battleground in this wider struggle. The real test now lies in implementation: only WHO-compliant track-and-trace systems, with both digital and physical safeguards, can turn the tide. Anything less leaves governments compromised and Big Tobacco in control.