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Tobacco ban boosted illegal trade

16 Sep 2020. While the alcohol and tobacco ban during lockdown was meant to tackle the health impact of the coronavirus pandemic, it has allowed illegal traders to enter the market, reports Bloomberg.

Tobacco and alcohol products continued to be readily available on the black market when the ban first came into force with the 27 March lockdown. A study by the University of Cape Town found that 90 per cent of smokers were able to buy cigarettes during the ban, often at increased prices, the report said. The cost of cigarettes rose by 4.4 per cent per day in the two weeks up to 11 May and, according to the survey, was on average almost 250 per cent higher than before the virus.

Even before the restrictions, South Africa was one of the world's largest markets for illegal cigarette sales, according to a 2018 report by the country's producer-funded Tobacco Institute. It could now take years to reverse the effects of the criminal networks that emerged and benefited from the bans, according to Edward Kieswetter, the commissioner of the country’s tax agency.

Data from the National Treasury show that in the first four months of the fiscal year the government lost ZAR 9.5 billion (USD 574 million) in alcohol and tobacco taxes as a result of the bans. Manufacturers and retailers complained that the restrictions not only encouraged illegal trade, but also cost thousands of jobs in the country, where unemployment reached a 17-year high before the virus brought activity to a halt, the report said.