Illicit Cigarettes Account for 60% of South Africa’s Market Share

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JIMMY MOYAHA: Earlier today, around lunchtime, we received an update from the Transactional Alliance to Combat Illicit Trade [Tracit]. They introduced the 2025 Illicit Trade Environment Index, which delves into global illicit trade and its underlying factors.

I’m joined by Philippe Van Gils, the director of illicit trade prevention at Philip Morris International, to discuss this latest index report and interpret its findings.

Good evening, Philippe! It’s a pleasure to have you on the show. Let’s start by understanding the goals of this index and report. What does it analyze, and how extensive is its reach?

PHILIPPE VAN GILS: Thank you, Jimmy, for having me. Tracit is an international association comprising several companies, including ours. Its mission is to offer policy suggestions to governments on effectively combating illicit trade.

They’ve released the Illicit Trade Index, assessing various aspects and ranking countries to highlight strengths and areas needing improvement in the battle against illicit trade.

JIMMY MOYAHA: Philippe, what factors are included in this report? You mentioned it addresses enforcement and the effects of corruption, among others. How is the ranking system formulated, and what additional elements influence it?

PHILIPPE VAN GILS: The methodology includes interviews with many experts and a thorough analysis of regulations across various domains. The ranking is established based on a blend of data and qualitative insights from these interviews.

They also consult organizations like the OECD [Organisation for Economic Co-operation and Development] and law enforcement agencies to inform their evaluations.

What stands out is the transition from data collection to engaging in dialogue about enhancing strategies against illicit trade.

JIMMY MOYAHA: South Africa is ranked 60th out of 158 countries. Is this a positive or negative position? Should we aim to be rated higher or lower on this list?

PHILIPPE VAN GILS: Beyond the ranking itself, it’s crucial to identify South Africa’s strengths and the areas of policy that require enhancement.

In terms of taxation and the economic climate, they excel in regulatory frameworks and enforcement. However, there is room for improvement in addressing the criminal aspects of illicit trade, such as supply-chain intermediaries and specific illicit indicators.

Illicit trade goes beyond enforcement; it fundamentally presents an economic challenge, especially in our sector.

JIMMY MOYAHA: You mentioned that enforcement needs to be underpinned by regulation. What insights did the report provide about how countries can address weaknesses or bolster strengths?

PHILIPPE VAN GILS: A crucial discussion point for South Africa was the potential for better inter-agency coordination.

This requires improving collaboration among agencies like SARS, SAPS, and national prosecutors. A unified approach in sharing information and formulating a national action plan is vital.

JIMMY MOYAHA: Illicit trade is a global concern impacting all economies, as highlighted in the report. From your perspective at Philip Morris, how can the international business community unite to tackle this significant challenge?

PHILIPPE VAN GILS: That’s an important issue. While initiatives are underway, such as those from the World Customs Organization, there’s much more potential, especially for Philip Morris.

Since 2008, we’ve invested about $14 billion globally in developing scientifically validated smoke-free products, like heated tobacco products and nicotine pouches.

If we lack a conducive regulatory and fiscal environment, we may encounter challenges, as consumers might choose unregulated cigarettes over superior alternatives.

Consumers are more likely to stick with lower-cost illicit products rather than transitioning to better options.

This difference between legitimate and illicit products creates a lucrative opportunity for illicit traders. Tragically, this situation fuels international criminal organizations that exploit these circumstances for money laundering. Thus, collaboration is essential—not only domestically among agencies but also internationally.

This is why Tracit is calling for stronger cooperation among national law enforcement agencies, along with the private sector, to establish platforms for sharing information and advancing strategies against illicit trade.

JIMMY MOYAHA: Another recommendation from Tracit was to enhance penalties for illicit trade. What is your view on how this affects legitimate businesses and consumers? Would increasing penalties be an effective deterrence against illicit trade?

PHILIPPE VAN GILS: Absolutely. For instance, today, an illicit container of cigarettes costs around $100,000 for a trader, while it could be sold for $2.3 million worldwide.

This scenario generates significant profits with minimal penalties, especially considering that countries like South Africa only impose commercial fines.

Countries that have made strides in combatting illicit trade have notably increased both financial penalties and related criminal sentences.

It is crucial to ensure that the repercussions of illicit actions are severe enough to deter future occurrences.

JIMMY MOYAHA: Addressing illicit trade remains a vital task. It is a highly profitable operation that adversely affects businesses and consumers alike.

Unfortunately, we are out of time. Thank you, Philippe, for your valuable insights and discussion.

That was Philippe Van Gils, director of illicit trade prevention at Philip Morris International, sharing insights from the recent index report released by Tracit on the landscape of illicit trade.

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