The South African Revenue Service (Sars) has come under criticism for failing to chase down illegal cigarette barons.
Excise revenue collected from tobacco products dropped from R13 billion in the 2015/16 fiscal year to R12.1 billion in 2016/17 and to R10.9 billion in 2017/18.
This is a 16% drop over the period, says tobacco control expert Professor Corné van Walbeek.
Prof Walbeek says there has been a 20% decrease in the number of declared cigarettes in South Africa over two years.
He explains that excise tax, which is currently R15.52 per pack, is levied at the point of manufacture.
According to Walbeek, income and cigarette pricing influence the demand for cigarettes.
He argues that the decline in excise revenue shows how illegal cigarette barons have taken advantage of a weakened revenue service.
Walbeek says the erosion of Sars, and its inability to stamp out tax evasion, has ignited the growth of the illicit market.
Companies are no longer declaring cigarettes.— Prof Corné van Walbeek, head of the Economics of Tobacco Control Project at UCT
It has much to do with the fact that Sars' ability to follow up on the tax evaders had been hollowed out to the extent that people are taking chances.— Prof Corné van Walbeek, head of the Economics of Tobacco Control Project at UCT
There's been a gradual decrease in smoking prevalence.— Prof Corné van Walbeek, head of the Economics of Tobacco Control Project at UCT
The price of cigarettes and income of people impact the number of smokers and cigarettes traded.— Prof Corné van Walbeek, head of the Economics of Tobacco Control Project at UCT
Listen to his expert analysis on the local tobacco industry: