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No to SARS cigarette tracking

No to SARS cigarette tracking

26 May 2019 10:02 PM

Guest : Francois Van Der Merwe

A RUSHED NEW SYSTEM for tracking cigarettes in South Africa will award a multi-billion
rand tender to a monopoly, yet may fail to curb the R8 billion illegal cigarette trade,
was the warning today from the Tobacco Institute of Southern Africa (TISA).
Originally conceptualised under the watch of Tom Moyane while he was Commissioner,
SARS issued a Request for Proposals on April 26 2019, with a deadline of 20 June 2019
for bidders to submit proposals for the appointment of a single service provider, and is
then attempting to implement in 12 months a system that has taken the EU and Ghana
more than four years of consultation and trials to achieve.
SARS intends to appoint a single service provider for an unprecedented 8 years to
implement a system which will impact on wholesalers, retailers, distributors and
manufacturers, at significant cost and without consulting the value chain stakeholders.
The contract will be worth billions of Rand to the winning bidder.
SARS lost more than R8 billion last year due to volumes not declared. Therefore, any
new system should primarily focus on addressing the main problem, which is volume
verification through digital technology at the point of manufacture. This will address
the core of the problem.
TISA says it supports Track and Trace systems which address the most profitable aspect
of the illicit trade and ensures the legal tobacco sector makes inroads into one of the
world’s worst illegal markets.
“These are complex, hi-tech systems that must be able to plug into the existing, as well
as future technology used by SARS, retailers, wholesalers and manufacturers so data
can be shared in real time,” said François van der Merwe of TISA.
“Rolling out such a sophisticated, IT-intensive system requires enough time for
preparation, consultation and testing and TISA is concerned that the rushed process
being followed by SARS has skipped these critical steps. It will impose excessive and
impractical regulatory burdens on small retailers when the real problem lies with local
manufacturers who are evading taxes. This will only encourage retailers to sell illegal
products because they won’t be able to cover the compliance costs of receiving legal
The Chairman of TISA said the error in the tender request sent out by SARS, is that it
does not reflect the realities of the cigarette market in SA. 80% of cigarettes are retailed
by small informal retail shops who are not equipped for the new rules and will be
forced out of the legal trade as a result.
“The system specified in the tender will capture only the legal market and could drive
illicit trade up further.
“TISA is acutely aware of the urgency of reversing the phenomenal growth of the illicit
tobacco trade since the disastrous Tom Moyane era at SARS and we applaud the
revenue service’s determination to do so. We have already seen some positive results
from new SARS crackdowns and tax revenue seems to be stabilising for the first time in
many years.
“It would be disastrous if this rushed process resulted in the adoption of a system that
would not only fail to achieve its stated goals but actually lead to increased illegal
“It seems if an unsuitable proposal is on the cards and the appointed service provider
stands to make billions of Rands out of it. For SARS to have come out with a detailed
proposal in a frantic hurry without any consultation with the sector is deeply worrying.
“We call on SARS to invite retailers, wholesalers and manufacturers to a round-table
discussion to ensure that the chosen process will be effective and efficient.”

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