One minister’s decision helped criminals make so much money they had to start laundering it

The latest data from the South African Revenue Service (SARS) shows that the ban on cigarette sales during the COVID-19 lockdowns significantly boosted the illicit trade.

In fact, criminal networks linked to the illicit cigarette trade started to make so much money that they had to develop new money laundering strategies.

The illicit cigarette industry became so strong during that period that the South African Revenue Service still struggles to improve the situation.

To understand what happened, one has to turn back the clock to March 2020 when the COVID-19 pandemic hit local shores.

On 27 March 2020, the government implemented numerous lockdown rules, which included a nationwide ban on the sale of tobacco products.

The person behind this ban was Cooperative Governance and Traditional Affairs minister Nkosazana Dlamini-Zuma.

Dlamini-Zuma said the prohibition on tobacco sales was put in place to stop South Africans from smoking, for health reasons tied to the Covid-19 pandemic.

She further claimed that the nationwide ban on tobacco sales would encourage smokers to kick the habit. This did not happen.

In court defenses, Dlamini-Zuma’s lawyers admitted she was “fully aware” criminal groups would profit, calling it an “unfortunate reality.”

She argued the ban disrupted illicit trade by reducing overall demand, but courts rejected this as “constitutionally perverse”—relying on illegal activity to achieve health goals.

A National Income Dynamics Coronavirus Rapid Mobile Survey showed that 85% of smokers continued smoking during the ban.

The research revealed that only 8% of South Africans quit smoking during the ban. Half of those who quit started smoking again when the ban was lifted.

The most significant impact of the cigarette sales ban was driving people to buy illicit cigarettes and growing this criminal activity.

As cigarettes were a prized commodity due to the ban, criminals selling illicit cigarettes could charge exorbitant prices for their product.

The average price of cigarettes increased by nearly 200% at the highest point during the sales ban, which means the money rolled in for the illicit market.

The cigarette market in South Africa changed dramatically during the sales ban period and has not returned to its pre-COVID structure.

The chart below, shared by SARS Commissioner Edward Kieswetter during a presentation on 22 October 2025, shows the change from 2020.

SARS highlights the significant challenge

Kieswetter shared his views on the new South Africa’s Tobacco Products and Electronic Delivery Systems Control Bill at the portfolio committee on health.

The Revenue Service Commissioner flagged major disruptions to tax collection due to the rapid growth of the illicit market.

Data shows that, despite rising tobacco consumption in South Africa over the last five years, tax collection from the sector has stagnated.

This has led to a R40 billion gap in tax collection post-COVID-19, not including displaced consumption taken up by the illicit trade.

SARS said the prohibition on smoking put in place during the pandemic by the South African government significantly altered the licit and illicit parts of the tobacco sector.

This pushed traditional crime cartels, syndicates and gangs into becoming involved in the illicit cigarette trade.

The illicit tobacco industry in South Africa now accounts for between 60% and 75% of the entire sector, with tax losses between R51 billion and R84 billion.

The rapid scaling up of the black market for tobacco also emboldened these criminal syndicates and mafias to start getting involved and invest in other illicit sectors.

This diversification has spread to mining, refinery, and property development, and these syndicates have also been seen building networks in other countries.

Simply put, the criminal syndicates started to make so much money through illicit cigarettes that they had to engage in money laundering and diversification.

The criminal networks are becoming more sophisticated

Kieswetter said fraud schemes have become more complex and specifically designed to avoid FIC obligations and SARS scrutiny.

Worse still, foreign cartels and syndicates have developed relationships with local cartels and syndicates and entered the South African market.

SARS said that syndicates have formed new relationships with money laundering channels, illicit financial flows and related service providers.

Kieswetter explained that many of these channels and criminal networks are rooted in the illicit tobacco sector.

He noted that some tobacco syndicates had become money laundering facilitators themselves due to the inordinate amounts of cash they had on hand.

It even involves manipulating the computerised banking system to remove transactions to avoid detection by the South African Reserve Bank and SARS.