Years to dismantle lockdown-induced booze and tobacco criminal gangs

It could take South Africa "years" to dismantle the criminal networks that mushroomed and handsomely profited from the alcohol and tobacco ban during the country's COVID-19 lockdown, says the head of the SA Revenue Service (SARS).

The ban, which the SA government said was aimed at mitigating the health impact of the pandemic, has allowed illegal operators to gain a foothold in the market, SARS Commissioner Edward Kieswetter said Monday.  

Criminals masquerading as honest brokers

Many illegal and criminal operators have now "marketed themselves to previously honest smokers and drinkers," he said. 

"They are now embedded in the supply chain and it will take us years to reverse the impact."

Tobacco and liquor remained readily available on the black market from when the ban first kicked in with the nation's coronavirus lockdown on March 27. 

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Producers and retailers complained the restrictions resulted in thousands of job losses and encouraged illegal trade.

National Treasury data show the government lost R9.5 billion in alcohol and tobacco taxes in the first four months of the fiscal year. 

A 2018 report published by the country's producer-funded Tobacco Institute showed South Africa was already one of the world's biggest markets for illicit cigarette sales at the time.

Investments at risk because of ban

While the alcohol and tobacco bans were lifted in the middle of last month, shops are still only allowed to sell alcohol four days a week and the authorities have warned it could reinstate the curbs if needed.

"The policy achieves no end other than to fuel illegal activity which ignores any regulatory safeguards and contributes not a single cent to the beleaguered tax service which desperately needs the revenue for the state to meet its socio-economic obligations," Gareth Ackerman, chair of Pick n Pay Stores, addressing shareholders two weeks before the bans were lifted.

The ban on alcohol sales also put investment projects worth at least R12.8 billion on hold, with Anheuser-Busch InBev SA unit South African Breweries, Heineken NV, glass manufacturer Consol Holdings and wine and spirits maker Distell Group Holdings adjusting spending plans.

SARS is working with law enforcement agencies to bolster its investigative capabilities to tackle tax fraud and illicit activities, Kieswetter said.

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