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# Some cigarettes are selling for R7 a pack, when the tax alone comes to more than R27
- URL: https://www.businessbagel.com/batsa-r38-minimum-cigarette-price-illicit-tobacco/
- Published: 2026-10-15T03:15:00.000Z
- Updated: 2026-10-15T03:14:59.000Z
- Description: British American Tobacco South Africa wants a legal minimum price of R38 a pack, on the back of an Ipsos study it commissioned into how cheaply cigarettes are being sold.
- Author: Christian Maidman
- Tags: Companies, Business Bagel News

Every pack of cigarettes in South Africa owes R27.12 in tax before the factory, the truck or the shopkeeper has made a cent from it. That is R23.58 of excise duty plus R3.54 of VAT charged on the duty.

So a pack selling for less than R27.12 is worth a second look. Ipsos, the market research firm, sent fieldworkers into spaza shops, grocery stores, forecourts and wholesalers in a study commissioned by British American Tobacco South Africa, or BATSA. They asked for the cheapest cigarettes on the shelf, were not allowed to haggle, and across 4,704 purchases found packs going for as little as R7\. Brands priced below the tax were on sale in around three in four of the outlets surveyed, and packs under R20 in almost two thirds.

A low price is not, on its own, proof that someone dodged the tax, and IOL, which reported the study, says so plainly. BATSA's argument is that the makers of cheap brands are pushing more of their volume into packs priced below what the tax adds up to.

## How BATSA gets to R38 a pack

BATSA wants a compulsory minimum retail price of R38\. It gets there by starting with the R27.12 tax and adding what it costs to distribute, transport and sell a pack, which it calls the lowest economically viable price. Under that floor, a pack selling for R20 today could no longer legally be sold at that price, whether or not its maker had paid the tax.

"How can you compete against a R7 per pack of cigarettes when the taxes alone are R27.12?" asked Johnny Moloto, BATSA's head of corporate and regulatory affairs for Sub-Saharan Africa.

The company has its own losses in mind. It announced in January that it would close its Heidelberg factory this year, which runs at just 35% of capacity, and it blames the illicit trade for the volume it lost. BATSA puts the cost of illicit tobacco to the fiscus at about R30 billion a year, while an Econometrix and Oxford Economics study put direct tax losses at R31.4 billion in 2024.

## What SARS says a floor can and cannot do

SARS has already given its view. In a presentation to Parliament's health committee in October 2025, it said a minimum price could disrupt the illicit market and make it less profitable, but that a floor would not by itself prove whether tax had been paid.

Moloto has a second request on top of the floor: halve the R23.58 excise duty, so every player competes on the same footing. So BATSA is asking government for two things at once, a rule that makes the cheapest cigarettes dearer and a cut to the tax on every pack. Moloto hopes Finance Minister Enoch Godongwana hears the second one in next week's mini-budget.