South Africa launches tender for tobacco track-and-trace

The South African Revenue Service (SARS) is looking to introduce track-and-trace technology for cigarettes and has invited tenders for the service.

The country wants to procure a “fiscal marking and track and trace solution for marking of cigarettes,” with the implementation “planned to occur on a full scale” in order to curb revenue leakages from the illicit tobacco economy.

The tender is for the "production management" of the track-and-trace solution, with the service provider expected to work with cigarette manufacturers to implement the system. Full details of the tender are available here.

“SARS is looking to introduce the track-and-trace marker technology in the cigarette industry, which will enable the organisation to monitor the journey from cigarette manufacturing plants to points of sale and/or import or export trades,” said the agency.

“This non-intrusive technological innovation is expected to boost the monitoring and control of duties and taxes in this industry significantly.”

In late 2018, research by Ipsos to quantify the nature and extent of the illegal cigarette trade in South Africa, revealed that the country is losing over R8bn ($551m) per year in evaded taxes, due to the exponential growth in illegal cigarettes, says the Tobacco Institute of Southern Africa (TISA).

The tender document notes that the system should be set up at no cost to South Africa, with the service provider absorbing the cost of implementation and recouping its investment from the sale of fiscal marks from cigarette manufacturers. Data from the track-and-trace system should be made available in “near real time” to a central SARS repository.

The move has been welcomed by the Fair-Trade Independent Tobacco Association (FITA), which cautioned however that SARS should “steer away from the influence of Big Tobacco, the proverbial wolves in sheep clothing, when it comes to the selection of the preferred system.”The organisation cites the World Health Organization’s Illicit Trade Protocol, noting its call for a traceability system but adding: “given big tobacco’s historical involvement in tobacco smuggling, [the Protocol] stipulates that track-and-trace ‘shall not be performed by or delegated to the tobacco industry’.”

“If South Africa is serious about tackling the problem of illicit trade and getting this essential revenue back into government coffers, SARS has the ability to act under its existing powers and it does not need, and should not accept, assistance from the tobacco industry or its front groups,” continues FITA.

The closing date for proposals is June 20, 2019. SARS is due to hold a briefing on May 10 to provide more detail on the project and its objectives.