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JIMMY MOYAHA: Today, around lunchtime, we received an update from the Transactional Alliance to Combat Illicit Trade [Tracit]. They introduced the 2025 Illicit Trade Environment Index, which explores global illicit trade and its contributing factors.

I’m joined by Philippe Van Gils, the director of illicit trade prevention at Philip Morris International, to delve into this latest index report and interpret its findings.

Good evening, Philippe! It’s great to have you on the show. Let’s start by discussing the goals of this index and report. What does it examine, and how far-reaching is its scope?

PHILIPPE VAN GILS: Thank you, Jimmy, for having me. Tracit is an international network of various companies, including ours. Its purpose is to provide policy recommendations to governments for effectively addressing illicit trade.

They’ve released the Illicit Trade Index, which evaluates various facets and ranks countries to identify strengths and areas needing improvement in the fight against illicit trade.

JIMMY MOYAHA: Philippe, what factors are included in this report? You mentioned it addresses enforcement and corruption, among others. How is the ranking system established, and what other elements contribute to it?

PHILIPPE VAN GILS: The methodology involves interviews with knowledgeable experts and an examination of regulations across multiple areas. The ranking is based on a blend of data and qualitative feedback.

They also consult organizations such as the OECD [Organisation for Economic Co-operation and Development] and law enforcement agencies to support their findings.

A key aspect is the transition from data to dialogue on enhancing strategies against illicit trade.

JIMMY MOYAHA: South Africa is ranked 60th out of 158 countries. Is this a positive or negative ranking? Should we aim for a higher or lower position on this list?

PHILIPPE VAN GILS: It’s crucial not just to focus on the ranking but also to acknowledge South Africa’s strengths and the policy areas that require improvement.

In taxation and the economic sphere, they excel in regulatory frameworks and enforcement. However, there are opportunities to better address the criminal aspects of illicit trade, particularly regarding supply-chain intermediaries and specific indicators of illicit activities.

Illicit trade extends beyond mere enforcement; it is essentially an economic concern, especially in our sector.

JIMMY MOYAHA: You mentioned that enforcement must be supported by regulation. What insights did the report provide on how countries can address weak points or bolster strengths?

PHILIPPE VAN GILS: For South Africa, a significant discussion point was the potential for improved inter-agency coordination.

This requires enhanced collaboration among agencies like SARS, SAPS, and national prosecutors. A cohesive approach to information sharing and developing a national action plan is vital.

JIMMY MOYAHA: The report noted that illicit trade is a global challenge affecting all economies. From your viewpoint at Philip Morris, how can the international business community unite to tackle this serious issue?

PHILIPPE VAN GILS: You raise an important consideration. While initiatives exist, like those from the World Customs Organization, there is much more potential for growth, particularly for Philip Morris.

Since 2008, we have invested about $14 billion globally in creating scientifically validated smoke-free products, including heated tobacco products and nicotine pouches.

Without an appropriate regulatory and fiscal framework, we encounter challenges, as consumers may gravitate towards cheaper, unregulated cigarettes rather than better alternatives.

Consumers are less inclined to switch to improved options when faced with low-cost illicit products.

This gap between legitimate and illicit products presents a golden opportunity for illicit traders. Unfortunately, it also fuels international criminal networks that exploit these situations for money laundering. Thus, collaboration is essential—not only domestically among agencies but also on an international scale.

That’s why Tracit is advocating for better cooperation among law enforcement agencies worldwide, alongside the private sector, to create platforms for information sharing and strategizing against illicit trade.

JIMMY MOYAHA: Another recommendation from Tracit was to escalate penalties for illicit trade. What are your thoughts on how this would affect legitimate businesses and consumers? Could increasing penalties effectively deter illicit trade losses?

PHILIPPE VAN GILS: Absolutely. For instance, a container of illicit cigarettes costs about $100,000 for an illicit trader, potentially selling for $2.3 million globally.

This results in substantial profits with minimal penalties, especially in countries like South Africa, where only commercial fines are imposed.

Countries that have successfully tackled illicit trade have greatly increased both financial penalties and relevant criminal sentences.

It’s vital to ensure the repercussions of illicit actions are sufficient to deter future occurrences.

JIMMY MOYAHA: Addressing illicit trade remains a critical task. It continues to be a highly profitable operation that adversely impacts businesses and consumers alike.

Unfortunately, we’ve reached the end of our time. Thank you, Philippe, for your valuable insights and discussion.

That was Philippe Van Gils, director of illicit trade prevention at Philip Morris International, sharing insights from the latest index report produced by the Tracit team on the landscape of illicit trade.

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