Thursday, 28 March, 2024
HomeMedico-LegalIllicit cigarette market – a multi-billion-rand free-for-all for lawbreakers

Illicit cigarette market – a multi-billion-rand free-for-all for lawbreakers

South Africa's cigarette market has been "transformed into a multi-billion rand free-for-all for lawbreakers". News24 reports that this is according to British American Tobacco SA (Batsa) – the company wants calls for an urgent inquiry into the situation to be stepped up.

The report says the company was reacting to the results of a new "mystery shopper" survey, which Batsa commissioned independent market research company Ipsos to do.

The study was undertaken from 11 to 16 February. The mystery shoppers managed to buy packs of 20 cigarettes below the minimum collectible tax rate (MCT) of R20.01 in every retail sector, from spaza shops to supermarket chains.

The Ipsos "mystery shoppers" asked for and bought the cheapest pack of 20 cigarettes or ten-pack carton on offer in 4,586 statistically representative stores nationwide. About 48% of outlets visited in the informal sector sold below MCT.

According to Batsa GM Johnny Moloto, even if one allows for the possibility of some of the purchases bought by the mystery shoppers perhaps having been stolen, smuggled or counterfeit stock, the sheer volume of below-MCT purchases the mystery shoppers could buy, makes him wonder about the likelihood of some manufacturers being "complicit" in the sale of these products – whether through omission or active facilitation. "This is tax evasion on an industrial scale.

News24 quotes Moloto as saying: “Government has a responsibility to act with urgency to stop such looting. This research is damning proof that the booming illegal trade in cigarettes is costing South African taxpayers billions of rand in lost revenue. Criminal cartels who ruthlessly exploited the tobacco sales ban have since maintained their grip on the sector. We need a commission of inquiry as well as rapid enforcement by SAPS and SARS."

Watchdog organisation Tax Justice SA (TJSA) has called for every tobacco company in the country to submit to a comprehensive, official investigation in the wake of the latest Ipsos report. "This is nothing less than organised crime, which is robbing decent South Africans of billions of rand desperately needed to save lives and rebuild our shattered economy. Instead of paying lip service to the rule of law, South Africa's tobacco companies must face a full official audit to establish how illicit cigarettes bearing their name are able to flood the market," said TJSA founder Yusuf Abramjee in the News24 report.

The South Africa Tobacco Transformation Alliance (SATTA), said it supports the statement made by Batsa regarding the Ipsos report. BATSA is one of the largest members of SATTA.

For Raees Saint, chair of the South African Tobacco Organisation (SATO), it is interesting that the Ipsos study, commissioned by Batsa, "surfaces" about a week after it was alleged in a report by the Organised Crime and Corruption Reporting Project (OCCRP) as benefitting from the illicit tobacco trade in Mali, West Africa. The report alleged almost all the cigarettes smuggled in Mali, came from South Africa. In the view of Saint, BAT is attempting to change the narrative by shifting the attention to South African local manufacturers.

"As far as these allegations against our member GLTC are concerned, they are rejected with contempt. GLTC has been under permanent surveillance by SARS from March 2019 up to December 2020. GLTC has and continues to make a constant contribution to the fiscus of R200m per month through the sales of its cigarettes," said Saint. "GLTC is fully compliant with all SARS regulations all well other laws governing the industry, including the implementation of the counter system."

Sinenhlanhla Mnguni, chair of the Fair-Trade Independent Tobacco Association (Fita), said the organisation is not shocked by what it too deems to be the latest attempt by Batsa "to deflect and divert" attention away from the allegations made against its parent company in the OCCRP report.

News24 reports that Fita believes there is no need at present for what it calls "a costly and protracted" commission of inquiry, which, in its view, will only serve to waste taxpayer money and time. "The SAPS and other law enforcement agencies are slowly implementing mechanisms to enforce compliance and they are capable of investigating allegations of unlawfulness such as those raised by Batsa if the evidence is presented to them, without the dramatisation of the process," said Mnguni.

"Our members are all compliant with the relevant laws of this country governing the tobacco industry and have at all times been co-operative with SARS.”

 

[link url="https://www.news24.com/fin24/economy/south-africa/sa-cigarette-market-a-free-for-all-for-crooks-with-billions-going-up-in-smoke-batsa-claims-20210309"]Full News24 report (Open access)[/link]

 

[link url="http://www.batsa.co.za/group/sites/BAT_A2ELAD.nsf/vwPagesWebLive/DOBYWCXR/$file/BATSA_IPSOS_Price_Benchmark_Survey_Report.pdf?openelement"]BAT/Ipsos survey[/link]

 

 

See also MedicalBrief archives:

[link url="https://www.medicalbrief.co.za/archives/government-and-batsa-clash-again-in-appeals-and-counter-appeals-over-tobacco-ban/"]Government and Batsa clash again in appeals and counter-appeals over tobacco ban[/link]

 

[link url="https://www.medicalbrief.co.za/archives/dlamini-zumas-appeal-against-tobacco-ban-to-be-heard-online/"]Dlamini-Zuma’s appeal against tobacco ban to be heard online[/link]

 

[link url="https://www.medicalbrief.co.za/archives/tobacco-giant-challenges-governments-covid-19-strategy/"]Tobacco giant challenges government’s Covid-19 strategy[/link]

 

[link url="https://www.medicalbrief.co.za/archives/fita-goes-ahead-with-tobacco-appeal-despite-unbanning/"]Fita goes ahead with tobacco appeal despite unbanning[/link]

MedicalBrief — our free weekly e-newsletter

We'd appreciate as much information as possible, however only an email address is required.