Johannesburg – British American Tobacco South Africa (BATSA) has called for an inquiry after a report it commissioned from Ipsos found the sale of illicit cigarettes and tax evasion in the industry was at an industrial scale.
Ipsos used a mystery shopper study, which was conducted in February, to determine that three out of every four retail outlets were selling a pack of cigarettes below the collectable tax rate of R20.01.
Survey participants went to a shop and bought the cheapest cigarettes available and recorded the purchases for the purpose of the study.
BATSA is calling for an urgent inquiry, while its competitors, the Free Independent Tobacco Association (FITA), said the Ipsos report was meant to discredit the Organized Crime and Corruption Reporting Project’s (OCCRP) study in west Africa, which implicated BATSA with damning allegations of smuggling, corruption and funding of terrorism.
The Ipsos survey found that Gold Leaf Tobacco Corporation (GLTC) brands, such as RG, Sharp and Savannah, were found to comprise half of all products selling below R20 around the country.
The study found 41% of all retail outlets around the country sold cigarette packs below taxable R20, while in the Free State, the figure was 76%, Western Cape 73% and Gauteng, 62%.
The RG (or Remington Gold) cigarettes were the cheapest available cigarette brand at 533 outlets around the country.
BATSA’s general manager, Johnny Moloto, said it was clear some tobacco manufacturers were complicit in the sale of their products.
“There is no other plausible explanation. This is tax evasion on an industrial scale. The government has a responsibility to act with urgency to stop such looting,” said Moloto.
“Three initiatives will make all the difference, and they’re not difficult to achieve:
1. All tobacco companies should be complying with SARS production counter rules
2. The government should finally ratify the WHO Illicit Trade protocol to fight illicit trade,
3. South Africa must introduce a comprehensive track-and-trace system to stamp out this brazen criminality once and for all,” he said.
Moloto said the report proved that South African taxpayers were losing billions in revenue because of “criminal cartels” who had exploited the cigarette ban, he alleged.
“Criminal cartels who ruthlessly exploited the tobacco sales ban have since maintained their grip on the sector and we now have one of the biggest illicit cigarette markets in the world, with tax-evaded products on open sale throughout the land.
“South Africa urgently needs an uncompromising, comprehensive investigation into all players in the industry and must enforce the law to bring criminals in the trade to justice. South Africans are demanding to know how, and by whom, this has been allowed to happen.
“We need a Commission of Inquiry as well as rapid enforcement by SAPS and SARS,” he said.
FITA chairperson Sinenhlanhla Mnguni said the report was an exaggeration.
“Independent researchers and academics have repeatedly voiced their concerns about Big Tobacco and how it should not be trusted in respect of its research and studies on the illicit (trade). “They have repeatedly been found to have overstated the size and prevalence of this scourge in order to suit their selfish needs, often to the detriment of their commercial competitors and/or the fiscus,” he said.
Mnguni said the report was designed to strong-arm retailers into removing smaller independent manufacturers of tobacco products from the shelves.
“These so-called independent reports are now also being used as ammunition by Big Tobacco for anti-competitive purposes to smear the names and brands of independent local cigarette manufacturers, and as a way to strong-arm retailers into removing the products of smaller independent manufacturers off their shelves in order to maintain the status quo and to keep certain players in the informal trade in order to protect the profits of multinationals in an anti-competitive manner, and to perpetuate the illusion that the brands of local cigarette manufacturers must be illicit given that they can only be procured from informal traders and not in formal retail spaces,” said Mnguni.
Mnguni said FITA had been firm in its call for law enforcement agencies to investigate the aforementioned evidence emanating from the OCCRP report, and the very serious allegations against the multinational without delay.
Meanwhile, Pacific Cigarette Company chief executive Yves Le Boulengé welcomed Ipsos’ report and said it was a true reflection of the local tobacco industry.
The Pacific Cigarette Company had been implicated in a recently released Maverick Citizen reporter.
“We welcome the Ispos report that captures the state of the industry. We are most heartened that this is a more credible and researched report rather than the bar talk and anecdotes that characterized a recent ’report’ by the Maverick Citizen.
“It is often stated that lies and conjecture have short legs and we feel exonerated by this report. Pacific cigarettes, despite their popularity, have not been shown in the report to be a source of the concern highlighted.
“Pacific cigarettes, as always stated, continue to be legally available in all the markets in which our company operates.
“We always welcome constructive criticism as a way of strengthening our processes and procedures against the scourge of illicit cigarette trade highlighted in the Ipsos report commissioned by BAT.
“What is most satisfying is that the Ipsos report identifies our Pacific brand as one of the most upstanding in the report,” said Le Boulengé.
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