Batsa vs. Fita: Controversy over dirty cigarettes deepens

Blame-shifting continues as BATSA now says an independent Ipsos study implicates FITA in illicit tobacco trading. FITA, however, says it is not surprised by BATSA’s so-called deflection, 'refusing to roll in the mud' with the cigarette giant

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British American Tobacco South Africa has singled out cigarette brands represented by the Fair Trade Independent Tobacco Association and the South African Tobacco Organisation for fueling the illicit cigarette trade.

BATSA says an independent study by Ipsos South Africa – as commissioned by the cigarette giant – now implicates brands specifically owned by leading members of FITA and SATO.

Illicit cigarette trade war: Batsa’s general manager, Johnny Moloto. Photo: Supplied/Batsa
British American Tobacco South Africa’s general manager, Johnny Moloto. Photo: Supplied/BATSA

These brands allegedly lead Mzansi’s rampant black market with BATSA calling for a full investigation. The study found that illicit cigarettes are being sold at 75% of retail outlets throughout the country.

In a mystery-shopper study by Ipsos, results indicate three out of every four retail outlets were selling a pack of 20 cigarettes below the minimum collectible tax (MCT) rate of R20.01, as set by law.

Mystery shoppers bought packs of 20’s below MCT across all retail sectors, with informal traders accounting for 48% of the most likely to trade illegal tobacco products. 

Fita chairperso Sinenhlanha Mnguni, however, believes BATSA is trying shift the narrative and deflect the focus onto local traders and manufacturers of tobacco products. This, after its alleged implication in a global illicit trading scandal.

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According to BATSA general manager Johnny Moloto brands registered to Gold Leaf Tobacco Corporation (GLTC) were found to comprise half of all products selling below MCT, while Carnilinx brands were the next most prevalent.  

BATSA has now accused the leading cigarette manufacturers of “running scared”. This follows their U-turn on backing for an industry-wide investigation into illicit tobacco trade following the Iposos report.

“Almost half of all shops nationwide are selling illicit cigarettes and billions are being lost by the fiscus, according to the damning Ipsos survey published on Monday,” said Moloto.

“A full investigation should be a national priority. Brands owned by Gold Leaf Tobacco Corporation and Carnilinx accounted for half of all cigarettes sold below the legal tax rate.

“Yet the companies who last week said they supported an investigation are now against that very thing. They’re running scared and one can only wonder what they are afraid of.”

‘We will not roll in the mud with you

Fita has, once more, reiterated its refusal “to roll in the proverbial mud” with the multinational urging it to account for allegations of illicit trading.

Last week, the organised crime and corruption reporting project OCCRP alleged that British American Tobacco and Imperial Brands dominated the global “grey market”.

Illicit cigarette trade war: Fair-trade independent Tobacco Association (FITA) chairperson, Sinenhlanhla Mnguni. Photo: Supplied/Food For Mzansi
Fair-trade independent Tobacco Association (FITA) chairperson, Sinenhlanhla Mnguni. Photo: Supplied/Food For Mzansi

Together, they were accused of alleged Jihadist ties and fuelling the pockets of terrorists in Mali.

Mnguni said the report was merely a ploy in BATSA’s attack of local manufactures. He likened the report to “being used as a Trojan Horse to do more of their dirty work.”

“These so-called independent reports are being used as ammunition by Big Tobacco for anti-competitive purposes to smear the names and brands of independent local cigarette manufacturers and to strong-arm retailers into removing the products of smaller independent manufacturers off their shelves.

ALSO READ: BATSA accused of terrorist funding, ciggie smuggling

FITA said it has been firm in its call, as far back as 28 February 2021, for law enforcement agencies to investigate the evidence emanating from the OCCRP report, and the very serious allegations against the multinational without delay.

“It is very clear from their conduct exactly who is running scared,” said Mnguni.

“We do not wish to roll in the proverbial mud with those that are experts in that terrain. Our members will only be dictated to by the authorities, not by those who think we live in a lawless state and seek to take the law into their own hands in order to suit their own self-serving commercial needs,” he added.

“We continue to urge them to find their conscience and account for the many allegations levelled against them much in the same manner FITA members have accounted for past transgressions.

“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 in as far its efforts in implementing measures to curb non-compliance in the industry along the value chain.”

R9 for a pack of 20’s?

Batsa said the cigarette market had been transformed into a “multi-billion-rand-free-for-all for lawbreakers” as the sector struggles to break free from the shadows of illicit traders of tobacco products.

The Ipsos study was conducted in outlets ranging from spaza shops to supermarket chains in every corner of the country. It further revealed the lowest purchase price for a pack of 20 was set at R9 and R6,30 for a 10-pack carton. 

Ciggie prices in different provinces

Prices also jumped three-quarters amongst 76% of retailers in the Free State and 73% in the Western Cape and two-thirds amongst 62% of retailers in Gauteng.

Moloto said, “These results are outrageous. There is no other plausible explanation. This is tax evasion on an industrial scale. Government has a responsibility to act with urgency to stop such looting.”

Moloto suggest three initiatives to curb the scourge of illicit cigarette trading. “All tobacco companies should be complying with SARS production counter rules.

“The government should finally ratify the WHO Illicit Trade protocol to fight illicit trade. And South Africa must introduce a comprehensive track-and-trace system to stamp out this brazen criminality once and for all.

“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. We need a commission of inquiry as well as rapid enforcement by SAPS and SARS,” Moloto concludes.

ALSO READ: Budget speech: Tobacco smugglers ‘dancing in streets’

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