Smaller tobacco companies are at loggerheads with cigarette giant British American Tobacco South Africa (BATSA), with both parties accusing each other of anti-competitive behaviour.
This follows the release of two reports into the tobacco trade, one compiled by data company Ipsos and another by the Organised Crime and Corruption Reporting Project (OCCRP).
The latter detailed damning findings on smuggling and organised crime attributed to a number of multinational cigarette manufacturers in West Africa, particularly British American Tobacco (BAT) through its South African subsidiary, BATSA.
The Ipsos report showed how BATSA competitors were allegedly involved in the illegal sale of tobacco via tax evasion across various South African provinces.
The Fair-trade Independent Tobacco Association (Fita) has accused BATSA of trying to divert attention from the damning allegations and evidence implicating them in smuggling, corruption and indirectly funding terrorism. However, the company has denied using its report to divert attention from the OCCRP report, contending that the allegations in that report were being dealt with.
According to Fita, the cigarette company’s latest ploy comes by way of attacks on their commercial competitors through an apparently independent report they have commissioned on cigarette wholesale and retail prices, conducted by Ipsos and paid for by BATSA. The report is being used, the organisation claims, as a “trojan horse to do more of their bidding”.
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Fita is referring to a report released this week by BATSA detailing possible cartel behaviour by its competitors in South Africa. A previous report released by BATSA through Ipsos was discredited in 2018, Fita pointed out.
“Independent research and academics have repeatedly voiced their concerns about Big Tobacco and how it should not be trusted in respect of its research and studies into the illicit tobacco trade,” said Fita head Sinenhlanla Mnguni on Monday.
“These so-called independent reports are now being used as ammunition by Big Tobacco for anti-competitive purposes to smear the names of brands of smaller, independent manufacturers off their shelves.”
But Johnny Moloto, general manager at BATSA, hit back at Fita and contended that an inquiry should be established into the South African tobacco industry, vowing to cooperate fully in its mandate.
“Every cigarette that BATSA produces can be accounted for, and Sars [South African Revenue Service] knows where it is made and where it is going. We urge Sars to ensure that other manufacturers are just as transparent and compliant,” says Moloto.
He added that BAT had previously noted in response to the OCCRP report that the group has established anti-illicit trade teams, operating at global and local levels.
“We also have robust policies and procedures in place to fight this issue and fully support regulators, governments and international organisations in seeking to eliminate all forms of illicit trade.’
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The Ipsos report found that three quarters of retail outlets in hotspot provinces for illegal tobacco trade were selling below the legal tax rate, showing an almost 10% increase from figures recorded a month ago.
Tax Justice South Africa’s Yusuf Abramjee has accused Fita of deflecting attention from this report, which he says is a clear sign that government policy has bolstered the illegal tobacco trade.
These figures, he pointed out, came after last month’s budget speech in which Finance Minister Tito Mboweni announced hikes to sin taxes including tobacco.
The BATSA/Ipsos study found that cigarettes were selling for as little as R6 for a pack of 20 cigarettes, far below the legal minimum of R21,61.
The Zimbabwean-owned Gold Leaf Tobacco Corporation saw a 13% in the number of its brands selling below the Minimum Collectible Tax (MCT), according to the report. Fita members Afroberg and Carnilinx are also apparently selling below MCT for 100% and 90% of their products respectively, the report says.
“Fita’s statement is another classic example of their deflection tactics. The new Ipsos study shows Fita members are at the forefront of a full-scale price war over illegal cigarettes,” said Abramjee.
“Tax Justice is opposed to all tax crimes and we have been calling for a commission of inquiry into the whole of the SA tobacco industry. For some reason we can only guess at, Fita are reluctant to sign up for this.”
simnikiweh@citizen.co.za