🔒 Cigarette ban: Instead of running to IMF, govt should stop R4bn illicit trade – Yusuf Abramjee

Yusuf Abramjee, the founder of Tax Justice South Africa, has filed an affidavit in the Western Cape High Court in support of a bid by British American Tobacco (BATSA) to overturn the four-month-old cigarette ban. The economy has already lost over R4bn in indirect taxes, and thousands of people have lost their jobs. Abramjee, who is no stranger to campaigning against illegal trade, hopes that common sense will finally prevail. “The case, which will be heard on 5 and 6 August, is a choice between protecting honest citizens and their constitutional rights or allowing criminals to continue coining it in a booming tobacco black market.” Abramjee joins BizNews founder Alec Hogg to discuss the importance of the case and the extent of illicit trade happening under our noses. – Claire Badenhorst


Organised crime in SA is rife

Yusuf Abramjee is the founder of Tax Justice South Africa. You’re making your voice heard now, Yusuf, but I’ve been receiving a lot of feedback from many people on the cigarette ban. It is something, though, that you’ve been focusing your attention on. Before we go into the big court case tomorrow, the whole idea of Tax Justice SA last time we spoke was to actually rally South Africans against organised crime. How big a part of organised crime is illicit tobacco?

Hello, Alec. It’s massive. We are talking of millions and millions of rands being pocketed by these criminals every day. Right from day one of the lockdown when the government announced a ban on tobacco products we raised our concerns because we knew even pre-lockdown that the illicit trade was thriving. An average of about R35m, verified by Africa Check subsequently, is being lost to our fiscus every day in sin taxes alone and the reality is, a lot of studies have now confirmed our biggest fear with this particular ban is that the criminals are going to be making more and more money. We know that the reports coming in from the ground are showing that these criminals are making millions and millions of rands.

The various cigarette brands are available very easily. We know more and more people are sharing cigarettes. We’re just saying to this government, enough is enough, because the longer the ban continues the more harm we’ll do to our economy and the more we’re going to benefit the criminals.

It’s interesting numbers, that. R35m a day and we’ve had, what, 19 weeks now of lockdown?

Yes. In terms of the overall losses, we are talking about two, three, R4bn already, and that is indirect taxes alone. So, we know the Commissioner of Sars, Ed Kieswetter, is on record saying that the losses from the alcohol and tobacco sin taxes will run into billions and billions of rands. So, I can’t even understand the thinking behind this particular ban. Despite the lack of medical evidence giving a correlation between Covid-19 and smoking, one cannot understand why government is still adamant to continue with a ban on cigarette products.

Read also: SA cigarette ban: Only one in 10 smokers has quit; the rest are ‘criminals’ – study

Yusuf, you know the underworld. You spent years and years telling us about what was going on in the criminal situation here in Gauteng with Radio 702. Are you seeing evidence from the illicit economy that the guys are raking in all this money because it must be billions?

Most certainly. We are seeing cigarettes being openly traded, not only in street corners, but at intersections. We see it on the black market on social media platforms like Instagram and Facebook, where people are openly advertising it. Also very concerning, Alec, is that more and more rogue policemen are involved in the illicit trade. They’re going to shopkeepers. They’re stopping people. A lot of them are stealing the cigarettes, which they confiscate. We don’t even know what happens to the legal seizures of these cigarettes because we haven’t heard of any cigarettes being destroyed.

Corruption is rife. We know that a lot of these rotten cops, in fact, the Minister of Police mentioned a figure of about 300 or 400 of them being arrested during the lockdown for stealing cigarettes and alcohol. A lot of these cops are involved and they blackmailing the shopkeepers and members of the public. And believe it or not, we still have the mentality where the cops, when they stop you, even with a pack of 20 cigarettes, will ask you, where’s your till slip? It’s completely ridiculous and makes a mockery of our justice system and our laws.

Here in Johannesburg they are openly selling cigarettes opposite the Norwood police station. You apparently drive up there and say, I want Lexington or I want Lucky Strike, and the guys will even give you the brand that you want.

Let’s just say, Alec, I’m not surprised that it’s not being sold inside the police station because a lot of stock has disappeared from inside the police stations themselves. We know that a lot of cops are involved in illicit trade so I’ve repeatedly called for an investigation into what happens to these cigarettes. And it appears that a lot of the seized stock is also disappearing from the police stations.

It’s time the courts made a decision

Now, you’re aligning with the court case that’s going to be heard tomorrow in the Western Cape High Court. You’ve issued a supplementary affidavit. Why are you doing it and what exactly did you say in your affidavit?

Well, we were approached by the applicants, namely British American Tobacco, JTI, the South African Informal Traders Alliance, and a number of individuals to ask us about the extent of the illicit trade. Let’s not forget Tax Justice South Africa has been focusing on the illicit trade in all facets of the market, including alcohol, fuel, the counterfeit good industry, textiles, and so on. We were asked a few weeks ago whether we were in a position to provide a supporting affidavit to highlight the illicit trade, which we gladly did because we believe that the illicit trade is continuing to flourish.

The courts need to make a decision, and that is why we are supporting the application brought in the Cape division of the High Court, which will be heard on Wednesday and Thursday. We know that UCT has come up with the second results of a survey showing which brands are the most popular, showing how cigarettes are being shared, and how organised crime is benefiting. And I think it’s important for the full bench of the high court, when they meet over the next two days, to listen to the facts of the matter, because no one is benefiting from this ban other than the criminals themselves, unless there are politicians that are involved. That is why we have the bench.

Read also: Tax Justice SA urges Ramaphosa to admit error of cigarette ban as court declares lockdown rules invalid

Cigarette ban will make illicit trade worse after lockdown 

But, you know the criminal system. Once these guys get their hooks into a system, and if we are talking about billions of rands that are being made by the underworld, they don’t relinquish them very easily. Aren’t we looking down the line at quite a big problem out of the cigarette ban?

I’m so happy you raised it. We’ve repeatedly raised that concern to say post the lockdown or post the cigarette ban, we’re going to have the biggest problem in the illicit trade. These criminals now have a good taste of how easy it is to make money. I’ve repeatedly said that if a packet of 20 cigarettes, for example, is being sold for under R25 it’s probably an illicit product. If you take the minimum taxes and the VAT, you’re supposed to be paying about R20 odd for a pack of 20 minimum, without the production costs, and without the chain of cost that goes with it.

So, if a packet of cigarettes costs R24 or R25, there’s no way you can – right from the tobacco farmer, right to the end of the chain – produce a packet of cigarettes for R4 or R5. Even post the lockdown we saw some of these brands being sold for under R25, which means they are clearly avoiding the taxes. While Sars is starting to clamp down, not enough is being done. And I can tell you now, post the unbanning of cigarettes and post the lockdown, we will see a massive increase in the illicit trade and I think government officials have quietly also expressed that concern to us as well.

OK, so the big story here is why? Why, with so much evidence? Corne van Walbeek, the professor from UCT, has given us the information. We’ve heard from Telita Snyckers on her book. Johan van Loggerenberg on his book. We’ve seen on Carte Blanche. We’ve had you telling us time and time again what’s going on. Why does it continue?

I’m very suspicious. I have no proof to indicate that politicians are making money. In the absence of some proof one can only imagine that they are clearly stupid. And I’m sorry, I’m going to be very blunt here but clearly government hasn’t thought out a plan yet. We know that Minister Dlamini-Zuma has been one in the forefront of being against the anti-smoking lobby right when she was Minister of Health up to today, and it appears that that seems to be the sentiment. Government, even in the court papers in the BAT application, have not given any proof of a correlation between smoking and Covid-19. We know that the World Health Organisation, if they were so adamant that there’s a correlation, why are we the only country in the world with a cigarette ban? Surely there must be something that government is trying to achieve here.

The ban is causing massive, massive damage to our economy. It’s not only making the 11 million or so smokers more and more frustrated by the day, but we stand to lose about 300,000 jobs in the tobacco industry. I have tobacco farmers phoning me every week, crying that they don’t have money to pay their farm workers. They are facing closure. We know that the campaign, ‘Lift the Ban’, has been launched and these 300,000 workers, some of them, I believe, already starting to lose their jobs, are down and out. And I think, really, this cigarette ban again is benefiting no one and one cannot understand the rationality behind the law. I hope that the Western Cape High Court will declare this particular ban not only irrational and unlawful, but completely unconstitutional.

So, that’s the big hope for democracy in South Africa, or for Democrats in this country who want to see rational action being taken – is the Western High Court case tomorrow and the next day. Presumably government are defending?

Well, government have been defending it right from day one. We know in the Fita case, in the North Gauteng High Court, they lost that application. The judges, believe it or not, even refused the applicants’ leave to appeal. That’s now before the Supreme Court of Appeal. The president has been given until, I think, Friday to reply why it should not go on appeal to the Supreme Court. Fita has been given until next Tuesday, and I hope that even that particular case succeeds and that the Supreme Court of Appeal will look at the merits of the case and decide that this ban should be lifted.

As far as the Cape one is concerned, I think that the applicants have put up a very, very strong argument from the thousands of pages that I’ve read, and also from the heads of argument, the various affidavits, and even expert affidavits from doctors and scientists. That is why we at Tax Justice again wrote a letter to the president on Friday to appeal to him at this late stage to say, lift the ban, because the more time we are wasting in lifting the ban, the longer it’s going to be.

We know that the government also messed up recently by saying that cigarettes and alcohol will not be unbanned during the entire period of the lockdown. That was completely retracted. So, government doesn’t seem to know themselves, Alec, whether they’re coming or going. I think really, even at this late stage, even before this hearing or even as the hearing continues, government should just do the right thing, save face and unban cigarettes because it would be the right thing to do to save our country and to save thousands of jobs. Instead of running to the IMF for billions of rands of loans, here’s about R4bn in cigarettes alone that you’ve thrown away to the criminals.

Nothing is being done

How big is the illicit economy?

Massive. It’s massive. We are talking about organised syndicates and large groups that are infiltrating the market. We are talking about smuggling from our neighbouring countries that is rife. We’ve seen while police and the authorities have made some seizures, that’s only the tip of the iceberg. The majority of these criminals are getting away with it. And that is our biggest concern. The smuggling is continuing, our borders are not being policed, and also, I would suspect, you know, somebody is asking me, where does all this stock come from? It can only come from the factories. I mean, for some of these producers to claim that their cigarettes are being counterfeit I think is a bit far fetched. I think the police and the authorities need to have a closer look at some of these people within the factories themselves that might be even allegedly selling the stock.

Well, they are talking about ghost exports and the exports from these manufacturing companies have been surging during lockdown – sold to whom? But if we just look at the illicit economy generally, if this is R35m that the fiscus is losing in excise taxes, do you have any understanding on how big the illicit economy or organised crime is in South Africa in financial terms?

Well, you know, post the lockdown we estimated that they were making between R35m and R40m a day, lost to the fiscus over a period of a year. Last year we looked at it in my previous capacity as the spokesman for the Take Back the Tax campaign, and about R8bn in cigarettes alone was being lost every year. That is how big it is. The alcohol illicit trade is running probably into three or four times that number. So, the illicit economy generally is running into billions and billions of rands. I remember at one or other stage, Sars gave some official figures, and if I’m not mistaken, that ran into several billions of rands every month lost.

We also know the tricks used by these criminals: round tripping and avoiding taxes. But what is very concerning to me is that even on your show, even where somebody comes on a public media platform and concedes that he was involved in smuggling, or concedes that he was involved in money laundering, there is no action being taken. So I have to ask, where’s the willpower by our authorities to bring these people to book? Years have past now and cigarette smugglers come on publicly saying that we’ve done A, B, and C, and there’s no consequences. I think the law enforcement agencies need to get their act together if we’re serious about fighting the illicit trade.