Sometimes facts are stranger than fiction. Yesterday we published an interview that I did with Yusuf Kajee, going back a few years ago. In the interview, which originally was around 45 minutes. He made so many allegations and so many of them that seemed incredibly wild that I put it on the back burner and didn’t pick up on it but with the recent publication of a couple of books, Telita Snyckers and Johann van Loggerenberg and with the decision by the South African government to not allow the sale of cigarettes. Suddenly the whole tobacco sector is now very much in focus. I went back to the Yusuf Kajee interview, took out the libellous statements and published it. As a consequence of that, I got a call today from his one-time partner, Azeem Carim, who unveiled another side to this whole story. What’s extraordinary to me is that it shows yet again how little we know about what’s really going on, but in this interview, Mr Carim helps us to join a lot of dots and points to local cigarette manufacturers who are manufacturing under the guise of exporting but selling their product into the South African market, making between R6 and R10 million, he says, per day. – Alec Hogg
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Yusuf Kajee and I met through a common friend who was with me in the pilgrimage in Mecca 2006, and in 2007 approached me to buy his cellphone business Royal Sonic Trading, which I did with Yusuf Kajee.
Part of the story that Yusuf Kajee told us, was that he then went into the cigarette manufacturing business with John Bredenkamp. This is where there might be some issues from the way you recall it.
Correct. In 2007, after purchasing the cellphone business, I was approached by a friend, who then brought us to a father and son and one thing to the next and we met with John and we were bringing in containers of Mega, Dullahs, John’s various brands from Zimbabwe.
Illegally?
It was smuggled in. It was not possible to bring it in legally, there was no money to be made if we brought it in legally.
Just explain that.
What we do is we purchased the product at a price in Zimbabwe where there is no taxes and duties. Get a transporter who’s connected at the border and the transporter will then smuggled cigarettes through the border post, into South Africa and delivered to our warehouse.
When you say connected, presumably he was able to get through the SARS or the customs officials?
Correct.
How many of these cigarettes did you bring in?
Quite big quantities, we were doing this for a period of about 4 years.
In partnership with John Bredenkamp?
No. John was never a partner as such, john was a supplier and a friend. He would supply us the cigarettes from Zimbabwe and we would then sell those cigarettes in South Africa. Without paying customs duties.
What kind of reaction did you get from the legitimate players in the South African market?
Well, I don’t know how to term legitimate players. Do you mean the likes of the big tobacco?
Those who were paying their customs duties, because clearly, with about half of the cost of a cigarette being in taxes, they couldn’t have been too happy with a competitor who came in and wasn’t paying taxes?
Overtime when we became more stablest, we had the tobacco industries of South Africa, FSS and SARS at various points looking into business and following our containers. SARS at one point came in and took some stock away and it was becoming a problem. That’s when we changed, using the bond store method.
What’s that?
Your goods would come into the into South Africa legally, but no taxes and duty paid as it’s meant to be in bond, when you remove it from bond, you pay the taxes and duties to SARS. Those goods would come in, would remain in bond and we sell it as a ghost export.
That sounds complicated, but I presume there was a lot of money in it?
Yip.
What kind of profit margins?
Initially, when there was less competition, we were making up to a million rand on a 40-foot container.
Where did Yusuf Kajee come into all of this?
Yusuf and I were together in the cellphone business and we were introduced by a man who worked for John Bredenkamp. That’s how we started trading. We’re bringing in the containers from John. Yusuf made a statement in the interview where he met John Bredenkamp on an aeroplane or flying somewhere. Not possible, because the only time we’ve ever flown was John is on his private jet to Harare for a weekend when he invited us to his farm. Other than that, we did meet with John once in Dubai for dinner but he would fly in his private jet and we would fly commercial.
When did you decide to start the manufacturing business in Pietermaritzburg, leading from what you saying, Yusuf Kajee’s story was that he’d sat on an aeroplane next to John Bredenkamp, which you say it’s not true and that they decided then to be partners in building a manual, creating a manufacturing business for cigarettes in Pietermaritzburg? When did all of that actually happen?
Initially, the idea was we were going to purchase or do a joint venture deal with John Bredenkamp on his factory in South Africa, it was a factory in Wadeville. We’d agreed with him in Harare on a deal to purchase the factory but after the agreement, we arrived in South Africa and that factory was liquidated by SARS so we never went ahead with the deal. Subsequent to that, the weekend that I mentioned earlier that we flew to Harare, on that Saturday morning, were having breakfast at John’s place and John suggested that we start a factory. We said that’s a good idea, we were interested in doing a factory. We flew back with one of John’s employees, a gentleman who was a rep for Masters International in Durban. Went to Pietermaritzburg, looked at the premises and that’s where the idea started off. John brought up the idea and that’s where it ended. We then went ahead, we were trading with the one company, bringing in cigarettes from Zimbabwe and the capital was pumped in from there into buying the machinery and building the factory. The person who assisted us in building the factory and bringing the Chinese workers, introducing to us a gentleman by the name of Sean who is the factory manager in Pietermaritzburg, was Kevin Lombard. Kevin Lombard was also employed by us, as a joint venture deal to introduce us to more brands in Zimbabwe. Kevin went with us to China, introduced us to Sean, and that’s how we started building the factory. Kevin was quite knowledgeable in the cigarette industry.
You were bringing in cigarettes from Zimbabwe that you were able to sell without any customs or excise duties and using the profits from that to fund a manufacturing business in Pietermaritzburg. On that business, what kind of investment was required?
I’m not in front of the figures right now, but it was a good R100-R150 million. There was machinery brought in from China and on auction, which was John’s ex-machines. There was property which now stands as ATM, which was CK Tobacco Manufacturing. I think that’s about it, the property, the renovations on the property and the machinery.
You must have been pretty confident that you could sell this into the South African market at a profit with that kind of investment?
Yes. There was no doubt. From where we began in the cigarette industry with John and the level we had grown, we had built a nice client base and the potential was great. The other issue coming in, the borders were getting tighter, smuggling through the bond stores was getting more complicated and it was easier to manufacture within the country and create ghost exports.
What are ghost exports?
Ghost exports are the physical goods never go across the border. The documentation through various agents gets stamped as if it was an export that left the country and the physical goods would leave the bond store and get sold into the local market.
Again, without having to pay excise duties because they supposedly were exported?
Correct.
This is dynamite stuff, this is all pretty illegal.
Yes. The situation went further where, in 2011, my company was hijacked. I was set up and various situations happened and my company was hijacked. From there, I was no longer director on the company and Yusuf Kajee carried on. We had a run-in with SARS, which is still being investigated so I’m not going to talk about that. Eventually, SARS issued the licence on that factory in 2011, it was put on Edward Zuma’s name. Edward Zuma was employed by us at the time, and he moved on to be partners again in the factory. SARS had refused the licence and then issued the licence.
Was this when there’d been a change of personnel at source?
Prior to that.
Did they have no idea that you were smuggling from Zimbabwe?
They had an idea, they were aware of the situation. They had actually refused the licence in 2011. All that happened is that it was the same company with the name change. It was CK Tobacco Manufacturing, and it was just a name change to Amalgamated Tobacco Manufacturing, and the licence was issued.
It sounds strange. Why was that?
Obviously, its connection calls.
Okay, so in the same way, as the connections worked at the border, the connections would have worked at SARS?
SARS would be more political connections.
What then happened between you and Yusuf Kajee, you say that your company was hijacked, were you bought out of Amalgamated Tobacco?
No, I was never bought out. My company was stolen and that was it, I was never a director again and they took over the whole business and out of the picture.
Who were the directors who did this to you?
It was only myself and Yusuf Kajee.
Then suddenly you weren’t involved anymore, that sounds like quite a difficult act to pull off. How did that happen?
There was change is done at CIPRO and the changes remained as the company was sold to a known person and then sold back to Yusuf Kajee.
So there were connections at CIPRO as well?
Yes.
It’s a weird story Azeem, but what did you do about this?
I’ve been to the authorities, which was crime intelligence. I did go to SARS, who I had several meetings with and then in 2013, the big change came at SARS and nothing went forward.
And you gave up?
I haven’t given up. I’m still hoping that justice will be served.
You know this tobacco industry well. What do you make of what’s going on at the moment with the banning on legitimate sales of cigarettes? We know that smokers are still smoking, so what’s going on here, what’s behind all this?
All that’s happened is cigarettes have become now completely illegal. SARS doesn’t receive any duty’s Taxes. They allow the manufacturers to manufacture for export, so the manufacturers continue manufacturing as if they’re exporting and selling it into the local market at phenomenal prices. Anything that’s illicit or unavailable, the demand goes up and the prices go up. Cigarettes that were sold for R70 and R60 for a carton of 10 packets, is now being sold for R400. They’re making unbelievable margins.
Who’s they?
All the cigarette manufacturers.
Including the BATs, in other words, the supposedly legitimate tobacco multinationals?
The product is available in the market, so where does that product come from? I don’t have evidence of that but where does that product come into the market? I’m a smoker, I am able to buy my cigarettes. I smoke brand Camel and if I want to buy Camel, I make a few phone calls, R800-R1,000 for 10 packets, which is R80 to R100 per packet. Before the lockdown, I would buy my cigarettes for R42 at any filling station.
It’s an extraordinary situation that we’re in right now. The manufacturers are manufacturing. They are telling the authorities that they’re exporting, presumably, but not exporting, what you called ghost exports. Those cigarettes are getting into the market and the manufacturers are making huge profits. I presume that these are very, very strong vested interest on their behalf for the current situation to continue. Why did they go to court to try and end it?
I couldn’t understand that. I couldn’t understand why would FITA go to court to fight it, it is smoke screens and mirrors? What was that all about? At the moment, they’re making an absolute killing. Just to give you an example, I’ve seen mention of it within the industry, they are making anything between R6 and R12 million a day.
* For more on the tobacco industry, see this interview by BizNews founder Alec Hogg: Meet “half pregnant” Yusuf Kajee – independent tobacco player with strong Zuma connection
