African King of the cheapie ciggie – extract from Tobacco Wars

Johann van Loggerenberg describes many characters, as he called them in his book “Tobacco Wars”. He told Alec Hogg in an interview there were no angels in the tobacco industry, only bag snatchers, muggers and bank robber. And although many can be described as sailing close to the wind or just downright tax cheats, Van Loggerenberg appears to have a grudging respect for some of them. One of them is Tribert Ayabatwa. He is a Rwandan, who popped up in many other African countries including Burundi and South Africa, and is described by Johann as one of the pioneers of the value brand or cheapie cigarettes that are sold in South Africa. He managed to build up a £200m fortune, but his illegal activities caught up with him in Burundi, the UK and South  Africa. Ayabatwa’s business ventures and adventures, which includes brushes with war and rebels sounds like a Hollywood script and it would not be surprising if it is snapped up by some movie director. If a Somali pirate can find himself in a script that attracted Tom Hanks (Captain Phillips); anything is possible. – Linda van Tilburg

The following extract is taken from Tobacco Wars by Johann van Loggerenberg published by Tafelberg:

Tribert Ayabatwa: Africa’s tobacco baron

Like Highway Hennie, Tribert Rujugiro Ayabatwa is one of the first generation of independent tobacco manufacturers in South Africa though his empire extends right across the continent. A Rwandan by birth, his personal fortune was estimated in 2012 by Forbes magazine to be around $200m, with his tobacco empire in nine countries in Africa, the Pan African Tobacco Group (PTG), bringing in $250m in annual revenues. He has been giving the big boys’ club a real run for their money on the African continent since the late 1970s. His story is a fascinating tale of genuine hardship, adventure, daring and controversy; a real rags-to-riches tale, with sorrow, tragedy, lost opportunities, brushes with the law, rebels and wars thrown into the mix.

Tobacco Wars, Johann van Loggerenberg

Growing up under the remnants of colonialism in Rwanda, Ayabatwa was expelled from school at the age of 16. He had lost his mother at the age of 12, and, following his expulsion from school, he had to pretty much take care of himself. Clouds were busy gathering over Rwanda, so Ayabatwa fled to neighbouring Burundi as a refugee, seeing no future for himself in his home country at the time. It was in Burundi where he got his first job at a post office, and soon enough, with his wits and natural intelligence, he worked his way up the ranks. But he appears to not have been satisfied with this, so after studying French part-time, he secured a job at a petroleum storage facility where he stood in for the manager of the enterprise. True to
the way entrepreneurs generally start off, he began to use his little savings to explore various other business ventures.

His first efforts were to buy a small truck, hiring a driver, and he was soon transporting goods and people for a fee. These experiences must have spurred him on to achieve more, because he left the petroleum company, and went into business on his own. At the age of 29, he started a bakery, importing his own salt, wheat and flour.

Around this time, there was a shortage of salt in Burundi, but ever the entrepreneur, Ayabatwa found ways and means of importing salt and as a result, he was awarded an exclusive salt-trading licence by the government. Despite the odds, he then moved into the gold trading sector, a move he would later describe as a ‘life-long lesson’ because he lost all his investments in the process. He had to start again, and so he did.

In 1974, at a time when the tobacco multinationals were undisputed masters of the trade worldwide, Ayabatwa began to import cigarettes from Tanzania into Burundi. Soon he found cigarettes rather profitable and began to focus more on this end of his business.

Of all the so-called independents, Ayabatwa was likely the most far-sighted and ambitious. Already in 1978 he had switched from mere importation and began to manufacture his own cigarettes. In this sense, he must be recognised as the grandfather of independent tobacco manufacturing on the continent of Africa. He would later explain how this came about. ‘My transition from trading to manufacturing tobacco products was facilitated by a combination of factors. First, importation was adversely affected by unreliability of supply due to either poor infrastructure or political instability in
the region, making trade at times difficult if not impossible. Second, I had built an excellent relationship with Tanzanian suppliers who exposed me to manufacturing principles and encouraged me to start my own manufacturing venture. At first, the possibility of manufacturing seemed far-fetched given that making cigarettes is a highly capital-intensive process dominated by a handful of multinational corporations. Looking back, it was a daring step to even think about it, let alone enter manufacturing. Some people thought I was crazy to think an African could manufacture products. But I did. I took the risk and it soon paid off, beginning with my original Burundi enterprise, soon followed by the second venture, namely, my enterprise in the Democratic Republic of Congo (then Zaire).

At the height of the tragic events that struck Rwanda in the early 1990s, Ayabatwa put some of his money into funding the Rwandan Patriotic Front (RPF), which has been widely recognised for its contribution to bringing an end to the genocide. But as his empire was growing, disaster struck. Military man Pierre Buyoya became the ruler of Burundi through a coup d’état. In 1987, Ayabatwa was imprisoned for three years by Buyoya’s government on charges of conspiring to overthrow the dictatorship. His entire tobacco manufacturing business was nationalised by Buyoya’s regime and he lost everything. Ever enterprising, Ayabatwa managed to flee from prison in what he calls a ‘daring night time escape’, arriving in South Africa.

Once again, he had to start from scratch in a foreign country.

At first in his new homeland, he dabbled with a company that was in dire financial straits. Later he set up Mastermind Tobacco South Africa (Pty) Ltd in East London in the Eastern Cape. He built up a manufacturing plant and produced what were then lesser-known brands, Yes and Forum, whose sales would increase significantly over time. In the early 2000s, the market was still mostly cornered by the big multinational brands, yet, slowly but surely, the brands that Ayabatwa produced began to gain a foothold in the markets of South Africa and other southern African countries. Ayabatwa, like Hennie Delport, Simon Rudland and John Bredenkamp, was a pioneer of what would later become known as the ‘value brands’ or ‘cheapies’. But competing against the multinationals who had already established a massive market share over many years proved difficult. And, as I have often encountered in the world of entrepreneurship, sometimes corners were cut to gain some sort of edge in the market. And this would lead to Ayabatwa’s difficulties with South African law enforcement agencies.

On 29 June 2005, the news broke. In a press statement, SARS announced that, following investigations and a complaint made by SARS to the South African Police Service, four people connected to a multimillion-rand scam had been arrested by the Scorpions. Three of the arrested persons were employed by Mastermind Tobacco. They were Jennifer Nanette Putter, Pascal Wiehahn and Carmen Daniels. The company itself, together with the arrested employees, was accused of having defrauded SARS of at least R48m by falsely representing that certain consignments of cigarettes had been exported. Instead, they were sold locally. Because goods that are manufactured in South Africa and destined for export are zero-rated for VAT, this meant that the VAT collected on sales was pocketed by the company. Soon the amount of the fraud ballooned to about R60m. Ayabatwa, at that time out of the country, was ultimately tracked down in the United Kingdom. A warrant of arrest was issued by the prosecuting authority and efforts were made to have him extradited to South Africa to stand trial alongside the others. The charges included 25 counts of fraud relating to non-payment of excise duties, 25 charges of illegally exporting goods from a customs and excise warehouse, and 6 charges relating to the non-payment of VAT.

What followed was a protracted battle between the South African law enforcement authorities and Ayabatwa. He was ultimately arrested by the British police in 2008, but was then released into house arrest, pending the extradition case. In the meantime, he began to negotiate with the South African prosecuting authority from afar.

This eventually culminated in a plea-bargain arrangement and hefty fines. He agreed to pay the sum of R57m to the state, after having already paid R3m upfront. He also agreed to a guilty plea on behalf of Mastermind Tobacco SA. All this was confirmed in 2009 by the East London High Court, which imposed a further R250m fine, suspended for five years on condition that the R57 m was paid. Mastermind Tobacco SA was no more.

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