Smoke and mirrors: cartels flood SA with illicit cigarettes
Slippery syndicates piggyback on human, drug and gun traffickers as we struggle to plug holes in our borders
Cigarette smuggling is exploding in SA as sophisticated transnational organised crime syndicates step up operations, flooding the market with “knock-offs”.
Presentations made in May to parliament’s standing committee on finance on the illicit tobacco trade show the country ranks among the world’s top five countries, along with Brazil, Iraq, Malaysia and Pakistan, when it comes to the trade in illicit cigarettes.
Advocate Malini Govender, of the National Prosecuting Authority’s specialised commercial crimes court, who told the committee of SA’s ranking, said the illicit trade was a transnational problem that involved neighbouring countries.In the same committee briefing, SARS officials revealed that in the past five financial years, 270 million cigarettes valued at R217-million were seized in anti-crime operations.
SARS told Times Select on Friday that since January it had seized more than R33-million worth of cigarettes smuggled into and through the country. In 2017, SARS seized R29-million worth of cigarettes.
Last week a report by research think tank Ipsos showed that the taxman allegedly lost R7-billion annually through the illicit cigarette trade, where boxes of cigarettes are sold below the R17.85 which has to be paid to SARS in taxes.
The report was produced on behalf of the Tobacco Industry of SA.
Cigarette manufacturers and researchers are sounding warnings over the rapid growth of sophisticated organised international crime syndicates, which were traditionally involved in other crimes, that are increasingly becoming involved in cigarette smuggling.In April, Gold Leaf Tobacco [GLT], a South African cigarette company, obtained an interim order from the Maseru High Court in Lesotho to shut down the operations of a Chinese-run factory that was “knocking off” their products.“Everything that you could think of they were counterfeiting, from the actual boxes, carton packaging to the cigarette itself, even the filters. They were not just counterfeiting one brand, but multiple. It was not just our cigarettes, but numerous products of other cigarette-manufacturing companies as well,” said attorney Raees Saint, who represents GLT.
“Their operations were highly sophisticated. Their factory was not a Mickey Mouse set-up. They were making their products look exactly like ours,” he said.Saint said they established that the cigarettes produced in the Lesotho factory were being sold in SA in vast quantities.
“We discovered not only are smugglers using Lesotho to bring in illicit cigarettes in South Africa, but also Namibia and Botswana.”
A SARS official, who cannot be named, said smugglers were rapidly expanding and diversifying their traditional courier routes.
“It’s like a rabbit warren. You go after them along one route and they pop up somewhere else.”
He said the cigarette syndicates relied on numerous other criminal networks to ply their trade.
“They work closely with human, drug and gun traffickers. They rely on cross-border trucking companies to help them.
“In the past the traditional smuggling route for cigarettes was Zimbabwe, but now lots of cigarettes are brought to South Africa via Swaziland and Mozambique. In some cases the syndicates go as far as Namibia to get cigarettes into South Africa.”SARS, in response to questions, confirmed that smugglers were increasingly using different routes.
The taxman said the port previously favoured by smugglers was Beit Bridge, “but due to increased interventions on imports, that trend changed to other borders”.
While its records for the 2017-18 financial year showed most cigarettes were smuggled through the Limpopo borders, in the latest financial year “SARS has seen a particular shift to the Eastern Cape borders”.
“This has to do with the increased efforts on the northern borderline and border ports of entry.
“While customs has been very effective to reduce cross-border smuggling through ports of entry, our current challenge has shifted to unlawful local manufacturing and smuggling through the borderline where resources are less concentrated.Independent researcher Jenni Irish-Qhobosheane said there were major problems with the smuggling of raw tobacco into the country which was then manufactured into cigarettes.
“Johannesburg and KwaZulu-Natal are the manufacturing hubs. The main areas tobacco and cigarettes are being smuggled from are Zimbabwe and China. When it comes to products from Zimbabwe, they are brought into the country via Swaziland and Mozambique.”
She said research into heroin trafficking showed cigarette smugglers used narcotics-smuggling routes and worked with these syndicates.
“These syndicates don’t just deal in one illicit good. They deal in multiple products.”
Simone Haysom of the Global Initiative Against Transnational Organised Crime, which is currently researching cigarette smuggling in SA, said the entire cigarette industry had gone rogue.“This ‘industry’ is incredibly intricate, involving an inappropriate amount of access to political figures and a say in the running of state institutions involved in law enforcement. These syndicates have a huge impact on the political economy of South Africa.”
She described cigarette smuggling as probably the most lucrative illicit trade in SA.
“It’s a multibillion-dollar industry which involves the illicit trade in illicit goods. Those involved are formal businesses, which are behind revenue disappearance through sophisticated tax-avoidance schemes.”