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Opinion Piece

27 billion reasons why ‘cheapie’ cigarette makers are camera-shy

It is difficult to overstate the significance of the recent court ruling involving the taxman and some key players in the tobacco industry.

Several cigarette companies failed in their urgent bid to interdict the SA Revenue Service (SARS) against installing CCTV cameras at their warehouses. Now these companies – including Carnilinx, which is owned by self-confessed tobacco smuggler Adriano Mazzotti – will have to heed laws enabling SARS to monitor the true volume of cigarettes they produce.

Don’t think this is merely a technical dispute between private enterprise and state bureaucracy.

It’s far more consequential than that. 

The conflict has deep implications for how we regard the rule of law in South Africa, and whether we’re prepared to let criminals help themselves to billions of rand in state revenue that’s meant to build a better future for all.

The stark reality is that the tobacco industry in Mzansi has become one of the biggest black markets in the world. 

Organised crime’s grip on the trade has been tightening for more than a decade. As a direct result of the sales ban imposed during the Covid lockdown, that grip became virtually unbreakable as sophisticated illicit networks seized total control of the market.

Experts at the University of Cape Town’s Research Unit on the Economics of Excisable Products (REEP) have demonstrated that the illicit cigarette trade in South Africa has grown by over 1000% in little more than 10 years

A recent report by global analysts Oxford Economics paints an even bleaker picture. It concludes that two-thirds of cigarettes sold in South Africa are now illicit, and that deprives the fiscus of R27 billion tax revenue a year. That’s a breath-taking R74 million stolen by criminals from South Africans every day.

The mechanics of this industrial-scale looting are relatively straightforward. 

It’s widely acknowledged that our border authorities cannot cope with a tide of contraband from neighbouring countries. Tobacco products on which the correct customs duties have not been paid are a major cargo for smugglers, particularly from Zimbabwe. 

It’s less commonly known that a lot of the tax-evading cigarettes flooding our stores come from factories on home soil. They are made by established companies that have received Government licences to produce.

By hook or by crook, cigarettes made by these rogue companies find their way out of their factories and into shops without featuring on official records. Because the manufacturers have evaded the due taxes, smokers are able to buy criminally cheap cigarettes. TJSA investigations have shown how easy it is to buy popular, locally produced brands at a price that’s just a fraction of the minimum legal taxes due on them.

To combat this problem, the taxman has been seeking to install CCTV cameras in factories and bonded warehouses to monitor the production volumes of every licensed manufacturer. SARS passed regulations requiring this be done two years ago.

The 16 Member States of SADC have agreed that their revenue administrations must have sufficient powers to effectively administer excise, including ‘to require CCTV or other appropriate technology to enable manufacture, storage and movements’ of excisable products.

However, some manufacturers of ‘cheapie’ brands have resisted this sort of transparency. Led by the Fair-Trade Independent Tobacco Association (FITA), they sought an interdict from the Gauteng High Court, claiming the cameras represent an invasion of privacy.

But that argument doesn’t stack up, as the court ultimately decided. People and businesses install cameras all the time to stop themselves being robbed. South Africans are being robbed of R74 million a day via the illicit trade in cigarettes. SARS, on behalf of all South Africans, is trying to stop that so we have enough money for schools, houses, security and other vital services.

Still, FITA is threatening to contest the latest ruling. For the sake of justice and the prosperity of our nation, we should resist any attempt to do so.

To rebuild our country after years of State Capture, our investigators and prosecutors must be properly equipped to do their jobs. Empowered by the court ruling, SARS must follow up with vigour, immediately install CCTV at all tobacco factories and cancel the licences of companies that refuse to comply.

Instead of hiding behind legal jargon, FITA must be forced to account why it’s trying to tie up our authorities in costly court actions and explain what it’s really trying to hide.

And the uncooperative manufacturers should be given a simple ultimatum: Put in the cameras or lose the right to make cigarettes.