Tuesday 8 September 2020 – ORGANISED crime syndicates are using gangland tactics to retain control of the cigarette trade they captured during the lockdown sales ban, Tax Justice South Africa (TJSA) warns today.
TJSA founder Yusuf Abramjee says: “We may be past the peak of the Covid pandemic, but the crime epidemic it spawned is still surging.
“The lockdown prohibition of alcohol and tobacco gave criminals in illegal trade a monopoly on these markets. Illicit cigarettes became more lucrative than dealing drugs and the kingpins were making R100 million a day, thanks to the ill-advised sales ban.
“Now the ban is lifted, these criminals are in no mood to relinquish control. They have used their vast tax-free profits to expand their supply networks and embed themselves in communities.
“There are even reports that these corrupt syndicates are using the threat of violence, intimidation and other tactics employed in protection rackets to force informal traders and spaza shops to keep selling their stock.
“There is a price war, with the emphasis on war and a very real danger of bloodshed.
“SARS Commissioner Edward Kieswetter said on Monday that these criminals became so entrenched during the sales ban that it will take years to root them out.
“That should come as no surprise, as Tax Justice SA warned of this disaster from Day 1 of lockdown. Now it is Ministers’ responsibility to repair the damage and fulfil their duty of collecting taxes and spending them in the interests of the South African people.
“Smuggling is an increasing problem, particularly at the border with Zimbabwe, and supposedly legitimate manufacturers are continuing to engage in the illicit trade.”
Research by the University of Cape Town’s Research Unit on the Economics of Excisable Products highlighted how the lockdown transformed the tobacco market.
It found that the Gold Leaf Tobacco Corporation more than doubled its market share during the ban on legal sales. The company, which makes brands such as RG and Voyager, accounted for at least one in four of all cigarettes sold during the prohibition, at prices up to five times higher than normal.
“Criminals are now flooding the market with cheap illicit products which evade paying the due taxes,” says Abramjee.
“The authorities should be investigating how these cigarettes can be sold while the taxman is cheated out of funds desperately needed to save lives and rebuild our country.
“We say any pack under R25 is suspicious: the excise (R17.40) and VAT (R3.26) leave a margin of no more than R4.34 to be shared by manufacturer, wholesaler and retailer. That is simply not credible.
“There must be better enforcement of trading laws and thorough auditing at tobacco factories.
“We are winning the fight against a deadly virus but our war against these deadly criminals is barely beginning.”