Press release – FITA – for immediate release
FITA Press Release 12 April 2021
Following the release, on 26 February 2021, of a report compiled by the Organized Crime and Corruption Reporting Project (“OCCRP”) into smuggling and organized crime attributed to a number of multinational cigarette manufacturers in West Africa, but in particular British American Tobacco (“BAT”) through its South African subsidiary (“BATSA”), we have noticed consistent efforts by BATSA to divert attention away from very serious and damning allegations and evidence implicating them in smuggling, corruption and the indirect funding of terrorism.
The latest ploy comes by way of attacks on their commercial competitors through an apparently independent report they have commissioned on cigarette wholesale and retail prices conducted by IPSOS, paid for by BATSA, which report is being used as a Trojan Horse to do more of their bidding.
Of course, this is not BATSA’s first dance with this particular research institution following the much-discredited report released in 2018, in essence by the same parties. Independent researchers and academics have repeatedly voiced their concerns about Big Tobacco and how it should not be trusted in respect of its research and studies on the illicit tobacco trade. They have repeatedly been found to have overstated the size and prevalence of this scourge in order to suit their selfish needs, often to the detriment of their commercial competitors and/or the fiscus.
These so-called independent reports are now also being used as ammunition by Big Tobacco for anti-competitive purposes to smear the names and brands of independent local cigarette manufacturers as a way to strong-arm retailers into removing the products of smaller independent manufacturers off their shelves. This is an attempt to maintain the status quo and to keep certain players in the informal trade in order to protect the profits of multinationals in an anti-competitive manner. This perpetuates the illusion that the brands of local cigarette manufacturers must be illicit given that they can only be procured from informal traders and not in formal retail spaces.
FITA has been firm in its position for law enforcement agencies to investigate the evidence emanating from the OCCRP report and the very serious allegations against the multinational without delay. FITA supports the convening of a commission of inquiry, however such inquiry may delay processes unnecessarily. The evidence contained in reports such as the one compiled by the OCCRP into allegations of smuggling clearly implicate BAT, and its South African subsidiary BATSA, together with other multinationals, and which reports are readily available.
BATSA cannot simply brush-off a report which implicates the organization in large-scale smuggling, corruption, the indirect funding of terrorism and the drug trade. BATSA has called for a commission of inquiry as a retort to queries directed at them in respect of these very serious allegations, which allegations come hot on the heels of other allegations of bribery and child labour practices in other parts of the continent against this very same multinational, as per the OCCRP.
It was reported by the OCCRP that trade data information from customs officials leaked BAT documents. Industry experts indicate there may be up to 4.7 billion surplus cigarettes in Mali every year — the equivalent of around 470 shipping containers of extra cigarettes. Some are produced in the country, but more are imported almost all of them from South Africa.
David Reynolds, who built Japan Tobacco International’s program on countering the illicit tobacco trade said BAT in South Africa is “notorious” for oversupplying the region. The rule is always the same: Oversupply plus lack of local controls leads to grey trade. That’s been a big part of BAT’s — and other cigarettes companies’ — business model for years,” he said.
The OCCRP has recorded that the U.N. trade figures also indicate years of discrepancies equalling millions of dollars in the price of the country’s cigarette imports. Mali imported more than 3 million kgs of cigarettes from SA annually in both 2016 and 2017, around 95% of the country’s cigarette imports. An ex-BAT official said the only cigarettes Mali imports from SA are BAT’s Dunhill cigarettes, a point confirmed in an earlier BAT document. If the former employee is correct, BAT reported to the government of South Africa it sold the cigarettes for under $7 per kilogram, while SONATAM reported it bought the cigarettes for $15 per kilogram in 2016 and 2017, the years for which U.N. trade data is available for Mali. The discrepancy amounts to between $29.1 million and $32.8 million per year, and this appears to have continued afterward, according to Malian government data available for 2018. Two former tobacco industry insiders told OCCRP that trade mis-invoicing, a method for moving money across borders that involves deliberate falsification of the volume or price of goods, is common practice in the company’s dealings with Mali.
That is apparently not unusual for BAT. In 2019, Tax Justice Network authored a report that found BAT used various methods to shift profits out of poorer countries, at a scale that could deprive eight countries in Asia, Africa, and South America of nearly US$700 million in tax revenue until 2030. It has been reported that SARS had assessed them to the tune of R 2 billion for similar tactics in South Africa.
We have also repeatedly voiced our opinion in as far as enforcement of compliance vis-a-vis the tobacco industry along its value chain being looked at more holistically without interference from any industry players and/or their agents or proxies. Any interference by industry would go against the provisos of WHO’s Framework Convention on Tobacco Control which is clear on its position in relation to interference by the industry in policy implementation by the state. These provisos have been adopted in order to protect governments from undue influence by Big Tobacco, armed with deep pockets, which is solely concerned with preserving its large profits. We therefore implore government to avoid being influenced by Big Tobacco to advance its own selfish agendas.
There is clearly no need at present for a costly and protracted commission of inquiry which will only serve to waste taxpayer money and time. To label BATSA’s own commercial challenges as equating to a state of disaster is to make a mockery of the current serious challenge, we, as a nation face in trying to contain the spread of a very serious virus which has inter alia led to the loss of many lives. This particularly at a time when the challenges of our country in respect of a host of other more prevalent and serious crimes are well-documented. The SAPS and other law enforcement agencies are slowly implementing mechanisms to enforce compliance and they are capable of investigating allegations of unlawfulness such as those raised by BATSA if the evidence is presented to them without the dramatization of the process.
FITA members are all compliant with the relevant laws of this country which govern the tobacco industry and have at all times been co-operative with SARS in as far as its efforts in implementing measures to curb non-compliance in the industry along its value chain such as that of installing production counters on the machines of our members.
The media should ask once and for all why this particular company goes through such great lengths at any given moment to avoid accountability. We saw similar tactics employed in 2016 when evidence surfaced, via a massive data leak implicating BATSA in a host of shenanigans such as money-laundering, espionage and corruption. To date the findings of the independent investigations which BAT commissioned both locally and abroad, are yet to see the light of day despite repeated requests for their disclosure.
If BATSA is serious about compliance and transparency they can get the ball rolling by sharing the findings of the above mentioned independent investigations with the public at large given their new-found eagerness to play open cards.
This multinational continues to act with impunity and feels that it can call the shots given its financial muscle. We will most certainly never dance to their tune. We continue to urge them to account for the many allegations levelled against them.
Leading academics such as the University of Cape Town’s Professor Corne van Walbeek have gone on record as stating inter alia that “BATSA has been at the forefront of destroying SARS. BATSA’s current accusation against the other tobacco companies of wrongful conduct is a bit rich. BATSA has a lot to be accountable for, especially in respect of SARS”.
It has further been pointed out by Van Walbeek that “evidence presented at the Nugent Commission, as well as various books written on the illicit trade, has implicated Big Tobacco like BATSA in a number of nefarious activities, including the closing down of the SARS High-risk Investigative Unit”.
It has been reported that BATSA was also involved in the activities of the Illicit Tobacco Task Team (ITTT). The primary aim of the ITTT, the Nugent Commission found was to undermine SARS, not to fight the illicit trade in the tobacco industry.
FITA is very clear in its position that the authorities should investigate the very serious allegations against BATSA without delay. We do not wish to roll in the proverbial mud any further with those that are experts in that terrain, and our members will only be dictated to by the authorities, not by those who seek to take the law into their own hands in order to suit their own self-serving commercial needs. FITA has constantly voiced its concerns to the authorities in relation to the illicit trade as its members are victims of the illicit tobacco trade.
Issued by Fair-trade Independent Tobacco Association Chairperson: Sinenhlanhla Mnguni 12 April 2021
For queries kindly contact Monique Vogel t: 072 720 7919; e: Monique@fita.co.za