FITA Press Release 13 September 2020

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FITA Press Release – for immediate release

We note the statement by TJSA, an organization allegedly concerned with criminals avoiding tax on a broad scale, and yet with an inordinate focus on the local cigarette market, and in particular the affairs of local cigarette manufacturers, and must say it doesn’t come as a surprise given their obsession of late with FITA member GLTC, which happens to be the manufacturer being targeted by multinationals in what seems to be a battle for market share. TJSA, for reasons only known to it, seems determined to turn a blind eye to the wrongdoings of multinational cigarette manufacturers and has only been seen to shift its focus to local independent cigarette manufacturers.

We also reject any assertions that a FITA member is not paying the requisite taxes from the sale of cigarettes. Should TJSA have evidence to the contrary we kindly request them to provide us with evidence of same in order for our office to investigate.

Considering the increase in job closures and retrenchments that are a direct result of lockdown, FITA member GLTC has conceived a convenient method of servicing small businesses and entrepreneurs to earn a living by trading in cigarettes, which has been proven to be a worthwhile consumer good to trade in.

We will over the next few days be engaging with GLTC to ensure that their methods comply with all the laws of the Republic of South Africa.

We must point out however that there seem to be multinationals hellbent on preserving their market dominance that are determined to stunt nascent businesses and prefer that business is done on the platforms they dominate and have power to exclude new players from. FITA has long been on record as describing the local tobacco industry as anti-transformation.

We have also been warned by leading academics and researchers of cigarette industry multinationals being engaged in what has been termed as “astroturfing”.

Astroturfing is the practice of masking the sponsors of a message or organization (e.g., political, advertising, religious or public relations) to make it appear as though it originates from and is supported by grassroots participants. It is a practice intended to give the statements or organizations credibility by withholding information about the source’s financial connection. The term astroturfing is derived from AstroTurf, a brand of synthetic carpeting designed to resemble natural grass, as a play on the word “grassroots”. The implication behind the use of the term is that instead of a “true” or “natural” grassroots effort behind the activity in question, there is a “fake” or “artificial” appearance of support.

We have seen a few examples of this over the years in the local tobacco industry such as the much-maligned #takebackthetax campaign.

One has to be mindful of the fact that the South African cigarette market has seen a shift from a market where consumers are brand conscious to one where consumers are price conscious. Multinationals, concerned with a shrinking market share, and out of sheer desperation, are now diverting the attention and focus of law enforcement agencies and the public at large towards their competitors.

We therefore see this as nothing more than another attempt by multinationals to deflect attention away from their well-documented shenanigans and to once again try to direct law enforcement agencies towards their competitors like they have done traditionally, not only in South Africa, but across the globe, with their multitude of indiscretions well-documented by many leading tobacco industry researchers and academics.

Most attention by law enforcement agencies, in the past and nowadays, appears to be focused primarily on micro-enterprises that trade in minute volumes and values of stock, which are made up of mainly informal traders. In addition, law enforcement agencies seem to be preoccupied with instances of smuggling and illegal manufacturing. FITA has always agreed with credible academic studies which suggest that these practices are often exaggerated for purposes of advancing the interests of multinationals. The challenge for law enforcement agencies is to approach the industry in a more holistic fashion, which should include looking at practices such as transfer pricing, aggressive tax avoidance schemes and the like. One case study that FITA is aware of serves as a good example to illustrate this point. A multinational reportedly owes the fiscus (and by implication the government as a whole) in excess of R 2 billion in relation to corporate tax for two or three fiscal years. If this is the case, one must question the resolve of TJSA to spend an inordinate amount of time, effort and energy to chase down a subsistence trader who trades small volumes and value of tobacco produce vis-a-vis going after the big companies.

The primary concern that FITA has in this regard relates to evidence of undue influence over state officials and the ability to direct their efforts in a manner that deflects attention away from bigger losses to the state. FITA has been on record in this regard for some years now with little response by law enforcement agencies. There has been credible evidence in the public domain of a massive data leak eminating from within the domain of multinationals and their private investigators and their symbiotic relationship with certain state officials in various government departments. One has to question why none of the very serious allegations of industrial espionage, corruption, money-laundering, illegal entries into premises of FITA members, illegal tracking and bugging and spying to mention a few, have yet to receive any meaningful attention by TJSA, the state and mainstream media. FITA has been, and will continue to investigate evidence of such wrongdoing and present this to law enforcement agencies. FITA also calls on the public, the media and law enforcement agencies to take the effort to familiarise themselves with the evidence of state capture, manipulation of state officials and very serious criminal offences by multinationals.

Rumblings of questionable practices by multinational cigarette manufacturers and private security firms associated with them first came to the fore during the ructions at SARS in 2014. We have in the past brought these allegations to the attention of the public through our press releases. These include but are not limited to the following practices:

  • Private investigators illegally entering private premises and planting surreptitious listening devices and bugging phones.
  • Private investigators operating an illegal covert network of spies throughout South Africa who in turn were paid to spy on our members.
  • The illegal infiltration and manipulation of FITA, which included the bugging of our board room and board meetings.
  • The setting up of an illegal spy network in neighbouring Zimbabwe.
  • Private investigators illegally entering the premises of our members and planting tracking devices on their vehicles.
  • Illegal accessing of private and confidential information only privy to FITA members in exchange for a fee. These matters have already been registered with law enforcement agencies in the United Kingdom.
  • Money-laundering practices, including the payment of persons spying on us by way of cash passports and debit cards in fictitious or false names.
  • Infiltration and manipulation of some of our members by means of “agents of influence” with the sole intention of disrupting their business activities and pitting them against each other.
  • Instances where commercial competitors used their access to and influence over state officials to instigate and direct actions against our members.
  • Instances where information obtained from our members by way of state actions ended up in the hands of their commercial competitors.
  • Conducting raids against some of our members under the pretext of one statutory provision, whereas the true intent was to achieve an entirely different outcome to their detriment.
  • Preferential treatment obtained by some multinationals including attendance of senior government officials at their conferences and purporting to act on behalf of the entire local tobacco industry stakeholders.
  • The escorting of deliveries of the now-defunct Tobacco Institute of Southern Africa’s members by members of law enforcement agencies whereas our members rightfully paid for their own security.

We have had sight of sworn to and draft affidavits obtained from former state officials, intelligence agents and persons who were involved in these practices in respect of the above. These clearly demonstrate that there was clear collusion between the multinationals, their private investigators, and state officials to drive a clear agenda against some of our members. These practices were not lawful, have had, and will continue to have a negative impact on our members as growing local businesses.

In late 2016 we lodged a criminal complaint against BAT and its employees and/or agents, certain employees and/or agents of the State Security Agency, certain employees and/or agents of Crime Intelligence, and certain employees and/or agents of the Directorate for Priority Crime Investigation. BAT soon thereafter instructed attorneys Norton Rose Fulbright to conduct investigations on their behalf in respect of allegations which implicated BAT and its agents and/or service providers of conduct including but not limited to corruption, espionage, money-laundering, tax evasion, unfair trade practices, and undue influence over law enforcement and government officials all in the name of maintaining their dominance of the market. It has been alleged that the primary targets of the aforementioned practices ascribed to BAT were its commercial competitors, a large portion of whom were and/or are still members of FITA. To date we are yet to receive the outcome of that investigation despite repeated requests from our offices for the release of same.

With these allegations we have repeatedly requested of the state to investigate these complaints with the same vigour and allocation of resources as they have done in the past in their multiple inspections, raids and criminal investigations against some of our members. This evidence has been available for some years now but this issue seems to have been swept under the carpet time and time again. One has to ask the question of who is being protected here and why.

We also believe it incumbent on the state and institutions such as the Competition Commission to put measures in place to level the playing field in the tobacco industry to give us as local employers and contributors to the economy a competitive and fair trading environment. We can’t have a situation in today’s day and age where multinationals still enjoy a monopoly in the local tobacco industry, making it nearly impossible for new entrants to come into the market given the many anti-competitive structures which exist within the industry.

Issued by Fair-trade Independent Tobacco Association Chairperson: Sinenhlanhla Mnguni 13 September 2020

For queries kindly contact Monique Vogel t: 072 720 7919; e: Monique@fita.co.za

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