OFFICIAL FITA Press Release – 4 February 2016:
In our January 2016 press statement, we alluded to evidence of instances which point to various practices by certain role-players in the tobacco industry that speak to unfair treatment of some by the state, preferential treatment in other cases and various anti-competitive practices. We now wish to elaborate on these.
Quite clearly, the practice of aggressive tax-base erosion and its devastating effects on our economy in other economic sectors have drawn significant interest in the media recently. According to the South African Revenue Service, these practices are rife among multi-nationals in South Africa and lead to billions leaking out of our economy annually. We believe the publication in early 2014 to shareholders of a large tax debt, issued by the South African Revenue Service against a multi-national tobacco manufacturer, is but the tip of the proverbial ice-berg. It is quite clear the significant unpaid taxes due to the fiscus resulting of such practices exceed the monetary gains of small-fry smuggling operations. For many years now the public outcry from the very same multi-nationals have been to vilify and label FITA members as “smugglers” and “manufacturers of illegal cigarettes”. We have acknowledged that whilst illicit manufacturing and smuggling may be a common malady in the industry, there are a multitude of other ills that affect economic growth and losses to the fiscus, on a greater scale and which need to be addressed by the state. We have stated on several occasions that a more holistic approach is required by the state to address losses to the fiscus – of which illicit manufacturing and smuggling form but a part. It would make no sense for the state to exert all energy towards smuggling and illicit manufacturing, when such large amounts are moved offshore and totally ignored. We appeal to the South African Revenue Service and other fiscal authorities to increase their efforts in the tobacco industry by extending their scope towards dealing with such practices. As small and mostly locally owned and based operations, such practices cannot be attributed to us – the state will have to look elsewhere.
Rumblings of rogue spies, bugging and surveillance and other questionable practices by multi-national companies and private security firms associated with them came to the fore during the ructions that unfolded at the South African Revenue Service recently. Whilst it remains difficult to distinguish between fact and fiction on the matter at this stage, we have noted with interest the allegations regarding certain multi-nationals as put to the Parliamentary Joint Standing Committee on Intelligence and Standing Committee on Finance by a former South African Revenue Service spokesperson. We eagerly await the outcome of the investigations undertaken by these committees. We can only express our disappointment when the South African Revenue Service Sikhakhane report and Kroon report did not reflect any light on the shenanigans in the tobacco industry. We have noted that the South African Revenue Service had acquired the services of audit firm KPMG to investigate these matters, and we similarly await the publication of their report to the public in the hope that this will address some of those allegations. We have good reason to believe that certain former South African Revenue Service officials are in possession of material evidence in support of our enquiries. Several attempts by FITA members to obtain such directly from them have failed.
We call on the South African Revenue Service to assist us in ensuring that this evidence is provided to us and made public.
We had been acutely aware of these and other allegations for some time prior. Following these revelations, and our difficulties in acquiring substantial evidence to advance our belief, we collectively and individually instructed our attorneys to look into these over the past year. We felt that we had reached a point where we had to defend ourselves against a total onslaught by multi-nationals and their influence over state officials and by implication their agencies. What we discovered is astounding to say the least.
We can now reveal that we have reached a stage where we have instructed our attorneys to directly engage with the Hawks, the South African Police, the National Prosecuting Authority, the South African Revenue Service and other state bodies in due course. This instruction includes making available evidence collected in respect of what we believe amount to:
- Private investigators operating an illegal covert network of rogue spies throughout South Africa who in turn are paid to spy on us. By way of example we can now release a page containing an excerpt of a database of such spies. The column depicting their names has been deliberately blocked out by us. You will note the references to handlers and the distribution of these spies across provinces. We can only appeal to those individuals who have been party to such practices to contact our attorneys immediately, or alternatively approach the South African Police Service. It is our considered view that the nature of the interactions between the so-called handlers and “SIN tobacco spies” constitute a “corrupt practice” as defined in the Prevention and Combatting of Corrupt Activities Act.
- The illegal infiltration and manipulation of FITA and its members since inception, which included the bugging of our board room and board meetings. By way of an example, we attach an excerpt of a manuscript affidavit setting out some of the details.
- The setting up of an illegal spy network in neighbouring Zimbabwe which included funding South Africans to do so.
- Private investigators illegally entering private premises and planting surreptitious listening devices and bugging phones on behalf of multi-national manufacturers and their private security firms. The same applies to illegally entering our premises and illegally planting tracking devices on our vehicles. In some instances this was done with the approval and full knowledge of state officials, well knowing that no proper legal authority was obtained in advance to do so. Our attorneys are in possession of a sworn statement by a former intelligence official wherein these practices are clearly demonstrated and proven.
- Manufacturing and passing off false information to state law enforcement agencies with a view to cause their officials to stop our imports and goods in transit and conduct constant raids on us, with the sole intention to disrupt our business activities. We attach a copy of a receipt of R 25 000, 00 paid to one such spy which clearly indicate the illegality of the scheme.
- Corrupt practices in terms of the Prevention and Combatting of Corrupt Activities Act which include the illegal accessing of private, confidential and legally privileged information only privy to FITA members in exchange for a fee. We are of the view that these same acts amount to the act of bribery as defined in the Bribery Act in the United Kingdom. These matters have already been registered with law enforcement agencies in the United Kingdom and our attorneys have been in constant contact with them since. We believe that good progress has been made in this investigation by the United Kingdom authorities and we want to applaud their demonstrated diligence and efforts to deal with our complaint without fear or favour.
- Money-laundering practices, including the payment of persons spying on us. These payments were made by way of cash payments in the United Kingdom and travel cash passports reflecting fictitious or false names with the clear intent to conceal the origins of the payments. We can now reveal examples of such cards used. We have further evidence setting out payments made by a multi-national tobacco manufacturer directly to a user of these cards, the dates of the transactions and the amounts paid. Such practices are clear contraventions of the Financial Intelligence Centre Act and Prevention of Organised Crime Act in several respects. In this vein, we very much doubt that any of these spies have declared their income for income tax purposes. Similarly we would be interested to know how these payments are treated and reflected as expenses in the accounting records of the private security firm and multi-national that pay for this operation. We will therefore make all their names available to the South African Revenue Service in order to assist them to investigate this.
- Infiltration and manipulation of some of our members by means of “agents of influence” (in one case acting as lawyer of one of our members) with the sole intention to disrupt our business activities and pit us against each other. Some of these activities included duping us into engaging the media to report on each other in a negative light. In some cases these reports carried a clear political agenda and were clearly aimed at seeking to embarrass us and certain prominent businesspeople and politicians.
- Instances where information ostensibly obtained from us for purposes of state actions such as inspections and raids, ended up in the hands of our commercial competitors.
- Causing continuous raids to be conducted against some of us by state officials under the pretext of one statutory provision (e.g. claiming to be investigating immigration contraventions) whereas the true intent was to achieve an entirely different outcome to our detriment and infringing on our basic rights. In one such a raid, one of our members suffered financial damages as a result of breakages and damage caused to property.
- Preferential treatment to some multi-nationals including but not limited to:
o Attendance of senior government officials at their conferences;
o Purporting to act on behalf of the entire local tobacco industry stakeholders;
o Subsequent media statements intended to vilify us in the public domain;
o The escorting of deliveries using state resources, whereas we have to pay for our own security;
o The introduction and imposition of untested, cumbersome and restrictive regulations on us via state agencies, with a view to cripple us financially.
- Instances where persons participated in the selling of tobacco products belonging to a multi-national manufacturer from a police vehicle. We attach video material as evidence hereto.
- Evidence where one such spy that was paid by a multi-national manufacturer to infiltrate one of our members, and then went about to advise and direct the setting up of financial structures which were believed to be legal at the time. When a reputable law firm was approached for a second opinion, it was found that these were in fact “loop structures” and totally illegal. They were never implemented, but it became quite clear that the spy intended to set up the FITA member. Along the same lines, a FITA member’s trade name was used by this same spy to create a false paper-trail to deceive the South African Revenue Service, where the member merely believed it was acting on sound legal advice.
- Some of our members and persons associated to them were approached by state officials from as early as 2010, seeking to place undue pressure and threats on them in order to force them to assist in discrediting other state officials. In one such case, during September 2010, there was mention made of an amount of R 800 000, 00 that was going to be made available to discredit certain South African Revenue Service officials. A manuscript affidavit and recording of these facts are now in possession of our lawyers.
- Evidence where one such spy employed by a multi-national manufacturer had instituted legal proceedings against the very same manufacturer on 23 May 2014 which ultimately would have exposed instances of bribery, corruption, money-laundering, illegal spying, tax evasion and collusion between state officials, the multi-national manufacturer and private investigators. The evidence suggests that this tobacco spy was persuaded by a police official and two prosecutors to withdraw the legal action in exchange for leniency. The spy then withdrew the legal action in return for a promise to avoid being prosecuted on 27 June 2014. We have been advised, which advise we accept, that this very attempt by state officials to protect the multi-national manufacturer and their spy, more than likely amounts to the specific offences of “corruption” as defined in the Prevention and Combatting of Corrupt Activities Act and “assisting a person who has committed an offence within the Republic or elsewhere” to conceal money-laundering “to avoid prosecution” as provided for in the Prevention of Organised Crime Act.
- Evidence of intelligence agents and an agent working for a multi-national manufacturer, infiltrating and then misleading persons associated with a FITA member, to participate in an elaborate scheme to defraud state intelligence agencies and obtain funding to set up a smuggling ring in South Africa under the code name “Robin”. The purpose of this scheme was to “legitimise” the intended smuggling, provide a “legal cover” to do so, and provide them with an excuse to the South African Revenue Service if ever caught. This scheme would have enabled them to unfairly and directly attack the very small market edge FITA members have over larger manufacturers, that is, our pricing and production cost models.
We are in possession of several sworn to, and manuscript affidavits obtained from former state officials, intelligence agents and persons involved in these practices. We have video material, audio recordings and reports, invoices, instructions and emails, all legally obtained and in support of our allegations. All of these clearly demonstrate that there has been collusion between multi-nationals and their private investigators, using their influence over state officials, and driving a nefarious agenda against some of our members. These practices are not only unlawful but have had and will continue to have a negative impact on us as growing local businesses and job-creators.
Apart from making all the evidence available to the authorities in South Africa and the United Kingodm, we have instructed our attorneys to register criminal complaints with the South African Police Service and Hawks. We are also seeking advice on how best to assist the law enforcement agencies in Zimbabwe in this regard. We insist that government thoroughly investigate these matters and where so required, prosecute private individuals, lawyers, state officials and companies without fear or favour. We expect of the government to investigate these complaints with the same vigour and allocation of resources as they appear to have directed against us in their multiple inspections, raids and criminal investigations over the past few years. Where the state appears reluctant or fails to do so, or where prosecutions are not instituted when they should, we have instructed our attorneys to seek nolle prosequi certificates from the National Prosecuting Authority. In such cases we will seek to institute private prosecutions against those suspects.
We have also instructed our attorneys to advise us on any civil proceedings we may institute against the identified parties, which include registering complaints with the Competition Commission in South Africa and similar bodies in other relevant jurisdictions.
We once again call on all state officials, private citizens and those who may have been involved in these practices, to contact our attorneys through our FITA website, or the state law enforcement agencies, as soon as possible. We believe it will be in their own interest to rather come clean now.
The evidence we have indicated further suggests that the collaboration between multi-nationals and their agents with state officials and departments is incompatible with Article 5.3 of the World Health Organisation’s Framework Convention on Tobacco Control. South Africa is a signatory to this convention. It is now very obvious that some of these multi-national manufacturers have been using the so-called “collaboration” with government officials and bodies on so-called Anti-Illicit Trade to:
- Circumvent the strictures of the Framework Convention on Tobacco Control and its International Tobacco Control Policy Evaluation Project. This they achieve by using so-called “cooperation” with authorities as a “Trojan Horse” to gain influence and access to areas of tobacco control which, were the provisions of the Framework Convention on Tobacco Control enforced, would be outside their reach. An example is their opposition to the proposed “Plain Packaging” on the spurious grounds that it will increase counterfeit and smuggled tobacco.
- To position and “present” themselves as part of the “solution” to end all illicit tobacco trade and thereby increase their ability to influence policy in this area and to attempt to keep intelligence and law enforcement actions on the illicit tobacco trade under their control and focused anywhere else except on themselves.
We therefore call on government to ensure that all its departments and officials conduct their interaction with the tobacco industry strictly according to the Framework Convention on Tobacco Control and their International Tobacco Control Policy Evaluation Project. As things stand now, it appears that the only government department that seems to take the Framework Convention on Tobacco Control and their International Tobacco Control Policy Evaluation Project happens to be the
Department of Health. We have expressed our scepticism and concerns on the latest proposed regulations issued by the South African Revenue Service during the festive season at very short notice in our press statement in January 2016. We are heartened by the fact that since then, the South African Revenue Service and ourselves have been engaged in a much more meaningful interaction and we look forward to developing a stronger platform where we are given equal voice and hearing than what has been the case in the past.
We believe the time has come for all stakeholders to meaningfully deal with all the challenges facing the tobacco sector in South Africa and to ensure that the playing field is levelled for all. The old refrain of “smuggling” and “illicit manufacturing” being the primary cause of losses to the fiscus is now running thin. The fact of the matter is that billions are pilfered out of our economy annually by a handful of entities through aggressive profit-base erosion schemes. We firmly believe that the government should refocus their resources and attention to include a more holistic approach to the industry. We further believe it incumbent on the state, and in fact its duty, to put measures in place that will level the economic landscape and give us as local employers and contributors to the economy, equal hearing and platforms. We believe the days of “big business” having some sway over how the state should direct its powers, actions and resources in the tobacco industry should now come to an end.
- 2 photos of “SIN database” (names removed)
- FITA excerpt from affidavit in photo format.
- 4 photos of Travelex cards.
- Copy of receipt of tobacco spy in photo format.
- Audio/video links.
Issued: 4 February 2016 (2 of 2016)
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